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Both M&T Bank and Fifth Third Bank EPS down slightly YOY in Q4'19

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity

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Both M&T Bank and Fifth Third Bank EPS down slightly YOY in Q4'19

Most U.S. banks with more than $100 billion in assets saw year-over-year gains in their earnings per share during the fourth quarter of 2019, though two saw slight decreases and Wells Fargo & Co. posted a sharp decline.

M&T Bank Corp. and Fifth Third Bancorp reported slight dips in their normalized EPS compared to a year earlier, while Huntington Bancshares Inc., whose CEO reported a slowdown in commercial activity following the bank's earnings release, saw a 6.9% year-over-year rise in normalized EPS but an 8.8% decline from the third quarter of 2019.

Wells Fargo's normalized EPS of 93 cents per share sank by 23.1% year over year and 13.1% compared to the third quarter, partly due to the low-rate environment taking a toll on net interest income.

Wells Fargo's net interest income fell to $11.20 billion, down from $12.64 billion in the year-ago quarter, and it is continuing to rack up expenses tied to addressing legal concerns, helping push up its noninterest expense to $15.61 billion in the fourth quarter, an increase of $2.28 billion compared to the year-ago period.

During his first earnings call as Wells Fargo's CEO, Charles Scharf told analysts that executives are "well aware that our expense levels are significantly too high" and that Wells will look to cut expenses where it can.

The other Big Four banks saw their respective EPS rise on a year-over-year basis, with JPMorgan Chase & Co.'s 29.8% jump leading the way.

That increase was partly due to a sharp rise in revenues from JPMorgan's corporate and investment bank segments, where revenues rose to $9.47 billion from $7.24 billion in the year-ago period.

Citigroup Inc.'s normalized EPS also saw a significant year-over-year increase, rising 18% to $1.90 per share. The bank also lowered its target for return on tangible common equity in 2020 to a range of 12% to 13% from a prior goal of 13.5%, which CFO Mark Mason said was partly due to pressures from lower interest rates and softer global growth.

Meanwhile, Bank of America Corp.'s normalized EPS rose 5.7% from the year-ago period to 74 cents per share, as growth in loans and deposits helped ease pressure from a lower net interest margin.

Other banks seeing significant increases in normalized EPS include: PNC Financial Services Group Inc., whose total revenue during the quarter rose to $4.61 billion from $4.34 billion; First Republic Bank, which lowered its NIM guidance for 2020 due to previous Federal Reserve rate cuts; and Regions Financial Corp., which saw a drop in its net interest income but an increase in noninterest income.

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