Earnings Preview for Regional Banks

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Earning season is well underway, with the number of S&P 500 companies reporting this week significantly higher than last. The volume of reports increases even further going into the third week of January. Here are several well-known regional banks that are reporting on Thursday, Jan. 17.

Fifth Third Bancorp (NASDAQ: FITB)
Thursday, Jan. 17 before open; Consensus $0.42 EPS / Revenue $1.64 billion

The Cincinnati, OH-based regional lender received an upgrade to Outperform from Market Perform at Keefe, Bruyette, & Woods on Dec. 13 with an $18 price target. Fifth Third has received a total of 8 analyst EPS revisions higher in the last 30 days for the upcoming fourth quarter 2012 release, and the mean analyst price target on the stock is $16.74.

Among the select firms that are pessimistic on Fifth Third heading into Thursday’s earnings release is Raymond James, which believes results for the current quarter will be hampered by net interest margin contraction and sluggish loan growth. Raymond James maintains its $18 price target on the stock, despite the potential for near-term weakness.

Huntington Bancshares (NASDAQ: HBAN)
Thursday, Jan. 17 before open; Consensus $0.17 EPS / Revenue $1.64 billion

Among the numerous regional banks reporting on Thursday is the Columbus, OH-based Huntington Bancshares. Consensus analyst expectations stand at $0.17 in earnings per share for fourth quarter 2012 on revenue of $705 million. Huntington received a downgrade to Underperform from Market Perform at Keefe, Bruyette, & Woods on Dec. 13. The sell-side research firm believes consensus estimates need to be lowered at Huntington, as it expects the bank’s negative operating leverage to continue in future quarters. The mean analyst price target on Huntington Bancshares is $7.13.

PNC Financial (NYSE: PNC)
Thursday, Jan. 17 before open; Consensus $1.57 EPS / Revenue $3.98 billion

The Pittsburgh, PA-based regional banking giant stated before entering the quiet period that it expects fourth quarter 2012 earnings per share to exceed consensus analyst estimates of $1.57. PNC also recently declared a quarterly dividend of 40 cents per share payable on Feb.5 to shareholders of record on Jan. 15. In recent weeks, the Wall Street Journal has reported that PNC and several other regional banks are the victims of cyber-attacks coming from Iran. All of the regional banks are expected to be working with the U.S. government to prevent further attacks.

In a Jan. 4 piece titled Why Barron’s Is Wrong on PNC Financial, I lay out the case for why Barron’s is overly positive on PNC heading into the New Year. I prefer other regional lenders such as the Cleveland, OH-based KeyCorp and the Minneapolis, MN-based U.S. Bancorp over PNC.

Since its glowing Dec. 24 write-up on PNC Financial, Barron’s published a new Jan. 12 op-ed on KeyCorp stating it could be worth up to $11 per share.

Annual Stress Test for Largest U.S. Banks

With respect to the banking sector as a whole, the 19 largest U.S. banks (all of the above except Huntington) were required to submit their annual capital allocation plans to the Federal Reserve no later than Monday, Jan. 14. Fifth Third Bancorp had its capital request rejected by the Fed last year for a dividend increase or buyback; however, analysts expect the Fed-supervised annual exercise will bear greater fruit during 2013.

Economic Data for Thursday, Jan. 17

On the economic front, the U.S. Census Bureau will be releasing new residential construction statistics (“housing starts”) for December on Thursday at 8:30 a.m. ET. Monthly housing starts are often volatile, having decreased 3.0 percent for November, following 5.3 percent and 12.4 percent gains in October and September respectively.

The U.S. Department of Labor will also be releasing its weekly jobless claims data on Thursday at 8:30 a.m. For the previous week, ending January 5, seasonally adjusted initial claims stood at 371,000. The number of claims surged above 600,000 during the recession, and in recent months have been in a range between 350,000 and 400,000.

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johnmacris owns and/or manages long positions in Fifth Third Bancorp. The Motley Fool owns shares of Fifth Third Bancorp, Huntington Bancshares, and PNC Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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