We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fifth Third (FITB) Rides on Organic Growth Amid Cost Woes
Read MoreHide Full Article
Fifth Third Bancorp (FITB - Free Report) is well poised to benefit from diversified revenue sources. This, along with rising deposits and loan base, is likely to keep supporting balance-sheet strength. However, a rise in non-interest expenses is expected to hamper bottom-line growth to some extent. Also, significant exposure to commercial loans remains a concern.
What’s Aiding It?
The company has expanded its fee-income base over the years on strategic acquisitions. FITB acquired Big Data LLC in May this year, enhancing its digital payments and managed services offerings. In the same month, it also acquired an embedded payment platform, Rize Money. The acquisition of Dividend Finance in 2022 and several past deals will continue to drive revenue growth in the upcoming period. We estimate non-interest income to rise 3.6% in 2023.
FITB continues to focus on core deposit growth in its retail and commercial franchises on the back of branch expansions and digital initiatives. Its strong deposit base, along with solid loan growth over the years, has provided balance sheet strength.
The company is well-positioned to continue its organic growth, aided by a strong loan pipeline and new commitments. We estimate both total deposit balances and net portfolio loans and leases to increase 4.7% and 3.7%, respectively, this year.
Fifth Third maintains a strong balance sheet. As of Sep 30, 2023, the company had a total debt (comprising of long-term debt and other short-term borrowings) of $20.9 billion. Further, total liquidity was $103 billion as of the same date. Therefore, with a strong liquidity position and manageable debt, we believe Fifth Third will be able to meet its debt obligations in the near term, even if the economic situation worsens.
Further, analysts are optimistic about the stock’s earnings prospects. The Zacks Consensus Estimate for FITB's current-year earnings has been revised 4% upward over the last 60 days. The company currently carries a Zacks Rank #3 (Hold).
In the past three months, shares of FITB have gained 29.5% compared with the industry's 11.7% rise.
Image Source: Zacks Investment Research
What’s Hurting It?
Though the company's expenses declined in 2022, the metric saw a five-year compound annual growth rate of 4.5% in 2022. The rising trend continued in the first nine months of 2023. Expenses are likely to escalate in the near term due to higher compensation and benefits expenses, branch digitization initiatives, marketing expenses and its ongoing strategic investments in several areas, including technology. We project total non-interest expenses to increase 4.7% in 2023.
Fifth Third's loan portfolio comprises high exposure to commercial loans (62.5% of total loans and leases as of Sep 30, 2023). The current rapidly changing macroeconomic backdrop may put some strain on commercial lending. In addition, the asset quality of these credit categories may deteriorate in case of any economic downturn. If the economic situation deteriorates, the company's financial position will likely be adversely affected by a lack of diversification in its loan portfolio.
Bank Stocks Worth a Look
A couple of better-ranked stocks from the banking space are Byline Bancorp (BY - Free Report) and Merchants Bancorp (MBIN - Free Report) .
The Zacks Consensus Estimate for Byline Bancorp’s current-year earnings has been revised 1.4% upward over the past 30 days. Its shares have gained 18.4% in the past three months. Currently, BY carries a Zacks Rank #2 (Buy).
Merchants Bancorp currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 10.9% upward over the past 60 days. In the past three months, MBIN shares have rallied 42.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Fifth Third (FITB) Rides on Organic Growth Amid Cost Woes
Fifth Third Bancorp (FITB - Free Report) is well poised to benefit from diversified revenue sources. This, along with rising deposits and loan base, is likely to keep supporting balance-sheet strength. However, a rise in non-interest expenses is expected to hamper bottom-line growth to some extent. Also, significant exposure to commercial loans remains a concern.
What’s Aiding It?
The company has expanded its fee-income base over the years on strategic acquisitions. FITB acquired Big Data LLC in May this year, enhancing its digital payments and managed services offerings. In the same month, it also acquired an embedded payment platform, Rize Money. The acquisition of Dividend Finance in 2022 and several past deals will continue to drive revenue growth in the upcoming period. We estimate non-interest income to rise 3.6% in 2023.
FITB continues to focus on core deposit growth in its retail and commercial franchises on the back of branch expansions and digital initiatives. Its strong deposit base, along with solid loan growth over the years, has provided balance sheet strength.
The company is well-positioned to continue its organic growth, aided by a strong loan pipeline and new commitments. We estimate both total deposit balances and net portfolio loans and leases to increase 4.7% and 3.7%, respectively, this year.
Fifth Third maintains a strong balance sheet. As of Sep 30, 2023, the company had a total debt (comprising of long-term debt and other short-term borrowings) of $20.9 billion. Further, total liquidity was $103 billion as of the same date. Therefore, with a strong liquidity position and manageable debt, we believe Fifth Third will be able to meet its debt obligations in the near term, even if the economic situation worsens.
Further, analysts are optimistic about the stock’s earnings prospects. The Zacks Consensus Estimate for FITB's current-year earnings has been revised 4% upward over the last 60 days. The company currently carries a Zacks Rank #3 (Hold).
In the past three months, shares of FITB have gained 29.5% compared with the industry's 11.7% rise.
Image Source: Zacks Investment Research
What’s Hurting It?
Though the company's expenses declined in 2022, the metric saw a five-year compound annual growth rate of 4.5% in 2022. The rising trend continued in the first nine months of 2023. Expenses are likely to escalate in the near term due to higher compensation and benefits expenses, branch digitization initiatives, marketing expenses and its ongoing strategic investments in several areas, including technology. We project total non-interest expenses to increase 4.7% in 2023.
Fifth Third's loan portfolio comprises high exposure to commercial loans (62.5% of total loans and leases as of Sep 30, 2023). The current rapidly changing macroeconomic backdrop may put some strain on commercial lending. In addition, the asset quality of these credit categories may deteriorate in case of any economic downturn. If the economic situation deteriorates, the company's financial position will likely be adversely affected by a lack of diversification in its loan portfolio.
Bank Stocks Worth a Look
A couple of better-ranked stocks from the banking space are Byline Bancorp (BY - Free Report) and Merchants Bancorp (MBIN - Free Report) .
The Zacks Consensus Estimate for Byline Bancorp’s current-year earnings has been revised 1.4% upward over the past 30 days. Its shares have gained 18.4% in the past three months. Currently, BY carries a Zacks Rank #2 (Buy).
Merchants Bancorp currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 10.9% upward over the past 60 days. In the past three months, MBIN shares have rallied 42.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.