Advertisement
New Zealand markets closed
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NZD/USD

    0.5979
    +0.0004 (+0.06%)
     
  • NZD/EUR

    0.5538
    +0.0005 (+0.09%)
     
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.37
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • NZD/JPY

    90.4340
    +0.0410 (+0.05%)
     

Loan Growth & Fee Income to Aid SunTrust's (STI) Q3 Earnings

SunTrust Banks STI is scheduled to report third-quarter 2018 results on Oct 19, before the opening bell. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from rise in revenues and lower provisions. However, in increase in non-interest expenses was the undermining factor.

SunTrust has an impressive earnings surprise history. Over the trailing four quarters,its earnings surpassed the Zacks Consensus Estimate in three and matched in one, the average beat being 8.7%.

However, the company’s activities in the third quarter were not able to impressive the analysts. As a result, the Zacks Consensus Estimate for earnings of $1.38 moved 1.4% lower over the past 30 days. Nonetheless, the figure represents year-over-year growth of 30.2%.

Moreover, the consensus estimate for revenues of $2.34 billion reflects a rise of 2.7% from the prior-year quarter.

Now, let’s check out the factors are expected to impact SunTrust’s third-quarter results.

Factors at Play

Net interest income to improve: The quarter witnessed a modest rise in lending activity, mainly in the areas of commercial and industrial, to which SunTrust has significant exposure. Further, increase in loans is expected to have led to a rise in earning assets. The Zacks Consensus Estimate for average earning assets of $186 billion for the to-be-reported quarter reflects nearly 1% rise on a sequential basis.

Thus, given the loan growth and higher interest rates, SunTrust is likely to record a rise in net interest income in the third quarter. Further, management expects net interest margin to remain stable or increase 2 basis points sequentially.

Relatively stable non-interest income: While overall mortgage servicing fees remained decent in the third quarter, production volumes slowed down. Thus, mortgage production income will likely be subdued. Also, rising interest rates have hampered activity and thus this segment is not going to be much of a help either. So, SunTrust’s overall mortgage revenues are not expected to witness much improvement.

Coming to investment banking activities, equity issuances globally might get a boost from IPOs and follow-on offerings, thereby having a positive impact on the related fees. However, the trend of pocketing solid advisory and underwriting fees for debt issuance may reverse to some extent in the to-be-reported quarter. Thus, investment banking income is expected to remain relatively stable.

Also, given the low volatility experienced in the third quarter, trading activities seem to be muted following the impressive first-half performance. This is expected to have an adverse impact on SunTrust’s trading income.

Decline in operating expenses to lend some support: Driven by branch consolidation efforts, SunTrust’s expenses have been declining for the past few quarters. This is expected to continue in the to-be-reported quarter as well.

Asset quality to offer some support: SunTrustexpects loan loss provision to match net charge-offs in addition to providing for loan growth. Further, the consensus estimate for non-performing assets of $796 million for the to-be-reported quarter shows a 2.2% decline on a sequential basis.Likewise, estimates for non-performing loans of $734 million reflect a decrease of 2.8% from the prior quarter.

Now, let’s check what our quantitative model predicts.

Chances of SunTrust beating the Zacks Consensus Estimate in the to-be-reported quarter are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for SunTrust is -0.09%.

Zacks Rank: SunTrust currently carries a Zacks Rank #3. This increases the predictive power of Earnings ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

SunTrust Banks, Inc. Price and EPS Surprise

 

SunTrust Banks, Inc. Price and EPS Surprise | SunTrust Banks, Inc. Quote

ADVERTISEMENT

Stocks That Warrant a Look

Here are some bank stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

M&T Bank Corporation MTB is slated to release results on Oct 18. The company has an Earnings ESP of +0.35% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

People's United Financial, Inc. PBCT has an Earnings ESP of +0.30% and holds a Zacks Rank of 2. It is slated to report quarterly numbers on Oct 18.

Ameris Bancorp ABCB has an Earnings ESP of +1.11% and has a Zacks Rank #3. It is scheduled to report results on Oct 19.

5 Medical Stocks to Buy Now

Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.

New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

Click here to see the 5 stocks >>


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
 
SunTrust Banks, Inc. (STI) : Free Stock Analysis Report
 
M&T Bank Corporation (MTB) : Free Stock Analysis Report
 
Ameris Bancorp (ABCB) : Free Stock Analysis Report
 
People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research