Fifth Third (FITB) Q3 Earnings Beat, Revenues Decline Y/Y
Fifth Third Bancorp FITB reported third-quarter 2023 adjusted earnings per share (EPS) of 92 cents, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company reported an EPS of 93 cents.
Results were aided by a rise in non-interest income and deposit balance. However, a fall in net interest income (NII) limited its revenue growth. Higher expenses and a decline in average loan and lease balance were undermining factors.
The company has reported net income available to common shareholders of $623 million, down 1.3% year over year.
Revenues Fall, Expenses Increase
Total revenues in the reported quarter were $2.15 billion, which was marginally down year over year. The top line matched the Zacks Consensus Estimate.
Fifth Third’s NII (on an FTE basis) was $1.45 billion, down 3.8% year over year. The fall was due to the impact of deposit mix shift from demand to interest-bearing accounts, partially offset by the higher loan yields. Our estimate for NII was $1.50 billion.
Net interest margin (NIM) (on an FTE basis) shrunk 24 basis points year over year to 2.98%. Our estimate for NIM was 2.96%.
Non-interest income increased 6.4% year over year to $715 million. This was primarily due to a rise in service charges on deposits, commercial banking revenue, wealth and asset management revenues. Our estimate for the metric was $724.8 million.
Non-interest expenses increased 1.8% to $1.19 billion. An increase in almost all components of expenses resulted in this upsurge, except leasing business costs and other non-interest expenses. Our estimate for the metric was $1.28 billion.
As of Sep 30, 2023, average loan and lease balances and average total deposits were $121.63 billion and $165.64 billion, respectively. Average loans decreased 1.4% on a sequential basis, whereas average deposits increased 3%.
Credit Quality Deteriorates
The company reported a provision for credit losses of $119 million compared with $158 million in the year-ago quarter.
However, net losses charged-off in the third quarter were $124 million or 0.41% of average loans and leases (on an annualized basis) compared with the $62 million or 0.21% witnessed in the prior-year quarter. The total allowance for credit losses increased 10.1% to $2.53 billion. Moreover, total non-performing assets were $618 million, up 13.2% from the year-ago quarter.
Capital Position Strong
Tier 1 risk-based capital ratio was 11.05% compared with the 10.40% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.80%, up from the 9.14% recorded at the end of the year-ago quarter. Also, the leverage ratio was 8.85% compared with the year-earlier quarter’s 8.44%.
Our Viewpoint
The revenues of the company were backed by a rise in non-interest income for this quarter. Its diverse revenue base and strategic acquisitions will likely drive top-line growth in the upcoming period. However, a weakening of credit quality and elevated expenses were matters of concern.
Fifth Third Bancorp Price, Consensus and EPS Surprise
Fifth Third Bancorp price-consensus-eps-surprise-chart | Fifth Third Bancorp Quote
Currently, Fifth Third carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Wells Fargo & Company’s WFC third-quarter 2023 adjusted earnings per share of $1.39 outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. The adjusted figure excludes the impacts of discrete tax benefits related to the resolution of the prior-year period’s tax matters.
WFC’s results benefited from higher NII and non-interest income. An improvement in capital ratios and a decline in expenses were other positives. However, the worsening credit quality and a dip in loan balances were the undermining factors.
Citigroup Inc.’s C third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26.
In the third quarter, C witnessed a rise in revenues due to higher revenues in the Institutional Clients Group, as well as the Personal Banking and Wealth Management segments. The higher cost of credit was another spoilsport.
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