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 Outlook

Management reaffirmed its expectation of growing its pre-provision income in 2011. While management expects the impact of the Durbin Amendment to reduce its annual debit and interchange revenue, it has not factored this into the forecasts as there is a fifty-fifty chance of its implementation in the present form.

Assuming the current rate environment and yield curve, management expects that the net interest margin will decline in 2Q11 by amounts similar to the decline it experienced in the last two quarters as the company continues to add to its securities portfolio. In 2Q11, management expects to continue to build its securities portfolio with around $5 billion, which will impact margin again in that 8–10 basis-point category. Security purchases are anticipated to continue throughout the remainder of 2011 as the company builds on-balance sheet liquidity in conjunction with the liquidity coverage ratio (LCR). Management therefore expects a fall in net interest margin to 3.60% in 2Q11. However, the anticipated reduction in net interest margin will continue to be neutral to net interest income and the bottom line as the decline in net interest margin will be offset by an increase in average earning assets.

Outlook

As per the Zacks Digest model, the analysts expect the share count to increase 0.01% y/y to 1,921.0 million by the end of FY11, decline 1.7% y/y to 1,888.0 million by the end of FY12, and drop 1.4% y/y to 1,861.0 million by the end of FY13. This represents a three-year CAGR of -1.1% on FY10 shares outstanding.

As per the Zacks Digest model, FY13 EPS estimate is expected to increase at a three-year CAGR of 19.8%, driven by a 19.3% CAGR for net income and by a -1.1% CAGR for shares outstanding.