Analysts are weighing in on how Discover Financial Services (NYSE:DFS), might perform in the near term. Wall Street analysts have a much favorable assessment of the stock, with a mean rating of 1.8. The stock is rated as buy by 13 analysts, with 10 outperform and 6 hold rating. The rating score is on a scale of 1 to 5 where 1 stands for strong buy and 5 stands for strong sell.
For the current quarter, the 25.00 analysts offering adjusted EPS forecast have a consensus estimate of $1.42 a share, which would compare with $1.33 in the same quarter last year. They have a high estimate of $1.50 and a low estimate of $1.30. Revenue for the period is expected to total nearly $2.22B from $2.18B the year-ago period.
For the full year, 27.00 Wall Street analysts forecast this company would deliver earnings of 5.70 per share, with a high estimate of $6.04 and a low estimate of $5.54. It had reported earnings per share of $5.13 in the corresponding quarter of the previous year. Revenue for the period is expected to total nearly $9.00B versus 8.74B in the preceding year.
The analysts project the company to maintain annual growth of around 7.76% percent over the next five years as compared to an average growth rate of 10.89% percent expected for its competitors in the same industry.
Among the 23 analysts Data provided by Thomson/First Call tracks, the 12-month average price target for DFS is $63.17 but some analysts are projecting the price to go as high as $75.00. If the optimistic analysts are correct, that represents a 41 percent upside potential from the recent closing price of $53.27. Some sell-side analysts, particularly the bearish ones, have called for $56.00 price targets on shares of Discover Financial Services (NYSE:DFS).
In the last reported results, the company reported earnings of $1.33 per share, while analysts were calling for share earnings of $1.32. It was an earnings surprise of 0.80%percent. In the matter of earnings surprises, the term Cockroach Effect is often implied. Cockroach Effect is a market theory that suggests that when a company reveals bad news to the public, there may be many more related negative events that have yet to be revealed. In the case of earnings surprises, if a company is suggesting a negative earnings surprise it means there are more to come.
Discover Financial Services operates as a direct banking and payment services company in the United States. It operates in two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover-branded credit cards to individuals; and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending, as well as deposit products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, and individual retirement arrangement certificates of deposit. The Payment Services segment operates the Discover Network, which processes transactions for Discover-branded credit cards, and provides payment transaction processing and settlement services; and PULSE network, an electronic funds transfer network that provides financial institutions issuing debit cards on the PULSE network with access to automated teller machines and point-of-sale terminals. This segment also operates the Diners Club International, a payments network that issues Diners Club branded charge cards and provides card acceptance services. The company was incorporated in 1960 and is based in Riverwoods, Illinois.
Other highlights from CoreLogics first-quarter report:
- Nevada had the highest percentage of homes in negative equity at 17.5 percent, followed by Florida (15 percent), Illinois (14.4 percent), Rhode Island (13.3 percent) and Maryland (12.9 percent). Combined, these top five states account for 30.2 percent of negative equity in the US, but only 16.5 percent of outstanding mortgages.
- Texas had the highest percentage of homes with positive equity at 98.1 percent, followed by Alaska (97.8 percent), Hawaii (97.8 percent), Colorado (97.5 percent) and Washington (97.2 percent).
- Of the 10 largest metropolitan areas by population, Las Vegas-Henderson-Paradise, Nev., had the highest percentage of homes in negative equity at 19.9 percent, followed by Miami-Miami Beach-Kendall (19.6 percent); Chicago-Naperville-Arlington Heights, Ill. (16.7 percent); Washington-Arlington-Alexandria, DC-Va.-Md.-W.Va. (10.9 percent); and New York-Jersey City-White Plains, NY-NJ (6 percent).
- Of the same 10 largest metropolitan areas, San Francisco-Redwood City-South San Francisco had the highest percentage of homes in a positive equity position at 99.4 percent, followed by Houston-The Woodlands-Sugar Land, Texas (98.3 percent); Denver-Aurora-Lakewood, Colo. (98.3 percent); Los Angeles-Long Beach-Glendale, Calif. (96.1 percent); and Boston (94.3 percent).
- Of the total $299.5 billion in negative equity nationally, first liens without home equity loans accounted for $166 billion, or 55 percent, in aggregate negative equity, while first liens with home equity loans accounted for $134 billion, or 54 percent.
- Among underwater borrowers, approximately 2.4 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $244,000 and the average underwater amount is $68,000.
- Approximately 1.6 million of all underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $307,000 and the average underwater amount is $84,000.
- The bulk of positive equity for mortgaged residential properties is concentrated at the high end of the housing market. For example, 95 percent of homes valued at $200,000 or more have equity compared with 87 percent of homes valued at less than $200,000.
That fact, added to the fact that were experiencing a bit of an inventory shortage, could make this a tougher than normal spring buying season for purchase money lenders. Zillow reports that there are 5.9% fewer homes for sale in the US than a year ago.
Even though the Federal Reserve has backed away from committing on additional interest rate increases this year, no one believes that mortgage interest rates will stay low forever or will return to their historically low rates, giving few homeowners reason to refinance. In fact, most people in the industry expect rates to rise eventually, further stifling the refinance business.
One part of the business that could benefit from these two trends is home equity lending.
With the value of a homeowners property increasing and no incentive to refinance, the only way to cash out is through a home equity loan. In fact, according to USA Today, consumers already realize this.
In a recent story, USA Today cited Equifaxs announcement that lenders originated home equity lines of credit with limits of $146.1 billion in 2015, up about 20% from 2014 and the third straight year of growth at that level or higher.
When the story came out in March, average home prices were up 35% from 2012 and were just 4.9% off of the 2006 peak, according to Samp;P/Case-Shiller, also quoted in the article. But executives at Equifax pointed out that underwriting was still strict.
Annamaria Andriotis, writing in the Wall Street Journal in the same time period, wasnt so sure. She pointed out that some lenders are already allowing borrowers with high credit scores to withdraw up to 95% of the homes equity and making home equity loans to borrowers with credit scores as low as 660.
Andriotis pointed out that competition for home equity borrowers is heating up, quoting LendingTree as saying that 37% of homeowners who have less than 20% equity in their homes and who applied for HELOCs through its website in February were contacted by lenders interested in possibly giving them a new line. Just 9% of those homeowners were contacted a year prior.
It appears that this spring-buying season, many lenders will be left either trying to entice Millennials into the first-time homebuyer market or chasing home equity loans. Either path will have its challenges, but the latter will be significantly easier with the right information. We have found that there are really two key pieces of information that a lender must have to effectively target and prospect home equity borrowers.
Those lenders who develop good systems for gathering these two sets of information will be more likely to find homeowners who are in the home equity buy zone ahead of their competitors.
The first piece of information is the customers credit profile. The second is the public record information relating to the real estate. When the information gathered in these two areas lines up, it suggests that there may be an opportunity.
The credit report is straightforward. While there has been talk for years about moving away from Fair Isaacs FICO score toward a more inclusive measure of a consumers credit capacity and character, nothing has come close to replacing the industry standard.
Each lender will have its own underwriting standards and since many home equity loans are held in portfolio, each lender will determine their own risk appetite.
Still, the credit report is an excellent go/no go gate with which to begin the process.
If the borrower is creditworthy, the next step is to gather information about the subject property. Many changes can occur that impact the property after the loan is boarded into the servicing system. Even if the institution services its own loans, it cannot be sure that the situation is the same as it was when the original loan was underwritten.
At a minimum, the lender must know
- The current owner of the property or vesting information
- Property conveyance from the prior owner to the current owner
- About any open mortgages
- About any Judgments amp; Liens
- Tax information and status
- The complete legal description
Comprehensive property reports exist that can provide all of this information in a very short timeframe. Thats important because for home equity lenders, time is of the essence.
When consumers need to access their home equity, they are likely to have a pressing need. This will reduce the size of the window of opportunity and drive borrowers to the first lender that agrees to work with them on the loan.
Borrowers often assume that the underwriting process for a home equity loan or line will be shorter than that of a purchase money loan. Often, that is not the case. Many large lenders alert borrowers on their websites that the underwriting process for these loans can take 45 days to complete, from the time the application is submitted.
That makes it vitally important that lenders who hope to compete for home equity loans identify prospects ahead of their competition in order to be the first to approach the borrower.
In order to move quickly, lenders should seek out a vendor partner that can provide both credit information and property information, allowing them access to all of the information they need to advance an offer as quickly as possible. Choosing the right information provider will also reduce risk during the underwriting process as the information acquired will be accurate.
This bundled services approach to home equity loan prospecting works quite well for community banks and credit unions that already have a portfolio of loans that they are servicing that quite often have HELOC opportunities hiding within them. There are not very many bundled services offerings in the market that can meet this need, but quality options do exist.
Although you wont get a 0% interest rate, taking out a personal loan or a home equity loan or line of credit may be a safer way to get cash. Personal loans have lower interest rates than credit cards, depending on your credit score. Home equity loans also have lower interest rates, and the interest you pay on the loan is tax-deductible, just like mortgage interest.
The average household with credit card debt now owes $7,879 — or just $500 less than credit card ratings and analysis site CardHub considers unsustainable for a median household income of little less than $52,000. On top of that, according to the Federal Reserve Bank of New York, roughly 8% of all credit card bills are more than 90 days past due — far worse than the percentage of mortgages (2.3%), home equity loans (2.4%) and car loans (3.4%) similarly behind.
By Kate Garber and Mohammad Eazaz Khan, SNL Financial staff writers
Home equity loans and lines of credit at large banks declined again during the first quarter of 2016, as both borrowers and lenders continue to rethink the post-crisis HELOC product.
The first three months of 2016 marked the 29th consecutive quarter of declines in home equity loans and lines of credit in the banking industry. The aggregate balance among US banks and thrifts dropped 1.81% to $523.68 billion as of March 31, according to SNL Financial data.
The large base of HELOCs, a hangover from the financial crisis, has locked into maturation, said Vining Sparks analyst Marty Mosby. More of these loans are being paid off and the post-crisis, redesigned version of the product has not been able to originate new loans fast enough to counterbalance that decline, he added.
The four largest US banks and many superregional banks top the list again of institutions with the largest declines in the first quarter of 2016 because of the large portfolios of HELOCs that they accumulated when the product was a key part of their consumer lending business, according to Mosby.
They built up those big portfolios and theyre still getting payoffs and paydowns that are still outpacing their ability to originate, he said.
Before the housing crisis, borrowers were encouraged to draw and spend the funds from their lines of credit, said Guy Cecala, CEO of Inside Mortgage Finance. Now, they are more of a specialized product for banks and a tool for borrowers who want to do home improvement projects, Mosby said.
People also thought that home price appreciation was going to go on forever and never really worried about it, Cecala pointed out. People now recognize theres no guarantee your home is going to appreciate and theyre looking at it more as a loan that has to be paid back or at least paid down at some point.
In the current environment, lenders are also more attuned to the need for a system that enables customers to repay HELOCs instead of maintaining them, Cecala said. He said that before the housing crisis, most lenders exclusively offered an interest-only option for making payments. Now, most banks offer three ways to pay down a HELOC, he said. Cecala said that the two other paydown options allow borrowers to choose interest-only
Still, Cecala said that most banks are hoping to ramp up their HELOC originations. Due to a fairly flat mortgage lending market so far in 2016, financial institutions are looking to related areas to boost volume, he said.
Amid a generally positive tone in the US housing market and rising home prices, some banks are optimistic. During the banks April 14 earnings call, Bank of America Corp. CEO Brian Moynihan said that home equity has kicked back up a little bit because people see equity in their homes.
Mosby said that residential real estate is growing, particularly in the one- to four-family space which has turned a corner.
HELOC is still kind of working through the overhang from the financial crisis and the overemphasis that was so significant back before the downturn, he added.
This article originally appeared on SNL Financial’s website under the title, Banks continue to deal with HELOC hangover in Q116
Download reprint of SNL article
TREE – Market Data amp; News
TREE – Stock Valuation Report
LendingTree Inc. (TREE) was one of the Russell 2000s biggest losers for Tuesday June 14 as the stock slid 8.95% to $74.13, a loss of $-7.29 per share. Starting at an opening price of $80.41 a share, the stock traded between $72.50 and $83.39 over the course of the trading day. Volume was 914,227 shares over 7,418 trades, against an average daily volume of 681,508 shares and a total float of 11.88 million.
The losses send LendingTree Inc. down to a market cap of $880.62 million. In the last year, LendingTree Inc. has traded between $139.59 and $52.11, and its 50-day SMA is currently $86.15 and 200-day SMA is $91.48.
The stock has a P/E Ratio of 22.8.
LendingTree Inc is an online lender exchange that connects consumers with lenders, and provides online tools to aid consumers in their financial divisions. It provides services such as mortgages, refinance loans, home equity loans, and among others.
LendingTree Inc. is based out of Charlotte, NC and has some 312 employees. Its CEO is Douglas R. Lebda.
For a complete fundamental analysis analysis of LendingTree Inc., check out Equities.com’s Stock Valuation Analysis report for TREE. To see the latest independent stock recommendations from Equities.com’s analysts, visit our Research section.
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Fifth Third Bancorp (NASDAQ:FITB) reported earnings for the three months ended March 2016 on April 21, 2016. The company earned $0.37 per share on revenue of $1.55B. Analysts had been modeling earning per share of $0.34 with $1.47B in revenue.
Fifth Third Bancorp operates as a diversified financial services company in the United States. It operates through four segments: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. The Commercial Banking segment offers credit intermediation, cash management, and financial services; lending and depository products; and foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing, and syndicated finance for business, government, and professional customers. The Branch Banking segment provides deposit and loan products to individuals and small businesses. This segment offers checking and savings accounts, home equity loans and lines of credit, credit cards, and loans for automobiles and personal financing needs. The Consumer Lending segment engages in direct lending activities that include origination, retention, and servicing of residential mortgage and home equity loans or lines of credit; and indirect lending activities, including loans to consumers through correspondent lenders and automobile dealers. The Investment Advisors segment provides various investment alternatives for individuals, companies, and not-for-profit organizations. It offers retail brokerage services to individual clients; and broker dealer services to the institutional marketplace. This segment also provides asset management services; holistic strategies to affluent clients in wealth planning, investing, insurance, and wealth protection; and advisory services for institutional clients comprising states and municipalities. As of December 31, 2015, the company operated 1,254 full-service banking centers, including 95 Bank Mart locations, as well as 2,593 automated teller machines in 12 states throughout the Midwestern and Southeastern regions of the United States. Fifth Third Bancorp was founded in 1862 and is headquartered in Cincinnati, Ohio.
Fifth Third Bancorp earnings per share showed an increasing trend of 20.7% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 171%.Analysts project EPS growth over the next 5 years at 4.57%. It has EPS annual growth over the past 5 fiscal years of 26.3% when sales declined -2.1. It reported 7% sales growth, and -5.7% EPS decline in the last quarter.
The stock is trading at $17.83, up 29.82% from 52-week low of $13.84. The stock trades down -16.99% from its peak of $21.93 and % below the consensus price target of $19.89. Its volume clocked up at 6.02 million shares which is lower than the average volume of 7.32 million shares. Its market capitalization currently stands at $14.38B.
Debt financing is emerging as a key strategy for private equity firms. In 2014, a significant number of private equity firms moved their capital to debt investments and with no signs of slowing down in 2015. According to Preqin, a research firm based in London, debt funds raised from 26 debt funds across the globe in 2014 amounted to $20 million up from $16 million raised by 29 debt funds in 2013.
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