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Fifth Third Bancorp: Financial Loser

Atlantic Equities analyst Richard Staite said in a report Jan. 29 that the increase in MBS yields had led to a contraction in the primary secondary mortgage spread to 82 basis points from an average of 123 basis points during the fourth quarter. This means smaller gains on the sale of loans to government-sponsored enterprises, including Fannie Mae (FNMA) and Freddie Mac (FMCC).

During a presentation at the Credit Suisse Financial Services Forum on Wednesday, Fifth Third CEO Kevin Kabat said it was too early to comment on how much mortgage loan gain-on-sale margins had declined during the first quarter, but he did say that the declining mortgage spreads would affect the "industry as a whole."

Stifel Nicolaus analyst Christopher Mutascio on Monday downgraded Fifth Third to "hold" from "outperform," saying the move was "purely a valuation call as the shares are now within 2% of our $17 target price." The analyst also said "we still like it over other Midwest banks like Comerica and KeyCorp ," which he downgraded to "sell" the same day.

Mutascio estimates that Fifth Third will earn $1.66 a share this year, with earnings growing to $1.73 a share in 2014.

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

FITB Chart FITB data by YCharts

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

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>Contact by Email.

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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