Fifth Third Bancorp 3Q Results Beat Wall Street on Earnings, Fall Short on Revenues

Even as much of the rest of the market was fading this morning, Fifth Third Bank was making a brief foray to the upside following news this morning that their quarterly earnings beat Wall Street estimates while their revenue missed expectations.

Fifth Third Bancorp today reported third quarter 2018 net income of $433-million compared to net income of $1.0 billion in the year-ago quarter. Net income available to common shareholders was $418-million, or $0.61 per diluted share, compared to $999-million, or $1.35 per diluted share in the year-ago quarter. Prior quarter net income was $586-million and net income available to common shareholders was $563-million, or $0.80 per diluted share. The earnings per share number beat the street by one penny, while revenues fell $20-million short of analyst's expectations.

Fifth Third Chairman, President & CEO Greg Carmichael says, “Our strong quarterly results again reflected the progress we have made toward achieving our long-term financial targets. Our balance sheet continued to become more resilient, as evidenced by the consistent improvement in key credit quality metrics. Although market dynamics remained challenging during the quarter, our net interest margin increased and we generated solid loan, deposit, and household growth. We continued to diligently manage expenses as we drive toward achieving our long-term efficiency target."

Compared to the year-ago quarter, NII increased $70-million, or 7-percent, reflecting higher short-term market rates and growth in interest-earning assets, partially offset by an increase in funding costs. NIM increased 16 bps, primarily driven by higher short-term market rates.

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Compared to the prior quarter, NII increased $23-million, or 2-percent, reflecting higher short-term market rates and a higher day count. NIM increased 2 bps, primarily driven by higher short-term market rates, loan growth, and an increase in higher-yielding consumer loans, partially offset by a higher day count.

Reported non-interest income decreased $998-million, or 64-percent, from the year-ago quarter, and decreased $180-million, or 24-percent, from the prior quarter.

Carmichael says, “Five months after we initially announced our planned acquisition of MB Financial, we remain confident in our ability to achieve the expected financial synergies from the transaction. We have received the necessary shareholder approvals for the acquisition and have recently re-submitted our pro-forma capital plans. We continue to expect the transaction to close in the first quarter of 2019."

He concludes, “With improving returns and a strengthened balance sheet, we remain very confident in our ability to achieve our long-term financial targets under Project NorthStar and remain well-positioned to outperform through the cycle.”

Compared to the year-ago quarter, Fifth Third corporate banking revenue decreased $1 million, or 1-percent, as a decline in loan syndication and equity capital markets revenue was partially offset by higher financial risk management fees. Mortgage banking net revenue decreased $14-million, or 22-percent, primarily driven by lower origination fees and gains on loan sales. Mortgage originations of $1.9-billion decreased 12-percent. Wealth and asset management revenue increased $12-million, or 12-percent, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased $3-million, or 4-percent, due to higher credit card spend volume and higher debit transaction volume, partially offset by higher rewards.

Compared to the prior quarter, corporate banking revenue decreased $20-million, or 17-percent, primarily driven by decreases in loan syndication revenue and corporate bond fees. Mortgage banking net revenue decreased $4-million, or 8-percent, primarily driven by lower origination fees and gains on loan sales as well as elevated negative net valuation adjustments. Mortgage originations decreased 12-percent. Wealth and asset management revenue increased $6-million, or 6-percent, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue decreased $2-million, or 2-percent, reflecting higher rewards.

Fifth Third Bank maintains a broad base of branch operations across Michigan's Great Southwest, although their original downtown headquarters building is now on the sales block as consolidation continues in multiple markets including St. Joseph.