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Fifth Third (FITB) Well Poised for Growth: Should You Hold?
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In the Q1 earnings season, the Finance sector was one of the best performers. Though uncertainty over further interest rate hikes on mixed U.S. economic data and increasing signals of rising political commotion in the White House are perceived, still we can hold on some of the banking stocks based on strong fundamentals and solid long-term growth opportunity.
Fifth Third Bancorp (FITB - Free Report) is one such stock. While the bank has a record of elevated expenses, its revenue performance and improving efficiency level through the implementation of various strategies should not disappoint investors.
Fifth Third’s robust fundamentals have contributed to 24.74% gain in share price since the last one year as compared with 24.70% growth recorded for the Zacks categorized Major Regional Banks industry.
However, the company’s earnings estimate has remained unchanged for the current year, over the last seven days. As a result, it carries a Zacks Rank #3 (Hold).
Looking at the fundamentals, Fifth Third has an expansion strategy, which includes de novo branching and acquisitions. With solid capital levels, further acquisition opportunities can be expected.
The company’s diverse revenue base is anticipated to enhance earnings growth. Moreover, following the March rate hike, it raised its prime lending rate from 3.75% to 4.00%.
In 2016 and first-quarter 2017, the company reported improving net interest margin (NIM), after years of facing a declining trend. Further, NIM is projected to be 2.95–3.00% on an adjusted basis in 2017. The higher end of the range is expected if there is a rate hike in September and December.
In addition, over the last 18 months, the company has closed or announced plans to close branches representing 12% of its branch network. Also, the company is focused on strategic investments through North Star initiatives, which are likely to result in revenue growth, expense savings and operational excellence.
Nonetheless, consistently rising operating expenses remain a major concern for the company. Its ongoing strategic investments in several areas, including technology, could lead to further escalate costs in the near term.
Regulatory restrictions are additional headwinds for the company. Stricter capital norms and a proposal to increase reserves are predicted to limit its flexibility in the medium term.
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock inched up around 1.1%, over the past six months. It currently has a Zacks Rank #2.
The PNC Financial Services Group, Inc. (PNC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 5.2%, over the last six months. It presently holds a Zacks Rank #2.
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Fifth Third (FITB) Well Poised for Growth: Should You Hold?
In the Q1 earnings season, the Finance sector was one of the best performers. Though uncertainty over further interest rate hikes on mixed U.S. economic data and increasing signals of rising political commotion in the White House are perceived, still we can hold on some of the banking stocks based on strong fundamentals and solid long-term growth opportunity.
Fifth Third Bancorp (FITB - Free Report) is one such stock. While the bank has a record of elevated expenses, its revenue performance and improving efficiency level through the implementation of various strategies should not disappoint investors.
Fifth Third’s robust fundamentals have contributed to 24.74% gain in share price since the last one year as compared with 24.70% growth recorded for the Zacks categorized Major Regional Banks industry.
However, the company’s earnings estimate has remained unchanged for the current year, over the last seven days. As a result, it carries a Zacks Rank #3 (Hold).
Looking at the fundamentals, Fifth Third has an expansion strategy, which includes de novo branching and acquisitions. With solid capital levels, further acquisition opportunities can be expected.
The company’s diverse revenue base is anticipated to enhance earnings growth. Moreover, following the March rate hike, it raised its prime lending rate from 3.75% to 4.00%.
In 2016 and first-quarter 2017, the company reported improving net interest margin (NIM), after years of facing a declining trend. Further, NIM is projected to be 2.95–3.00% on an adjusted basis in 2017. The higher end of the range is expected if there is a rate hike in September and December.
In addition, over the last 18 months, the company has closed or announced plans to close branches representing 12% of its branch network. Also, the company is focused on strategic investments through North Star initiatives, which are likely to result in revenue growth, expense savings and operational excellence.
Nonetheless, consistently rising operating expenses remain a major concern for the company. Its ongoing strategic investments in several areas, including technology, could lead to further escalate costs in the near term.
Regulatory restrictions are additional headwinds for the company. Stricter capital norms and a proposal to increase reserves are predicted to limit its flexibility in the medium term.
Stocks to Consider
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 3.9%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock inched up around 1.1%, over the past six months. It currently has a Zacks Rank #2.
The PNC Financial Services Group, Inc. (PNC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 5.2%, over the last six months. It presently holds a Zacks Rank #2.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>