Fifth Third Bancorp (FITB - Analyst Report) has accomplished the buyback of its shares worth $75 million, according to its filing with the Securities and Exchange Commission. The share buybacks were made as per regulatory approval that the company had received in March and were supported by the realized gains from the Vantiv Inc. (VNTV - Snapshot Report) initial public offering (IPO).
The shares were bought back pursuant to an accelerated share repurchase transaction agreement that the company entered into with Goldman, Sachs & Co. (GS - Analyst Report) in April. A total of around 5.5 million shares were bought back at an average price of $13.71.
The share repurchases were made as part of Fifth Third’s previously announced 30 million share buyback program. The company now has the remaining authorization to buyback around 14 million shares under this program.
Notably, according to the 2012 stress test results, Fifth Third was allowed to make this share buyback from the gains from the Vantiv IPO, formerly Fifth Third Processing Solutions, LLC. Moreover, the company got the permission to continue its quarterly common dividend at 8 cents per share and redeem up to $1.4 billion in certain trust preferred securities.
We believe that the share buybacks with the Vantiv gains are in the best interest of the company and its shareholders. With a diversified traditional banking platform, Fifth Third remains well poised to benefit from a recovering economy along its footprints. Its traditional commercial banking franchise built on the customer-oriented localized operating model and solid market share in key markets with focus on further improving density will augur well going forward.
However, a low interest rate environment as well as regulatory issues are concern. Moreover, the objection by the Fed to a number of elements in Fifth Third’s capital plan, including increase in its quarterly common dividend, puts the company in the back foot and weakens its competitive position to some extent.
Fifth Third shares currently retain the Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals we also have a long-term Neutral recommendation on the stock.