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Fifth Third Bancorp: Financial Winner (Update 1)

Shares of Fifth Third have returned 29% this year. The shares trade for 11 times the consensus 2014 earnings estimate of $1.74 a share, among analysts polled by Thomson Reuters.

Based on a quarterly payout of 12 cents, the shares have a dividend yield of 2.51%.

Fifth Third reported third-quarter net income available to common shareholders of $421 million, or 47 cents a share, declining from $582 million, or 65 cents a share, in the second quarter, but increasing from $390 million, or 43 cents a share, during the third quarter of 2012.

The sequential earnings decline and year-over-year earnings increase mainly reflect items related to an investment in Vantiv (VNTV), Fifth Third's former payment processing subsidiary, which was spun-off through a public offering in April 2012.

Fifth Third during the second quarter booked $157 million, or 17 cents a share, in after-tax gain on the sale of Vantiv shares and an after-tax benefit of $49 million, or five cents a share, on the valuation of a warrant to buy Vantiv shares. Fifth Third during the third quarter of 2012 booked a negative adjustment, after tax, of $16 million, or a penny a share, on its Vantiv holdings.

Aside from (messy, but usually profitable) Vantiv-related items, the sequential earnings decline mainly reflected the overall industry decline in mortgage origination volume, as rising long-term interest rates have curtailed the wave of refinance applications. Fifth Third's mortgage banking net revenue declined to $121 million in the third quarter, from $233 million the previous quarter and $200 million a year earlier.

KBW analyst Christopher Mutascio in a note to clients on Oct. 22 pointed out that Fifth Third showed the largest year-over-year growth in revenue-per-share among large-cap banks covered by his firm. The growth in revenue per share reflects Fifth Third's reduced share count from buybacks that haven't been outweighed by stock bonuses to executives.

Fifth Third announced after Tuesday's market close that it had agreed to settle an investigation by the Securities and Exchange Commission of its accounting for commercial loans sold or reclassified as held-for-sale during the fourth quarter of 2008.

The bank admitted no wrongdoing, but said it would consent to an SEC order that would include an undisclosed fine.

The company also said Fifth Third CFO Daniel Poston "is in separate settlement discussions with the SEC Staff." That settlement is expected to include "a cease and desist order, a separate civil money penalty, and a one-year ban from practicing before the SEC," Fifth Third said.

Fifth Third announced Poston "has been named the Company's chief strategy and administrative officer," and that Tayfun Tuzun, previously the company's treasurer, has been named executive vice president and chief financial officer.

FITB ChartFITB data by YCharts

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

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

>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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