On Jun 6, 2014, we issued an updated research report on Fifth Third Bancorp ( FITB ). This regional bank recently reported lower-than-expected results due to lower non-interest income and higher provisions for credit losses, partially offset by declining expenses. Though the company shows stability in its fundamentals, we remain cautious, given the prevalent economic uncertainty across the industry.
Fifth Third reported first-quarter 2014 earnings of 36 cents per share, missing the Zacks Consensus Estimate by 12.2%. Net income for the quarter available to common shareholders was down 25% year over year. Notably, results included a negative valuation adjustment amount of $36 million on the Vantiv warrant, litigation reserve charges of $51 million and certain other non-recurring items.
We view Fifth Third as a sound asset for yield-seeking investors. The company paid $103 million as common stock dividends and repurchased treasury shares and related forward contract worth $99 million in first-quarter 2014. Such a shareholder-friendly approach inspires investors' confidence in the stock.
Fifth Third remains focused on core deposit growth in its retail and commercial franchises by strengthening relationships with customers, catering to their needs and offering competitive rates. Despite the overall sluggish economic environment, the company's total deposits increased 5.8% year over year in first-quarter 2014.
Nevertheless, we believe there are certain issues that could pressure Fifth Third's financials in the near term. These include absence of any definite improvement in the mortgage market, declining net interest margin due to the low interest rate environment and stringent regulations that are binding at present.
The Zacks Consensus Estimate over the past 60 days declined 4.4% to $1.72 per share for 2014. Moreover, for 2015, it decreased 2.1% to $1.90 per share over the same time frame.
Currently, Fifth Third carries a Zacks Rank #3 (Hold).
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