Fifth Third Bancorp FITB has reported first-quarter 2023 earnings per share (EPS) of 78 cents, missing the Zacks Consensus Estimate by a penny. In the prior-year quarter, the company reported an EPS of 68 cents.
A significant rise in the fee income and net interest income (NII) aided revenue growth, while higher provisions for credit losses and lower deposits were the undermining factors.
The company has reported net income available to common shareholders of $535 million, up 13% year over year. Our estimate for the same was $603.7 million.
Revenues Rise on Higher NII, Deposits Decline
Total revenues in the reported quarter were $2.21 billion, up 17.7% year over year. However, the figure missed the Zacks Consensus Estimate of $2.22 billion. Our estimate for the same was also $2.22 billion.
Fifth Third’s NII (on an FTE basis) was $1.52 billion, up 27% year over year. Our estimate for the same was $1.56 billion. It primarily reflects the benefits of higher market rates, and growth in C&I loan balances and investment portfolio balances, partially offset by the deposit mix shift from demand to interest-bearing accounts.
The net interest margin (NIM) (on a FTE basis) rose 70 basis points (bps) year over year to 3.29%.
Non-interest income increased 2% year over year to $696 million. Our estimate for the same was $654 million. This was primarily due to a rise in commercial banking revenues and mortgage banking net revenues, partly offset by lower wealth and asset management revenues, and leasing business revenues.
Non-interest expenses increased 9% to $1.33 billion. Our estimate for the same was $1.3 billion. The main reasons for the rise were an increase in marketing expenses, technology and communications expenses, FDIC assessment fees to increase the deposit insurance fund, and expenses associated with Dividend Finance and Provide.
As of Mar 31, 2023, average loan and lease balances, and average total deposits were $122.8 billion and $160.64 billion, respectively. Loans increased 1% on a sequential basis, whereas deposits decreased marginally.
Credit Quality Deteriorates
The company reported a provision for credit losses of $164 million compared with $45 million in the year-ago quarter. Net losses charged off in the first quarter were $78 million or 0.26% of average loans and leases (on an annualized basis) compared with the $34 million or 0.12% witnessed in the prior-year quarter. The total allowance for credit losses increased 17.3% to $2.44 billion.
Moreover, the total non-performing assets were $623 million, up 10% from the year-ago quarter.
Capital Position Weak
Tier 1 risk-based capital ratio was 10.49% compared with the 10.63% posted at the end of the prior-year quarter. The CET1 capital ratio was 9.25%, down from the 9.31% recorded at the end of the year-ago quarter. Nonetheless, the leverage ratio was 8.67% compared with the year-earlier quarter’s 8.32%.
The rise in revenues of the company was backed by increased NII. The improvement in NIM was backed by higher rates. However, a decrease in total deposits and a weak capital position were concerning.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
U.S. Bancorp’s USB first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of $1.13 per share. It grew 17.2% from the prior-year quarter.
USB’s results benefited from an increase in NII, supported by higher interest rates. However, a decline in non-interest income (largely on lower mortgage banking income) and higher expenses were the headwinds. Also, USB’s credit quality deteriorated in the reported quarter.
Citizens Financial Group CFG reported first-quarter 2023 earnings per share of $1, missing the Zacks Consensus Estimate of $1.11. Nonetheless, the bottom line rose from 93 cents in the year-ago quarter.
CFG’s results reflect NII growth on an increase in interest-earning assets. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors for CFG.
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