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Fifth Third Stands Out on Boring Day for Banks

Stocks in this article: FITB FNFG I:BKX

NEW YORK ( TheStreet) -- Fifth Third Bancorp (FITB) was the winner among large-cap bank stocks on an otherwise lackluster Thursday for the sector, with shares rising 1.1% to close at $20.67.

The broad stock indices ended mixed, as investors took a breather from the Wednesday euphoria that followed the Federal Open Market Committee's announcement that the Federal Reserve would taper its bond purchases in January. The Fed on Wednesday also released its economic projections, showing a "central tendency" -- throwing out the three highest and three lowest projections -- of a U.S. gross domestic product growth rate ranging from 2.8% to 3.2% and continued improvement in the unemployment rate to a range of 6.3% to 6.6% during 2014.

In economic news, the Department of Labor on Thursday said initial unemployment claims for the week ended Dec. 14 totaled 379,000, increasing by 10,000 from the previous week's figure of 369,000.  Analysts polled by Reuters had on average estimated new unemployment claims would come in considerably lower, at 334,000.

The four-week moving average for unemployment claims rose to 343,500, increasing from 330,250 the previous week.

Also on Thursday, the National Association of Realtors said sales of previously owned homes in the U.S. during November declined to a seasonally adjusted annual rate of 4.90 million units from 5.12 million in October. This was the lowest level of sales since April.

On a brighter note, Zillow said homes in the U.S. have gained $1.9 trillion in value during 2013, for the largest one-year gain since 2005.

Back to the Banks

The KBW Bank Index (I:BKX) was up slightly -- to 68.04, with winners and losers roughly split.  The loser among the 24 index components was First Niagara Financial Group (FNFG) of Buffalo N.Y., with shares sliding 5.3% to close at 10.22, after the company announced that Gary Crosby had been named permanent CEO after serving as interim CEO since March, when former CEO John Koelmel abruptly resigned.

First Niagara's stock had underperformed during 2012, sliding 5%, while the KBW Bank index had risen 30%.  The underperformance reflected investors' disappointment with a wave of acquisitions, dilutive common-share offerings and a harsh dividend cut late in 2011.

But First Niagara's stock has performed quite well this  year, returning 33%, although some investors seem disappointed that the company didn't bring in a new CEO from outside.

Fifth Third

Shares of Fifth Third Bancorp of Cincinnati have returned 39% this  year.  The shares trade for 1.6 times tangible book value, for 11.9 times the consensus 2014 earnings estimate of $1.74, and for 11.0 times the consensus 2015 EPS estimate of $1.88, according to Thomson Reuters Bank Insight.

Jefferies analyst Ken Usdin in a report on Wednesday said Fifth Third was his firm's top pick among bank stocks for 2014.

Usdin rates Fifth Third a "buy," with a $23 price target.  He wrote that Fifth Third is well-positioned for an increased deployment of excess capital following the Federal Reserve's next round of stress tests in March, and is also well-positioned for the Fed's eventual decision to raise its target range for the federal funds rate.

Usdin also expects the bank to continue making significant cost cuts within its mortgage lending unit.

The following chart shows the performance this year of Fifth Third's stock against the KBW Bank Index  and the S&P 500 :

FITB Chart
FITB data by YCharts

-- 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 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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