While it is still early in the first-quarter earnings, banks have delivered an encouraging start. The companies that have reported so far have surpassed the Zacks Consensus Estimate, despite those forecasts moving higher before earnings were released. That is a positive sign for the strength of their underlying businesses.
Although rising oil prices due to the Middle East conflict have increased risks for the economy, the overall backdrop in the United States remains fairly stable. Comments from management teams at JPMorgan JPM, Citigroup C and other banks with better-than-expected quarterly results suggest that business momentum is still holding up well.
Banks are benefiting from lower rates, which are driving solid lending and stabilizing funding costs. Hence, we expect Live Oak Bancshares LOB, Civista Bancshares Inc. CIVB and Popular Inc. BPOP to post better-than-expected earnings.
Factors Likely to Have Influenced Banks’ Q1 Earnings
In the first quarter, demand stayed healthy for business and consumer loans, according to the latest Federal Reserve data, while demand for real estate loans was modest. Even though interest rates were lower, banks are still expected to have seen growth in net interest income (NII), helped by solid loan activity.
Fee-based businesses are also likely to have provided support. Strong activity in capital markets and steady performance in asset management are expected to have boosted fee income for many banks.
At the same time, the operating environment remained challenging. Some borrowers may have found it harder to repay loans, which could lead banks to set aside more money for potential losses, raising credit costs. Higher operating expenses are also expected to have weighed on overall profitability.
How to Recognize Potential Outperformers?
With several banks thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver better-than-expected earnings. While it is impossible to be sure about such outperformers, our proprietary methodology makes the task fairly simple.
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.
3 Bank Picks Poised to Outpace Q1 Earnings Estimates
Live Oak Bancshares is slated to announce first-quarter 2026 results tomorrow, after market close. As a provider of commercial & industrial (C&I) and real estate loans, the company is expected to have recorded a rise in NII in the to-be-reported quarter. Also, solid advisory and wealth management performance are likely to have supported its fee income.
LOB’s Zacks Consensus Estimate for first-quarter sales of $144.9 million implies 14.9% year-over-year growth. Also, the consensus estimate for earnings of 53 cents suggests a whopping 152.4% jump. The company has an Earnings ESP of +7.81% and it carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..
Nonetheless, Live Oak Bancshares doesn’t have an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in only one of the last four quarters (missing the mark on the other three occasions), with the average beat being 4.45%.
Live Oak Bancshares, Inc. Price, Consensus and EPS Surprise
Live Oak Bancshares, Inc. price-consensus-eps-surprise-chart | Live Oak Bancshares, Inc. Quote
Civista Bancshares is also scheduled to report quarterly numbers tomorrow, before market open. The bank is likely to have witnessed a decent NII growth, given the impressive demand for C&I loans and modest real estate loan demand. Further, strong investment management business performance is expected to have resulted in higher non-interest income in the to-be-reported quarter.
The consensus estimate for CIVB’s quarterly sales of $44.4 million indicates 9.3% rise. On the other hand, the Zacks Consensus Estimate for earnings of 56 cents suggests a 15.2% decline. The company has an Earnings ESP of +4.19% and it carries a Zacks Rank #3.
Civista Bancshares has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark once), with the average beat being 15.52%.
Civista Bancshares, Inc. Price and EPS Surprise
Civista Bancshares, Inc. price-eps-surprise | Civista Bancshares, Inc. Quote
Popular is set to report first-quarter 2026 results on Wednesday, before market open. With the company offering retail and commercial banking, auto and equipment leasing and financing, mortgage loans, its NII is expected to have witnessed decent growth. Further, with robust investment banking performance and impressive trading business, the bank’s fee income is likely to have risen.
BPOP’s Zacks Consensus Estimate for first-quarter earnings of $3.31 indicates 29.3% growth from the prior-year quarter. The company has an Earnings ESP of +3.78% and it carries a Zacks Rank #2.
Popular has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average beat being 11.83%.
Popular, Inc. Price and EPS Surprise
Popular, Inc. price-eps-surprise | Popular, Inc. Quote
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JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
Citigroup Inc. (C): Free Stock Analysis Report
Popular, Inc. (BPOP): Free Stock Analysis Report
Civista Bancshares, Inc. (CIVB): Free Stock Analysis Report
Live Oak Bancshares, Inc. (LOB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).