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) --

Fifth Third Bancorp


was the winner on Tuesday among the largest U.S. banks, with shares rising over 1% to close at $17.03.

The broad indices all closed higher after yet another economic report showed a strengthening real estate recovery in the U.S. S&P Dow Jones Indices said Tuesday that the 10-city S&P/Case-Schiller Home Price index for February was up 8.6% from a year earlier, while the 20-city index was up 9.3% year over year. The 10- and 20-city indices showed respective increases in February from January of 0.4% and 0.3%.

"The 10- and 20-City Composites recorded their highest annual growth rates since May 2006," according to David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. Blitzer said in a press release that "Phoenix, San Francisco, Las Vegas and Atlanta were the four cities with the highest year-over-year price increases."

Considering that Arizona, California, Nevada and Georgia were all grossly affected by the bursting of the real estate bubble in 2008, the data underscores just how dramatically home prices are recovering.

Also See: Foreclosure Inventory Down 23% in March >>

In a note to clients following the release of the S&P Case-Schiller data, Rafferty Capital analyst Richard Bove tied the rising home prices to bank stock valuations.

"The banks have marked down their holdings

of repossessed real estate to levels that reflected housing prices at the bottom," Bove wrote, adding that "the banks are not allowed to mark to market these holdings as they do certain of their securities holdings or their fair valued debt."

This means that book value per share is understated for many banks.

Because construction lending is very difficult in the current regulatory climate and "the regulators also frown upon lending to low income households," Bove wrote that "the demand for the residential real estate assets being held by banks is growing. The foreclosed property division (OREO) is now a profit center."

According to Bove, the big regional banks and money center banks with OREO representing the largest percentage of common equity include Fifth Third Bancorp, at 1.92%;

Wells Fargo


, at 1.59%;

PNC Financial Services Group


, at 1.40%; and



, at 1.13%.


KBW Bank Index


was up slightly to close at 56.87, with all but seven of the 24 index components ending with gains.

Also see: Three Top Picks Among Regional Banks >>

Fifth Third

Shares of Fifth Third Bancorp of Cincinnati have returned 13% this year, following a 23% return in 2012. The shares trade for 1.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.8 times the consensus 2014 earnings estimate of $1.73. The consensus 2013 EPS estimate is $1.71.

Based on a quarterly payout of 11 cents, the shares have a dividend yield of 2.58%.

Fifth Third on April 18 reported first-quarter net income attributable to common shareholders of $413 million, or 46 cents a share, compared with $390 million, or 43 cents a share, in the fourth quarter, and $421 million, or 45 cents a share, in the first quarter of 2012.

The first-quarter results included a benefit of roughly $22 million, or 2 cents a share after taxes, on the valuation of the company's warrant holds in



, Fifth Third's former payment processing subsidiary, which was spun off in 2009.

The results for the first quarter of 2012 had been boosted by positive adjustments of roughly $90 million, or 10 cents a share, on Vantiv shares and warrants.

Excluding the special items, Fifth Third said its first-quarter earnings came to 44 cents a share, increasing 22% from the first quarter of 2012.

Please see


earnings coverage

for a discussion on Fifth Third's financial results, which included very strong commercial loan growth.

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

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

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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.