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Bank Stock Roundup: Concerns Rife, Fifth Third, Capital One & SunTrust Top Estimates

Major banks which reported third-quarter 2018 results over the last five trading days managed to record bottom-line improvement, driven by rising rates, improving asset quality and lower taxes. In addition to the benefits from higher interest rates, banks' performance mirrored a marginal upswing in loans.

However, mortgage banking business was disappointing. Also, an overall rise in non-interest expenses, owing to high spending on technology and personnel, and other market development initiatives was an undermining factor.

Notably, the global sell-off in stocks pushed investors toward safe-haven assets which shrunk the benchmark 10-year Treasury yield. All these led the SPDR Financial Select Sector ETF to touch a 13-month low figure this week. Thus, the performance of banks over the last five trading sessions was bearish.

Nevertheless, banks continued with their restructuring and streamlining initiatives. Further, resolution of probes and lawsuits related to legacy matters continued.

(Read: Bank Stock Roundup for the Week Ending Oct 12, 2018 )

Important Developments of the Week

1. SunTrust Banks' STI third-quarter 2018 adjusted earnings of $1.42 per share outpaced the Zacks Consensus Estimate of $1.38. Moreover, the figure compared favorably with the prior-year quarter's earnings of $1.06. Results were driven by rise in net interest income, lower provisions as well as lower expenses. Moreover, improvement in overall asset quality was a tailwind. The balance sheet position also remained strong during the quarter. However, a decline in non-interest income was a negative for the company. (Read more: SunTrust Beats on Q3 Earnings, Costs & Provisions Down )

2. Regions Financial Corporation RF reported third-quarter earnings of 32 cents per share, up 28% year over year. The Zacks Consensus Estimate was pinned at 36 cents. Results included certain non-recurring items. Easing margin pressure and higher revenues were the positive factors. Also, credit quality recorded significant improvement. However, lower deposits balance was an undermining factor. In addition, expenses escalated in the reported quarter. (Read more: Regions Financial's Q3 Earnings Improve Y/Y, Revenues Up )

3. Fifth Third Bancorp FITB delivered a notable positive earnings surprise of 1.6% in the Sep-end quarter. Adjusted earnings per share of 64 cents surpassed the Zacks Consensus Estimate by a penny. Yet, including certain one-time items, the bottom line came in at 61 cents, down 55% year over year. Increase in revenues, aided by rising loans and deposits were positive factors. In addition, a strong capital position has been depicted. Nonetheless, escalating expenses and provisions were undermining factors. (Read more: Fifth Third Q3 Earnings Beat Estimates, Revenues Up )

4. Capital One's COF third-quarter 2018 adjusted earnings of $3.12 per share easily surpassed the Zacks Consensus Estimate of $2.89. Also, it compared favorably with the year-ago quarter's adjusted earnings of $2.42. Results benefited from rise in net interest income and strength in card business. Furthermore, a decline in provision for credit losses and improving loans and deposits were the tailwinds. However, lower non-interest income and an increase in operating expenses hurt the results to some extent. (Read more: Capital One Gains 1.3% as Q3 Earnings Beat Estimates )

5. Continuing with the bank's restructuring activities, U.S. Bancorp USB may retrench around 700 workers, or approximately 1% of its total employees. The reason, though not clear, is expected to be due to "changing business needs."

"While we are notifying some employees that their positions are being eliminated due to changing business needs, this change will affect only about 1 percent of our total employee population across the entire company," Rebekah Fawcett, a spokesperson said in an email. "We place a high priority on treating people respectfully in these situations, and we will be providing them with severance and outplacement assistance as they pursue new opportunities," Fawcett further noted.

Price Performance

Here is how the seven major stocks performed:

Company Last Week 6 months
JPM -2.8% -4.7%
BAC -6.1% -11.0%
WFC -1.9% -0.9%
C -5.6% -5.3%
COF -3.7% -4.0%
USB -2.3% 2.3%
PNC -4.4% -16.7%

Over the last five trading sessions, Bank of America BAC and Citigroup C were the major losers, with their shares decreasing 6.1% and 5.6%, respectively. Moreover, shares of PNC Financial PNC have declined 4.4%.

In the past six months, shares of PNC Financial and BofA have depreciated around 16.7% and 11%, respectively. Further, shares of Citigroup have lost 5.3%.

What's Next?

Over the next five trading days, performance of bank stocks will depend on the outcome of the proposal of further easing regulations to be considered by the U.S. Federal Reserve at a meeting scheduled on Oct 31.

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SunTrust Banks, Inc. (STI): Free Stock Analysis Report

Citigroup Inc. (C): Free Stock Analysis Report

The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report

Fifth Third Bancorp (FITB): Free Stock Analysis Report

Bank of America Corporation (BAC): Free Stock Analysis Report

U.S. Bancorp (USB): Free Stock Analysis Report

Regions Financial Corporation (RF): Free Stock Analysis Report

Capital One Financial Corporation (COF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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