On March 13, 2014, we issued an updated research report on
Fifth Third Bancorp
). This regional bank recently reported decent fourth-quarter
2013 results. Results were aided by lower expenses, increased
loan and deposit balances and reduced provision for credit
losses, partially offset by a declining top line. Though the
company shows stability in its fundamentals, we remain cautious
due to the current economic uncertainty across the industry.
Fifth Third reported fourth-quarter 2013 earnings of 43 cents per
share in line with both the Zacks Consensus Estimate and the
prior-year quarter figure. Net income for the quarter available
to common shareholders was $383 million, down from $390 million
in the year-ago quarter. Results included a benefit from the
mortgage repurchase provision of $28.0 million primarily related
to Fifth Third's settlement with Freddie Mac and certain other
The company exhibited a decent performance in 2013 as evident
from its earnings history. In 2013, the company posted a positive
earnings surprise in 1 quarter, negative earnings surprise in 2
quarters and in-line earnings in the final quarter.
We view Fifth Third as a sound asset for yield-seeking investors.
In June 2013, after getting the Federal Reserve's approval, the
company hiked its quarterly dividend to 12 cents per share.
Notably, during 2013, Fifth Third paid $393 million in common
stock dividends. Such a shareholder-friendly approach inspires
investors' confidence in the stock.
Fifth Third continues to focus on core deposit growth in its
retail and commercial franchises by improving customer
satisfaction, building full relationships and offering
competitive rates. Despite the overall sluggish economic
environment, Fifth Third's total deposits recorded a 4-year CAGR
of 5% in 2013.
Despite strong fundamentals, we believe there are certain issues
that may create pressure on the company's financials in the near
term. These include absence of credible improvement in the
mortgage market, declining net interest margin due to the low
interest rate environment and the prevailing stringent regulatory
Further, the Zacks Consensus Estimate over the past 60 days
inched up 1.1% to $1.80 per share for 2014. Yet, for 2015 it
remained stable at $1.94 per share, over the same time frame.
Fifth Third currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked companies in the banking sector include
Wells Fargo & Company
Raymond James Financial, Inc.
). All these 3 carry a Zacks Rank #2 (Buy).
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FIFTH THIRD BK (FITB): Free Stock Analysis
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WELLS FARGO-NEW (WFC): Free Stock Analysis
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