Fifth Third Bancorp FITB is scheduled to report fourth-quarter 2024 results on Jan. 21 before the opening bell. Quarterly revenues are expected to have registered growth in the to-be-reported quarter, while earnings are likely to have declined on a year-over-year basis.
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In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. Results benefited from a rise in loan balances and strong capital ratios. A decline in net interest income (NII), fee income and higher expenses were spoilsports.
This Cincinnati, OH-based lender has an impressive earnings surprise history. Its earnings beat estimates in the trailing four quarters, the surprise being 5.77%, on average.
Fifth Third Bancorp Price and EPS Surprise
Fifth Third Bancorp price-eps-surprise | Fifth Third Bancorp Quote
Here are some factors that are expected to have impacted FITB’s fourth-quarter performance.
Loans & NII: The Federal Reserve cut interest rates by 50 basis points to 4.25-4.5% in the fourth quarter. This, along with the rate cut in September, led the funding/deposit costs to stabilize. Also, the clarity on the Fed’s rate cut path and the stabilizing macroeconomic backdrop will likely have improved the lending scenario.
Per the Fed’s latest data, lending activities continued at a solid pace in the fourth quarter. This is expected to have supported the company’s average interest-earning assets in the fourth quarter of 2024.
The Zacks Consensus Estimate for average interest-earning assets of $197 billion for the quarter indicates marginal growth from the prior quarter’s actual. Our estimate suggests the metric to be $198 billion.
FITB expects fourth-quarter total average loans and leases to be flat to up 1% from the third quarter’s reported figure of $117.4 billion. We estimate the metric to be $118.6 billion.
The company expects adjusted NII to rise 1% from the $1.43 billion reported in the third quarter of 2024. The Zacks Consensus Estimate for NII of $1.44 billion indicates a 1.2% sequential rise. Our estimate is the same as Zacks Consensus Estimate.
Non-Interest Revenues: The stabilizing deposit balance is likely to have supported FITB’s service charges on deposits. The consensus estimate for the metric of $163.8 million suggests a 1.8% sequential increase. Our estimate is pegged at $165.7 million.
Global mergers and acquisitions (M&As) in the fourth quarter witnessed marked improvements after weakness in 2023 and 2022. Both deal value and volume were solid in the quarter, driven by solid financial performance, buoyant markets, interest rate cuts and a strong U.S. economy. Yet, lingering geopolitical issues were concerning.
With increased M&A volumes, advisory revenues are expected to have improved, positively impacting commercial banking revenues.
The Zacks Consensus Estimate for commercial banking revenues is pegged at $165.5 million, indicating a 1.5% sequential increase. We project the metric to be $170.9 million.
Despite the central bank's interest rate cuts, mortgage rates did not decline significantly. Mortgage rates in the fourth quarter of 2024 were close to 6.8%, slightly higher than the 6.2% observed at the end of the third quarter. However, refinancing activities and origination volumes witnessed decent growth. This is likely to have supported FITB’s mortgage banking income.
The Zacks Consensus Estimate for the mortgage banking income is pegged at $52.71 million, suggesting an increase of 5.4% from the prior quarter’s reported figure. We estimate the metric to be $59.2 million.
Wealth and asset management revenues are likely to have gained from higher equity market performance in the quarter. The Zacks Consensus Estimate for wealth and asset management revenues is pegged at $169.4 million, suggesting an increase of 4% from the prior quarter’s actual. Our estimate is pinned at $170 million.
The Zacks Consensus Estimate for card and processing revenues is pegged at $109.6. million, indicating a 3.4% rise from the prior quarter’s reported figure. Our estimate is pinned at $113.8 million.
Management expects non-interest income to rise 3-4% in the quarter to be reported, whereas it reported $748 million in the third quarter. The Zacks Consensus Estimate for non-interest income is pegged at $770.3 million, which indicates an 8.3% rise from the prior quarter. Our model estimates the metric to be $770.8 million.
Expenses: The company’s expense base is anticipated to have escalated due to investments aimed at operational efficiencies in technology and marketing and initiatives such as branch digitization and marketing expenses.
On a sequential basis, management expects adjusted non-interest expenses to remain flat from the $1.2 billion reported in the third quarter. We estimate total expenses to rise 6.5% on a sequential basis to $1.3 billion.
Asset Quality: Fifth Third is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of higher for longer interest rate backdrop
The Zacks Consensus Estimate for non-performing assets is pegged at $776.9 million, indicating a 5.9% rise from the prior quarter's reported figure. Our model estimates the metric to be $701.3 million.
What the Zacks Model Reveals for FITB
According to our quantitative model, the chances of Fifth Third beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of two key ingredients, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Fifth Third is -0.08%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
The Zacks Consensus Estimate for FITB’s fourth-quarter earnings of 87 cents per share has been unchanged in the past seven days. The figure indicates a fall of 12.1% from the year-ago reported number.
The consensus estimate for revenues is pegged at $2.2 billion, suggesting a rise of 2.4% from the year-ago reported figure. Management expects total revenues to increase 1-2% in the fourth quarter from $2.2 billion in third-quarter 2024.
Stocks That Warrant a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for First Horizon Corporation FHN is +3.18% and it carries a Zacks Rank #2 (Buy) at present. The company is slated to report fourth-quarter and 2024 results on Jan. 16.
Over the past seven days, the Zacks Consensus Estimate for FHN’s quarterly earnings has been unchanged at 38 cents.
Regions Financial Corporation RF is scheduled to release fourth-quarter and 2024 earnings on Jan. 17. The company has a Zacks Rank #3 at present and an Earnings ESP of +0.61%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Quarterly earnings estimates for RF have been unchanged at 55 cents over the past week.
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