Benzinga - by Zacks, Benzinga Contributor.
Shares of Fifth Third Bancorp (NASDAQ: FITB) gained 3% in the after-market trading as it announced a new share repurchase agreement with Morgan Stanley & Co. LLC (NYSE: MS). Under this, the company will buy back nearly $125 million of its outstanding common stock. The buyback is part of a 100 million share repurchase program that was announced in June 2019.
Fifth Third stated that it expects to receive a substantial majority of the shares underlying the repurchase agreement by Jun 12, 2024.
Second-Quarter Revenue Guidance Trimmed Further, at Morgan Stanley US Financials, Payments and CRE conference, FITB came up with an updated outlook for the second quarter of 2024.
Management now expects total revenues to be stable on a sequential basis compared with the previous guidance of an almost 1% increase. This lower revenue guidance is mainly attributable to a change in the non-interest income outlook. The metric is now expected to be stable compared with the previous guidance of 2-4% growth. Besides, FITB continues to expect net interest income to be stable to up 1%.
The company reiterated average loans & leases to be stable for the second quarter of 2024.
Additionally, non-interest expenses are now projected to decline in the range of 7-8% compared with a decrease of 6% reported in the previous guidance.
The net charge-off ratio is projected to be 50 basis points (bps) compared with the earlier guidance of 35-45 bps.
Allowance for credit losses is estimated to be $50 million release compared with the previously mentioned flat to $25 million build. The change in metric reflects stable loan balances and the release of specific reserves related to charge-offs. The company also assumes no change to the macroeconomic outlook and risk profile since the end of the first quarter.
Effective tax rate is now anticipated to be 22% compared with the previous range of 22-23%.
Conclusion With $215 billion of total assets and deposits of $170 billion, FITB holds the top five market share in commercial payments across several product categories. The new share repurchase agreement reflects the company's enhanced capital distribution plans, which positions it to generate long-term sustainable value for shareholders.
Further, Fifth Third's consistent investments to generate balanced and growing revenue streams while maintaining peer-leading expense discipline is impressive. Further, the company targets to grow its branch network through 2028, by opening 35-45 branches annually.
Over the past year, shares of FITB have gained 45.4% compared with the industry's growth of 35.5%.
Image Source: Zacks Investment Research
Currently, Fifth Third carries a Zacks Rank #3 (Hold).
Outlook Update by Other Bank At the same Morgan Stanley Conference, Huntington Bancshares (NASDAQ: HBAN) provides an update on its 2024 outlook. The bank expects NII to decline between 1% and 4% in 2024. The narrowing projection is primarily due to weaker loan growth as the company focuses on maintaining high marginal returns, as well as increased funding costs linked with strong deposit growth.
HBAN simultaneously lowered the top end of its previously guided loan growth range. The company now expects average loans to grow in the range of 3-4%, a change from previous guidance of 3-5%. The bank projects average deposit to grow in the 3-4% range compared with earlier guidance of 2-4% growth.
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