Back to top

Analyst Blog

In an effort to ease its debt pressure, Fifth Third Bancorp (FITB - Analyst Report) 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 redemption.

Fifth Third will utilize the existing available cash to fund these redemptions. Wilmington Trust Company, a subsidiary of M&T Bank Corp. (MTB - Analyst Report), 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 ratio.

In the past year, other banks that have undertaken similar redemptions include Citigroup Inc. (C - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) which redeemed TruPS worth $369 million and $5 billion, respectively.

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

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%