Fifth Third Bancorp (FITB)

"Worst Possible Business Model

Minyanville Professor Bennet Sedacca is writing about the business model of Keycorp and other banks. Let's tune in.

More on KEY and Others

What could be the worst possible model?

When a company pays out its entire EPS in dividends and then goes to market with a 9% preferred. Then it RAISES the common dividend. Come on!! Then it announces deteriorating fundamentals. Who is it?

Keycorp (KEY), Fifth Third (FITB), Regions Financial(RF) and Wachovia (WB).

What should they be doing?

Cut the dividend, lay people off and sell common equity while they can. If not, it could be curtains."
http://globaleconomicanalysis.blogspot.com/

This stock is a regional bank. I believe they have been knocked down by the sector, but have a sound management team. Once the credit crunch shakes out - banks that are sound will again attract investors looking for stable investment and dividends.

I worked at 5/3 from 1998-2002. When they got audited by the state of Ohio for accounting errors in 2002, they lost a lot of value. Much of their growth from the 1990's came from purchasing small banks and using their own high PE stock to fund the sale. Now they can't buy anyone because their stock is low and their internal growth is below average. I would buy US Bank or PNC Bank.

Normally strong superregional bank that got caught by the yield curve. Looks like it's straightening up its act.

Every time this stock lifts its head out of the mire, a broker with a putative short position slams it. Deutsche Bank, UBS, and Citicorp are prime examples. Yet Fifth Third was mentioned as a possible buyer of National City. Chairman Kabat expressed confidence in the safety of the dividend, which yields around 9%, at the April 22 annual meeting. The bank benefited from Visa's IPO and issued bonds underwritten by four top investment banks. Is it borrowing to pay the dividend? No, earnings cover it, and it has been increased at least once every year within memory, including this year. By long-standing policy, Ithe bank has NO exposure to subprime loans. Yes, its northern Ohio, southern Michigan, and Florida markets are currently soft, but its emphasis on acquiring banks/branches in Atlanta and other southern localities should pay handsome dividends. Yes, it is suing Citicorp to recover some losses from insurance policies and bond funds that it bought from that institution. I estimate that about half of its related losses will be recouped this year. Recently, the CEO and an EVP each bought 10,000 shares in the mid-twenties -- not the lowest price, to be sure, but clearly not in expectation of a dividend reduction. Full disclosure: I own a lot of it, mostly through inheritance, since I couldn't convince my mother to sell at $69.50-plus around six years ago. Her friend Florence, still iiving, said she would never sell, and against such an edict what does a son with forty years in the investment profession know?

Fifth Third Bancorp is a multi-bank holding company with $105.8 billion in assets and banking operations in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee and West Virginia. The group has four business divisions: retail banking, commercial banking, processing solutions and investment advisory.

The recent decision to restructure the balance sheet would help to mitigate the interest rate risk and effectively manage capital. In line with this the transaction to sell $11.5 billion of available-for-sale securities would be used to retire the troublesome high cost wholesale borrowings and reinvest the remaining in higher yields. This would help the annual net interest income rise by $110 to $120 million per year and improve the net interest margin by 40 basis points.

The bank has been very disciplined in keeping its expenses under check and religiously implementing the “great rate” strategy to improve customer satisfaction. Moreover it continuously reviews its distribution channels and closes non-profitable branches. Double-digit growth is expected in the processing solutions business as it enjoys economies of scale by leveraging the existing technology and infrastructure. Growth in merchant services is to be realized from the customer additions made in 2006 and Jeanie ATM network would supplement the same. The aggressive sale force along with conservative underwriting practices, has helped the bank in serving the small towns and acts as entry points for large potential markets regions of Florida

It will take time and confidence, but FITB is a good, solid bank. They have a good Midwest presence and prior to the big economic scare, things were going well. As soon as things improve, FITB will find itself as a large regional strong bank..

TARP questionable... I don't think this bank will fail, but I think its rally got a little to excited along with PNC's. I read it has substantial exposure to commercial real estate as well, but I have not independently verified this as I am not putting real money in short plays these days...

Undercapitalized regional bank.

The stock missed out the financial sector rally during the second quarter of 2009. FITB's fundamentals are not as bad as other financial institutions whose stocks have outperform S&P500 during the past six month.

It's just a matter of time... I sense that adjustment period is coming soon. FITB will bounce back and outpace S&P500 and the rest of the financial sector.

This is another bank stock that is starting to get institutional buyers and has been fairly (relatively) strong through out this whole mess.

Fifth Third Bancorp is acquiring 9 Atlanta branches from First Horizon National Corp (FHN). FITB is acquiring deposits, but not the loans from these branch banks. FHN keeps the loans.

FITB is also acquiring First Charter Corporation for $1 billion. The transaction is scheduled to close in the second quarter of 2008.

FITB is rumored to be looking at NCC also. NCC has said it is looking for a buyer.

I think history will show that lenders who survive the current crisis are an excellent buy. Obviously, FITB shares that opinion. CEO and corporate officers share that opinion also as they continue to buy stock.

Speculative, but if they can ride out the current credit crisis, they should be poised to shoot up.

As a recruiter in this industry, I see their top people fleeing in droves... not a good sign

I have had dealings with this bank, and can tell you that their nasty people IMHO.
Will never use them again. Nasty.

BUT their stock is undervalued and will go up 6-8 points quicky.

Sell at 46-47.

Did I say nasty ?

This is a well run super-regional bank that has managed their exposure to residential and commercial real estate losses well. There are still some pains to be felt short-term, but as those issues get resolved this stock is poised for huge gains.

Financials for the long haul

With the newly announced $1400 that each associate will receive is great. That's a small amount given what Goldman Sachs is paying but every little counts.

Possible take over High dividend