On Mar 8, we reiterated our Neutral recommendation on
Fifth Third Bancorp
) based on its rising revenues and healthy capital position.
However, pressurized net interest margin, rising expenses and
unsettling macro economic issues remain the major concerns.
Moreover, Fifth Third retains a Zacks Rank #3 (Hold).
Fifth Third's fourth quarter 2012 earnings came in at 45 cents
per share, beating the Zacks Consensus Estimate by 3 cents. Total
revenues came in at $1.78 billion, up 21% from the year-ago
quarter. Moreover, revenues surpassed the Zacks Consensus
Estimate of $1.64 billion. Further, Huntington has delivered an
average earnings surprise of 12.5% last year.
Over the last 60 days, the Zacks Consensus Estimate for 2013
hiked by a nickel Moreover, for 2014, the Zacks Consensus
Estimate moved up by a penny. Further, a diversified traditional
banking platform, along with a diverse revenue base helped the
company sustain the Neutral recommendation. Further, improving
credit quality metrics are a positive for the stock. Extensive
capital deployment activities also continue to reinforce
investors' confidence in the stock.
However, the low interest rate environment and changing
regulatory landscape are expected to pressurize its net interest
margin in the subsequent quarters. Further, given the sluggish
market recovery, we expect any significant improvement in top
line to remain elusive in the foreseeable future. In addition, we
remain wary of the continuously rising regulatory expenses, which
will lead to higher cost of compliance and may temper
profitability in the near-to-mid term. In addition, we believe
that the company's flexibility with respect to its investments
and lending volumes would be limited in the medium term, given
the stricter capital norms.
Other Stocks to Consider
Banking stocks that are currently performing better than Fifth
First Defiance Financial Corp.
Meta Financial Group, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
BANKUNITED INC (BKU): Free Stock Analysis
META FINL GRP (CASH): Free Stock Analysis
FIRST DEFIANCE (FDEF): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
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