Fifth Third Bancorp
) is likely to recognize a pre-tax gain of approximately $85
million (around $55 million after-tax) in the third quarter of
2013 from the partial sale of its stake in
). The proceeds from the sale are expected to aid Fifth Third
repurchase its own common shares.
Notably, Vantiv has priced a secondary offering of 20 million
shares of its Class A common stock, which are sold by
shareholders. Of the total, Fifth Third sold 5 million shares.
Therefore, following these transactions, Fifth Third would record
an approximate 9% drop in its ownership position in Vantiv.
The stake sale by Fifth Third comes on the heels of the approval
of its capital plan by the Federal Reserve under the
Comprehensive Capital Analysis and Review process in Mar 2013.
Stake Sale in Detail
Following this secondary offering of 20 million shares of Class A
common stock, around 48.8 million Class B units of Vantiv Holding
LLC would continue to be held by Fifth Third. These may be
exchanged for Vantiv's Class A common stock and a warrant, which
are exercisable as well as exchangeable into Vantiv's Class A
The remaining economic interest of Fifth Third in Vantiv's future
earnings would be approximately 25.1%. Notably, Fifth Third's
first-quarter 2013 results included a pre-tax benefit of $34
million on the valuation of the warrant, held by Fifth Third in
Vantiv, while second-quarter 2013 results included a pre-tax
benefit of $242 million on the sale of shares of Vantiv and
pre-tax $76 million on the valuation of the warrant held in
The Back Story
U.S.-based Vantiv, formerly known as Fifth Third Processing
Solutions (FTPS), is a payment processing company dealing with
more than 12.9 billion payment transactions valued at $426
Fifth Third had spun-off FTPS in 2009, following a joint venture
that was initiated between Advent International and Fifth Third
Bank, a subsidiary of Fifth Third. The company was named Vantiv
in Jun 2011. Notably, Vantiv Inc. opted for an initial public
offering of Class A shares of the company. The offering was
completed on Mar 21, 2012.
Any measures that would help optimize the balance sheet and share
buybacks is encouraging and represent an efficient use of funds.
Such actions would help create value for shareholders.
Going forward, with a diversified traditional banking platform,
Fifth Third remains well poised to benefit from a recovering
economy along its footprints. Its traditional commercial banking
franchise, diverse revenue mix, declining nonperforming assets
and enhanced capital position serve as positive catalysts for the
stock. Further, we believe that its capital deployment activities
will boost shareholders' confidence.
However, a low interest-rate environment, regulatory issues as
well as competitive pressures are the headwinds.
Fifth Third currently carries a Zacks Rank #3 (Hold). Some better
performing banks include
) with a Zacks Rank #1 (Strong Buy) while
) sports a Zacks Rank #2 (Buy).
BANKUNITED INC (BKU): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
VANTIV INC-A (VNTV): Free Stock Analysis
To read this article on Zacks.com click here.