Opinions
David Garrity
Fifth Third Bancorp
FITB-Q
DON'T BUY
Jun 02, 2008
Stock price when the opinion was issued
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Our PAST TOP PICK with FITB has triggered its stop at $31.50. To remain disciplined, we recommend covering the position at this time. When combined with our previous buy recommendation, this will result in a net investment loss of 14%.
For the recent quarter, FTIB grew sales 8% to $2.19B, in line with the estimate, and EPS was $0.82, slightly missing estimates of $0.83. Average deposits declined by 1% indicating a sticky deposit base, as other large banks lost deposits during the same quarter. ROEs improved to 13.9% compared to 12.3% in the same period last year. The result was okay given the challenging macro environment. Like other regional banks, FITB is an attractive acquisition target due to recent pressure in share price; FITB is now trading at 9.0x times' Forward P/E. In the last five years, FITB’s Return on Equity (ROE) has consistently been around the 13%-15% range, not excellent, but still a pretty good performance. FITB had a few years when it repurchased a significant amount of shares while paying growing and sustainable dividends over the years. We think FITB is also cheap ona Price/Book basis, currently trading at 1.3x P/B.
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