JPMorgan JPM kick-started first-quarter 2022 earnings for the banking industry on Apr 13. This global banking giant wasn’t able to surpass the Zacks Consensus Estimate due to dismal capital markets performance and reserve build over the ongoing Russia-Ukraine conflict.
Yet, JPM recorded a rise in net interest income (NII) driven by higher loan balance despite relatively lower rates. Management anticipates steadily rising loan demand and expectations of further rate hikes this year to positively impact NII in the quarters ahead.
While JPMorgan wasn’t able to meet the earnings expectations, there are a number of industry players that might be able to post an earnings beat this time. But the task of finding such stocks from the vast universe of the banking industry can be daunting. But by using our proprietary methodology, you can easily find such stocks. By using the Zacks Stock Screener, we have identified three banks, namely, Northern Trust Corporation NTRS, SouthState Corporation SSB and Prosperity Bancshares, Inc. PB, that are poised to outshine the Zacks Consensus Estimate in first-quarter earnings.
These stocks have the ideal combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to surpass expectations. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. And research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.
Factors to Influence Q1 Results
We all know that the financial performance of bank stocks is considered one of the barometers of the nation’s overall health. As economic growth gained traction, the overall lending scenario improved during the first quarter. Thus, despite relatively low-interest rates and flattening of the yield curve, banks’ NII is expected to have been positively impacted by robust loan growth.
Now coming to fee income, after several quarters of impressive performance, the trend reversed this time on geopolitical and economic concerns. These made the operating backdrop challenging for banks to drive up non-interest income. Thus, fee income, which had been a source of major support to banks’ revenues, is expected to have recorded disappointing performance in the first quarter.
On the cost front, increased investments in technology to boost digital offerings, business streamlining efforts, initiatives to expand into newer areas and rising inflation resulted in higher operating expenses.
Now coming to credit costs, unlike the past several quarters, banks build reserves to factor in the effects of a rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns. Thus, banks are expected to have witnessed a bit higher provision for loan losses in the first quarter.
3 Potential Safe Bets
Northern Trust, with its footprint across 23 U.S. states, Washington, DC, and 23 international locations, is a leading provider of wealth management, asset servicing, asset management and banking solutions. A robust lending scenario is likely to have more than offset the adverse impact of relatively lower rates on the company’s NII.
Further, as the company uses a lag effect to calculate its corporate custody and investment management fees, the same is likely to have registered a rise in the first quarter. NTRS is scheduled to announce first-quarter numbers on Apr 26.
The Zacks Consensus Estimate for first-quarter earnings of $1.66 indicates a fall of 2.4% from the year-ago reported figure. NTRS has an Earnings ESP of +0.06% and a Zacks Rank #3.
SouthState Corporation provides a range of banking services and products through more than 275 branches located in Florida, South Carolina, Alabama, Georgia, North Carolina and Virginia. On Mar 1, SSB completed the merger deal with Atlantic Capital Bancshares, Inc., thus making the combined company expand its presence in the Atlanta market and rank 8th in market share.
Solid loan demand and the above-mentioned merger deal are expected to have offered some support to SouthState Corporation’s NII. However, the industry-wide disappointing performance of fee income is also likely to have an adverse impact on the company’s non-interest income.
SSB is also scheduled to announce results on Apr 27. The Zacks Consensus Estimate for SouthState Corporation’s first-quarter earnings of $1.31 implies a plunge of 39.6% from the year-ago reported figure. SSB has an Earnings ESP of +1.97% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Prosperity Bancshares provides a wide range of financial products and services — traditional loan and deposit products, including digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management. PB’s impressive organic growth strategy driven by robust growth in loans and solid deposit mix is expected to have supported top-line growth.
On the expense front, management expects first-quarter non-interest expenses to be in the range of $118-$120 million. PB is slated to announce results on Apr 27.
The Zacks Consensus Estimate for Prosperity Bancshares’ first-quarter earnings is pegged at $1.29, implying a decline of 10.4% year over year. PB has an Earnings ESP of +0.26% and a Zacks Rank #3.
Prosperity Bancshares, Inc. Price and EPS Surprise
Prosperity Bancshares, Inc. Price and EPS Surprise
Prosperity Bancshares, Inc. price-eps-surprise | Prosperity Bancshares, Inc. Quote
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