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Fifth Third Expects MB Financial Buyout to Boost Revenues

Fifth Third Bancorp’s FITB recently announced that it expects revenues to be driven by 45% synergies from its MB Financial buyout, completed in March this year. Particularly, the company anticipates an annual pretax income benefit of $60-$75 million by 2022. Also, the transaction is likely to reduce expenses by $255 million.

Per the terms of deal, MB Financial’s 92 branches and $15 billion deposits were transferred to the acquiring company.  With the increase in deposits post merger, Fifth Third became the fourth largest bank in Chicago in terms of deposits.

Moreover, post-closure, to avoid overlapping of operations, Fifth Third reduced its branch count by 44, and slashed nearly 500 jobs.

The company has already witnessed 60% of cost cuts, and expects to reach 80% by the end of the ongoing year. Further, by the end of first-quarter 2020, it is likely to attain full anticipated cost savings.

Earlier, Fifth Third’s asset-based lending business catered only to midsized to large companies. Following the deal, the company’s revenues are likely to benefit from MB Financial’s smaller business clients as well. Also, it expects to cross-sell new products to the MB Financial’s existing retail customers. Moreover, Fifth Third’s focus on its wealth management department within its existing markets will be supported by the deal.

Further, revenues from leasing and commercial loan businesses are likely to witness improvement, with a major benefit coming from MB Financial’s commercial lending department. Also, the deal will help Fifth Third expand its operations to new line of products like treasury management or capital markets services.

Tayfun Tuzun, CFO of Fifth Third, noted “We are fairly optimistic that the wallet share in Chicago of their existing clients will grow. That wallet share is going to be an important contributor to synergies.”

Notably, Celtic and LaSalle, MB Financial’s leasing businesses, have already started fueling revenue growth.

Conclusion

Fifth Third’s diverse revenue base and growth in loan and deposits will continue to support the company’s top line. Moreover, its Project North Star is likely to boost efficiency and increase earnings, thus making Fifth Third well poised to undertake any strategic acquisitions in the future. Further, the company’s expanding net interest margin, despite the Fed’s interest rate cut, acts as a tailwind.

Shares of Fifth Third have gained 28.7% so far this year compared with the industry’s growth of 30.8%.



Currently, Fifth Third carries a Zacks Rank #3 (Hold).

Key Picks

Luther Burbank Corporation LBC has witnessed a 4.7% upward earnings estimate revision for 2019 in the past 30 days. Moreover, the Zacks Rank #1 (Strong Buy) stock has gained 28.7% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Metropolitan Bank Holding Corp.’s MCB earnings estimates for the ongoing fiscal year have remained unchanged over the past 30 days. Additionally, the stock has gained 48.3% so far this year. It currently carries a Zacks Rank #1.

FS Bancorp, Inc. FSBW has witnessed upward earnings estimate revision of 3.1% for 2019 in the past 30 days. Moreover, the Zacks #1 Ranked stock has risen 41% year to date.

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