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5 Reasons to Add Fifth Third (FITB) Stock to Your Portfolio
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Fifth Third Bancorp’s (FITB - Free Report) financials are expected to get continuous support from a robust balance sheet position, revenue growth and solid liquidity. Hence, it seems to be a wise idea to add the FITB stock to your portfolio now, given its solid fundamentals and decent growth prospects.
The Zacks Consensus Estimate for FITB's earnings has been revised 3.3% and 2.3% north for 2023 and 2024, respectively, over the past month. This shows that analysts are optimistic regarding the company’s earnings prospects. It currently carries a Zacks Rank #2 (Buy).
In the past six months, shares of the company have gained 5.2%, outperforming the industry's growth of 4.6%.
Image Source: Zacks Investment Research
Mentioned below are a few factors that make FITB a must-buy stock now.
Revenue Growth: Fifth Third’s diverse revenue base will likely support its financials in the upcoming period. Further, it has expanded its fee-income base over the years on strategic buyouts. It completed the acquisition of an embedded payment platform, Rize Money, and Big Data LLC in May 2023. The latter adds national healthcare revenue cycle capabilities.
We estimate NII and non-interest income to rise 3.9% and 3.6% in 2023, respectively. We expect revenues to reflect a compound annual growth rate (CAGR) of 2.9% over the next three years.
Balance Sheet Strength: Deposits being an essential source of funding, FITB continues to focus on core deposit growth in its retail and commercial franchises, given its branch expansions and digital initiatives. Total deposits recorded a CAGR of 10.7% over the last five years, ending 2022.
Thus, a strong deposit base along with solid loan growth provides balance sheet strength. Total loan and lease balance witnessed a CAGR of 6.1% over the same period. The bank is well-positioned to continue its organic growth, aided by a strong loan pipeline and new commitments. We estimate total deposit balances, and net portfolio loans and leases to increase 4.7% and 3.7%, respectively, this year.
Strong Liquidity: Reflecting a solid balance sheet position, as of Sep 30, 2023, FITB had a total debt (comprising long-term debt and other short-term borrowings) of $20.9 billion while total liquidity was $103 billion.
Its senior debt enjoyed investment-grade credit ratings of BBB+, A- and Baa1 from Standard & Poor’s, Fitch and Moody’s, respectively. This will likely enable the bank to access the debt market at favorable rates. Therefore, with a strong liquidity position and manageable debt, we believe it will be able to meet debt obligations in the near term even if the economic situation worsens.
Efficient Capital Distributions: Fifth Third has a decent capital distribution plan supported by solid capital base and ample liquidity. As of Sep 30, 2023, common equity tier 1 ratio was 9.80%. This offers room for enhanced capital distribution plans.
In September 2023, management announced a 6.1% rise in quarterly dividend to 35 cents per share. However, in anticipation of strong loan growth and Dividend Finance deal, the bank has paused share repurchases.
Favorable Valuation: The stock looks undervalued right now compared with the industry. It currently has a price/earnings (F1) ratio of 7.34, lower than the industry average of 8.15.
Further, FITB stock has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Stocks Worth a Look
A couple of other top-ranked stocks from the banking space are First Citizens BancShares, Inc. (FCNCA - Free Report) and Wells Fargo & Company (WFC - Free Report) .
The Zacks Consensus Estimate for First Citizens BancShares' current-year earnings has been revised 3.7% upward over the last 30 days. The stock has risen 19.1% over the past six months. Currently, FCNCA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wells Fargocarries a Zacks Rank #2 at present. The consensus mark for WFC’s 2023 earnings has been revised 7.6% upward over the last 30 days. In the past six months, WFC’s shares have gained 7.1%.
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5 Reasons to Add Fifth Third (FITB) Stock to Your Portfolio
Fifth Third Bancorp’s (FITB - Free Report) financials are expected to get continuous support from a robust balance sheet position, revenue growth and solid liquidity. Hence, it seems to be a wise idea to add the FITB stock to your portfolio now, given its solid fundamentals and decent growth prospects.
The Zacks Consensus Estimate for FITB's earnings has been revised 3.3% and 2.3% north for 2023 and 2024, respectively, over the past month. This shows that analysts are optimistic regarding the company’s earnings prospects. It currently carries a Zacks Rank #2 (Buy).
In the past six months, shares of the company have gained 5.2%, outperforming the industry's growth of 4.6%.
Image Source: Zacks Investment Research
Mentioned below are a few factors that make FITB a must-buy stock now.
Revenue Growth: Fifth Third’s diverse revenue base will likely support its financials in the upcoming period. Further, it has expanded its fee-income base over the years on strategic buyouts. It completed the acquisition of an embedded payment platform, Rize Money, and Big Data LLC in May 2023. The latter adds national healthcare revenue cycle capabilities.
We estimate NII and non-interest income to rise 3.9% and 3.6% in 2023, respectively. We expect revenues to reflect a compound annual growth rate (CAGR) of 2.9% over the next three years.
Balance Sheet Strength: Deposits being an essential source of funding, FITB continues to focus on core deposit growth in its retail and commercial franchises, given its branch expansions and digital initiatives. Total deposits recorded a CAGR of 10.7% over the last five years, ending 2022.
Thus, a strong deposit base along with solid loan growth provides balance sheet strength. Total loan and lease balance witnessed a CAGR of 6.1% over the same period. The bank is well-positioned to continue its organic growth, aided by a strong loan pipeline and new commitments. We estimate total deposit balances, and net portfolio loans and leases to increase 4.7% and 3.7%, respectively, this year.
Strong Liquidity: Reflecting a solid balance sheet position, as of Sep 30, 2023, FITB had a total debt (comprising long-term debt and other short-term borrowings) of $20.9 billion while total liquidity was $103 billion.
Its senior debt enjoyed investment-grade credit ratings of BBB+, A- and Baa1 from Standard & Poor’s, Fitch and Moody’s, respectively. This will likely enable the bank to access the debt market at favorable rates. Therefore, with a strong liquidity position and manageable debt, we believe it will be able to meet debt obligations in the near term even if the economic situation worsens.
Efficient Capital Distributions: Fifth Third has a decent capital distribution plan supported by solid capital base and ample liquidity. As of Sep 30, 2023, common equity tier 1 ratio was 9.80%. This offers room for enhanced capital distribution plans.
In September 2023, management announced a 6.1% rise in quarterly dividend to 35 cents per share. However, in anticipation of strong loan growth and Dividend Finance deal, the bank has paused share repurchases.
Favorable Valuation: The stock looks undervalued right now compared with the industry. It currently has a price/earnings (F1) ratio of 7.34, lower than the industry average of 8.15.
Further, FITB stock has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Stocks Worth a Look
A couple of other top-ranked stocks from the banking space are First Citizens BancShares, Inc. (FCNCA - Free Report) and Wells Fargo & Company (WFC - Free Report) .
The Zacks Consensus Estimate for First Citizens BancShares' current-year earnings has been revised 3.7% upward over the last 30 days. The stock has risen 19.1% over the past six months. Currently, FCNCA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wells Fargocarries a Zacks Rank #2 at present. The consensus mark for WFC’s 2023 earnings has been revised 7.6% upward over the last 30 days. In the past six months, WFC’s shares have gained 7.1%.