In an effort to ease its debt pressure,
Fifth Third Bancorp
) announced to redeem its outstanding 6.50% trust preferred
securities (TruPS) issued by Fifth Third Capital Trust IV. The
redemption of securities worth $750.0 million is scheduled to
take place on Dec 30, 2013.
Fifth Third fixed the price of redemption of these TruPS at
$1,000 per share, which is 100% of the liquidation amount. The
company will pay this redemption price along with the accrued and
unpaid distributions due on the securities till the date of
Fifth Third will utilize the existing available cash to fund
these redemptions. Wilmington Trust Company, a subsidiary of
M&T Bank Corp.
), will be the paying agent for these securities.
The redemption of the TruPS is expected to auger well for Fifth
Third as it will provide an opportunity to the bank to reduce its
interest expenses since these securities demand higher rates than
other securities. The redemption will further bring down the
company's interest expenses, which fell 4% in the first nine
months of 2013, compared to the prior-year period.
Notably, the company's decision to redeem TruPS is in line with
the new capital rules proposed by the Federal Reserve in Jun
2012. As per the new guidelines, TruPS issued prior to May 19,
2010 will not be considered for calculation of Tier 1 capital
In the past year, other banks that have undertaken similar
JPMorgan Chase & Co.
) which redeemed TruPS worth $369 million and $5 billion,
Fifth Third carries a Zacks Rank #3 (Hold).
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
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