Interest fee

NII, loans, fee income to help Truist Financial (TFC) Q2 Earnings – July 18, 2022

Financial truist (TFC Free Report) is expected to release its second quarter 2022 results on July 19, before the market opens. According to the latest data from the Fed, commercial and industrial loan balances (representing approximately 50% of the company’s total loans and leases held for investment purposes) rose sharply, with global loan.

Zacks’ consensus estimate for average earning assets for the reportable quarter is set at $471.8 billion, indicating a marginal increase from the reported figure for the prior quarter.

With the Federal Reserve raising interest rates by 125 basis points (bps) during the second quarter, the company’s net interest margin (NIM) and net interest income (NII) should have been favorably impacted. In addition, the rise in demand for loans should have offered support.

Management expects the base NIM to rise 7 to 10 basis points on the benefits of higher interest rates. NIM GAAP is expected to rise 3 to 4 basis points as purchase accounting growth slows, given a weaker prepayment environment resulting from higher rates.

The NII consensus estimate of $3.34 billion implies a 4.9% increase on a sequential basis.

Other factors to watch out for

Non-interest income: Unlike pandemic days, the deposit balance should not have increased much in the second quarter. This likely had a negative impact on revenue from service fees on deposits. Zacks’ consensus estimate of $251 million for the same implies a slight decline on a sequential basis.

Rising mortgage rates and inflation weighed on mortgage lending and refinancing activity in the quarter, which hurt TFC’s mortgage banking revenue. Thus, the consensus estimate for the same amount of $85 million suggests a decline of 4.5% sequentially.

Additionally, the consensus estimate for bank-owned life insurance revenue is $50 million, suggesting a 2% decline from the figure reported in the prior quarter.

Focusing more on its insurance business, Truist Financial acquired Kensington Vanguard National Land Services and insurance distribution platform Constellation Affiliated Partners. The consensus insurance commission estimate of $777 million reflects a 6.9% sequential improvement.

An increase in loan demand is expected to have provided support for the company’s loan costs. Zacks’ consensus estimate for the same $89 million shows a 4.7% increase from the prior quarter.

While rising inflation has hurt consumer confidence, decent economic growth and pent-up demand should have pushed consumers to use cards. So, it probably had a positive impact on TFC’s card business. Zacks’ consensus estimate for card and payment fees of $227 million suggests sequential growth of 7.1%.

In addition, the consensus estimate for investment banking and brokerage fees and commissions of $277 million indicates an increase of 6.2% from the prior quarter, given the volatility of equity markets in an environment slowdown in mergers and acquisitions.

Zacks’ consensus estimate for total noninterest income of $2.26 billion implies a 5.6% increase on a sequential basis.

Expenses: Truist Financial has witnessed a continued increase in overall spending in recent quarters due to investments in technology upgrades and merger integration. A similar trend is also expected to continue in the second quarter.

Asset quality: Over the past four quarters, Truist Financial had released reserves it had built up to cover losses from the effects of the coronavirus pandemic. This has enormously supported the profits of the company. Still, with demand for loans rising and expectations of an economic slowdown due to geopolitical and macroeconomic concerns, the company may have built up reserves in the second quarter.

The Zacks consensus estimate for non-performing assets is pegged at $1.07 billion, indicating a decline of 2.5% from the last reported quarter. The consensus estimate for total unaccrued loans and leases of $1.05 billion suggests a decrease of 2.7%.

Earnings Whispers

According to our quantitative model, the odds of Truist Financial beating the Zacks consensus estimate this time around are high. This is because it has the right combination of two key ingredients – a positive earnings ESP and a Zacks rank of #3 (Hold) or higher.

You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

ESP Earnings: The Revenue ESP for Truist Financial is +0.62%.

Zack’s Ranking: The company currently carries a No. 3 Zacks rank.

Zacks’ consensus estimate for second-quarter earnings of $1.17 per share is down nearly 1% in the past seven days. The figure indicates a 24.5% drop from the number reported a year ago.

The consensus sales estimate is set at $5.64 billion, indicating a marginal increase of 0.2%. Management expects adjusted net income before provision to increase sequentially to high numbers.

Other banks to consider

Here are a few other banking actions you might want to consider, as our model shows they have the right combination of elements to show a better result this time around:

Citizens Financial Group (CFG Free Report) is expected to release its second quarter 2022 results on July 19. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CFG’s earnings estimates for the quarter to report remained unchanged for the 30 days.

M&T Bank (MTB Free Report) is expected to release second quarter 2022 numbers on July 20. The company, which currently has a No. 2 Zacks ranking (buy), has an EPS on earnings of +1.53%.

MTB’s quarterly earnings estimates fell 4.3% over the past month.

Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.