With two consecutive interest rate hikes by the Fed, big banks, which reported first-quarter 2017 results this earnings season, mostly managed to beat estimates with their top-line strength and lower provisions. This also lifted market sentiments of the banking sector.
Banks' trading income is expected to improve on the back of strength in fixed income, and currencies and equity trading. However, a slowdown in loan growth during the quarter will have a marginal adverse impact on interest income.
Expense-control initiatives would likely continue to support the bottom line, though continued investments in digitization might lead to modest rise in expenses.
Therefore, per our Earnings Preview report , overall earnings for the Finance sector (of which major banks constitute a large part) in first-quarter 2017 are expected to be up 14.6% year over year.
Let's take a look at three major banks that are scheduled to release their results on Apr 25.
Fifth Third BancorpFITB projects net interest margin to expand 8-9 basis points on a sequential basis, attributed to two Fed interest rate hikes since Dec 2016. However, expenses are likely to trend upward in the upcoming release due to the ongoing strategic investments in several areas, including technology. Further, Fifth Third's non-interest income might be adversely affected as management predicts mortgage origination revenue to decline 10-15% year over year. (Read more: What's in the Cards for Fifth Third in Q1 Earnings? )
With a Zacks Rank #3 (Hold) and Earnings ESP of 0.00%, the chances of Fifth Third beating the Zacks Consensus Estimate are low. The Zacks Consensus Estimate for the quarter reflected optimism, with 2.7% upward revision over the last seven days.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Interestingly, Fifth Third delivered positive earnings surprises in all the trailing four quarters, as seen in the chart below:
Fifth Third Bancorp Price and EPS Surprise
Northern Trust CorporationNTRS : The company derives significant part of its revenues from trust, investment and other servicing fees. These fees are highly dependent on the market value of clients' assets under custody, which, in turn, are directly linked to the performance of equity markets. Notably, Northern Trust's calculation of these fees considers a lag effect, i.e., the computations are based on prior-quarter end valuations. Since the performance of equity markets were relatively decent in the fourth quarter, the company should be able to record growth in custody, servicing and management fees.
Further, the company's revenues should get a lift from higher foreign exchange trading revenues due to increase in volatility in the first quarter and volumes on a sequential basis. However, despite some cost-saving initiatives, Northern Trust's continued investments in new business activities, and higher regulatory and compliance costs may lead to a slight rise in expenses. (Read more: What's in Store for Northern Trust in Q1 Earnings? )
Over the last 30 days, the Zacks Consensus Estimate for the company remained unchanged at $1.07, for the upcoming release. In addition, the company has a Zacks Rank #2 (Buy), with an Earnings ESP of 0.00%, making it difficult to conclusively predict an earnings beat this quarter. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Notably, the company holds a track of decent earnings surprise history as depicted in the chart below.
Northern Trust Corporation Price and EPS Surprise
The Zacks Consensus Estimate for BankUnited, Inc.BKU is pegged at 56 cents, reflecting a year-over-year increase of 10.2%. With a Zacks Rank #3 and an Earnings ESP of 0.00%, we cannot conclusively predict that BankUnited will be able to beat the Zacks Consensus Estimate. The estimates remained unchanged over the last seven days.
Besides, this stock outpaced the Zacks Consensus Estimate in two of the trailing four quarters as depicted in the chart below.
BankUnited, Inc. Price and EPS Surprise
Check later on our full write-up on earnings releases of these stocks.
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