Hovde Group cuts bank earnings view across the board amid a 'competitive battle of historic proportions' over deposit funding costs

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Mid-quarter updates from regional banks have revealed that second-quarter profit projections are 'dramatically too high,' Hovde analysts said.

Hovde Group analysts on Wednesday cut their earnings projections for its coverage area of 27 regional banks to about 7% to 9% below the current Wall Street consensus figures amid competition for deposits, as Fifth Third Bancorp added its name to the list of super-regional banks to issue lower net interest income guidance.

“The banking industry is currently waging a competitive battle of historic proportions with regard to deposit funding costs,” Hovde Group analysts said in a research note on Wednesday. “The recent string of mid-quarter updates from the super-regional banks has well telegraphed the idea that consensus estimates are dramatically too high.”

The bank’s earlier forecast as of April 20 for second-quarter net interest income was a drop of only 1%. The newer projection assumed no rate hike by the U.S. Federal Reserve through the end of the quarter. For fiscal 2023, Fifth Third is projecting net interest income growth of 3% to 5%.

 

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