Fifth Third Bancorp (FITB) is scheduled to report its fourth-quarter and full year 2014 results on Jan 21, 2015, before market opens.
Fifth Third managed to deliver a positive earnings surprise in third-quarter 2014. Results were supported by lower expenses and increased net interest income, partially offset by lower non-interest income and higher provision for credit losses.
Will Fifth Third miss on earnings this quarter? Let’s see how things have shaped up.
What to Expect?
In the third-quarter 2014 Earnings Conference Call, Fifth Third chief financial officer (CFO) Tayfun Tuzun provided guidance for the fourth quarter and an updated outlook for the full-year 2014.
For the fourth quarter, expenses are expected to increase in the low-to mid-single-digits, mainly due to seasonally elevated compensation-related expense based on expectations for business activity levels during the quarter and continued investments in risk management and compliance including a slight increase in fee card related expenses.
Net interest income (NII) is expected to decline sequentially in the fourth quarter. Also, net interest margin (NIM) is anticipated to fall around 6 basis points (bps) sequentially.
Total fee income is expected to exhibit mid to high-single-digit increase in the fourth quarter from $573 million, which excludes the impact of the Vantiv warrant reported in the third quarter. The rise is anticipated to be attributable to growth in corporate banking revenue in the 15% range sequentially due to seasonally stronger business lending and syndication fees.
Additionally, fee income is expected to include $23 million benefit from the annual tax receivable agreement payment to be received from Vantiv. Mortgage banking is expected to remain relatively stable in the fourth quarter sequentially, excluding hedge related variability.
Further, pre-provision net revenue (PPNR) is expected to be up in the fourth quarter, excluding impact of the warrants.
Sequential loan growth of 1% is anticipated for the fourth quarter, driven by growth in C&I and commercial construction loans. Further total non-interest earnings assets is expected to grow in line with average loan growth over the next couple of quarters. Management also expects mid to high-single-digit increase in deposits.
Fourth quarter net charge-offs are expected to decline about 10% sequentially.
For full year 2014, NII is expected to increase about 1% year over year, NIM is expected to be lower than 315 bps and average loan growth in mid single-digits versus 2013.
Also for full year 2014, net charge-off ratio is expected to be in the mid-50 bps range compared with 58 bps reported in 2013. NPAs are expected to decline by about 20%. However, the ongoing benefit of improvement in credit results is expected to be partially offset by new reserves related to loan growth.
Overall, management anticipates achieving positive core operating leverage in 2014, excluding Vantiv, with the efficiency ratio improving about 80 bps relative to 2013.
Activities of Fifth Third during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter declined 2.3% to 42 cents per share over the last seven days.
Earnings Whispers
Our proven model does not conclusively show that Fifth Third is likely to beat the Zacks Consensus Estimate in the fourth quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Fifth Third is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 42 cents per share.
Zacks Rank: Fifth Third’s Zacks Rank #4 (Sell) further lowers the predictive power of ESP. We caution investors against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Associated Banc-Corp (ASB) has an Earnings ESP of +3.33% and it carries a Zacks Rank #3. The company is scheduled to release results on Jan 22.
BancorpSouth, Inc. (BXS) has an Earnings ESP of +3.23% and carries a Zacks Rank #2. It is scheduled to report results on Jan 21.
BOK Financial Corporation (BOKF) has an Earnings ESP of +0.94% and a Zacks Rank #3. It is slated to report results on Jan 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment