Fifth Third to Shed Vantiv Stake

Fifth Third Bancorp (FITB - Analyst Report) is contemplating the divesture of a part of its Vantiv Inc. (VNTV - Snapshot Report) stake. In this connection, an S-1 registration statement has been filed with the Securities and Exchange Commission. The company plans to sell up to 10.55 million shares of Vantiv.

Fifth Third’s sale of shares of Class A common stock of Vantiv would materialize once the registration statement has been stated effective. If accomplished, it would mark Fifth Third’s first sale of Vantiv’s stock since the latter’s initial public offering (IPO) in March 2012.

The offering would help Fifth Third earn proceeds for corporate purposes. This likely comprises the use of funds for optimizing its balance sheet and liability costs as well as buyback of its own common shares.

The Back Story

U.S.-based Vantiv, formerly known as Fifth Third Processing Solutions (“FTPS”), is a payment processing company dealing with more than 12.9 billion payment transactions valued at $426 billion annually.

Fifth Third had spun-off FTPS in 2009 after which a joint venture was initiated between Advent International and Fifth Third Bank, a subsidiary of Fifth Third. The company was named Vantiv in June 2011. Notably, Vantiv Inc. opted for an initial public offering of Class A shares on the company. The offering was completed on March 21, 2012.

Earlier in 2012, Fifth Third completed the buyback of its shares worth $75 million, which were made as per regulatory approval that the company had received in March and were supported by the realized gains from the Vantiv IPO.

In Conclusion

Any measures that would help optimize balance sheet as well as share buybacks is encouraging and represent an efficient use of funds. Such actions would help create value for shareholders.

For Fifth Third, which currently retains a Zacks #3 Rank (implying a short-term Hold rating), this is could serve as a slight positive for the company resulting in modest upward estimate revision. This, in turn, could help Fifth Third achieve a better Zacks Rank.