Fifth Third Bancorp
) is likely to recognize a pre-tax gain of approximately $125
million (around $81 million after-tax) in the second quarter of
2014 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 initiated a new secondary offering of 5.78
million shares of its Class A common stock, sold on behalf of Fifth
Third. Therefore, following this transaction, Fifth Third would
record an approximate 12% 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 2014.
Stake Sale in Detail
Following this secondary offering of 5.78 million shares of Class A
common stock, around 43 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 common
The remaining economic interest of Fifth Third in Vantiv's future
earnings would be approximately 22.8%. Notably, Fifth Third's
first-quarter 2014 results included a pre-tax negative adjustment
of $36 million on the valuation of the warrant, held by Fifth Third
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 billion
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
Any measures that would help optimize the balance sheet and share
buybacks is encouraging and represent an efficient use of funds.
Such initiatives would help create value for shareholders.
Going forward, with a diversified traditional banking platform,
Fifth Third remains well poised to benefit from a recovery in the
economy of regions where it has a footprint. Moreover, the
company's efforts in reducing its nonperforming assets and
operating expenses will serve as catalysts for growth. Further, we
believe that its capital deployment activities will boost
However, a low interest-rate environment, regulatory issues as well
as competitive pressures are the headwinds.
Fifth Third currently carries a Zacks Rank #4 (Sell). Some
better-ranked banks include
First Republic Bank
), both carrying a Zacks Rank #2 (Buy).
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