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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

10 Midwest Bank Stocks Finally Paying Off

Stocks in this article: BAC C JPM WFC HBAN FITB KEY USB TCB ASBC FMER CRBC MBFI FFBC

1. Fifth Third Bancorp



Shares of Fifth Third Bancorp of Cincinnati closed at $14.33 Friday, returning 13% year-to-date, following an 11% decline during 2011.

The company last Wednesday announced that the Federal Reserve had rejected Fifth Third's plan to increase its quarterly dividend from the current payout of eight cents, and also objected to common share buybacks, except for "the repurchase of common shares in an amount equal to any after-tax gains realized by Fifth Third from the sale of Vantiv, Inc. common shares by either Fifth Third or Vantiv," which has made preliminary filings for a public offering.

Based on the current payout, the shares have a dividend yield of 2.23%.

The shares trade for 1.4 times tangible book value, and for 10 times the consensus 2012 EPS estimate of $1.40. The consensus 2013 EPS estimate is $1.54.

Last Tuesday, after the stress test results were made public, Morgan Stanley analyst Ken Zerbe predicted that Fifth Third would submit a new capital plan to the Fed, and would "receive approval for a roughly 60% combined payout ratio in 2012 (perhaps weighted more toward the back half of the year), equating to buybacks of 3.6% of shares outstanding."

Zerbe said that Fifth Third remained one of his firm's top bank stock picks, "due to its strong profitability, aggressive approach to capital management, and large fee income base."

The analyst's price target for Fifth Third is $18, implying 26% upside from Friday's close. Zerbe estimates Fifth Third will earn $1.45 a share this year, followed by 2013 EPS of $1.50.

Interested in more on Fifth Third Bancorp? See TheStreet Ratings' report card for this stock.

>>To see these stocks in action, visit the 10 Midwest Bank Stocks Finally Paying Off portfolio on Stockpickr.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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