- Fifth Third reports second-quarter earnings of 40 cents a share, beating the consensus estimate by a nickel.
- Results include $36 million after-tax gain on sale of Vantiv shares.
- Net interest income flat; noninterest expense down 4% sequentially.
The shares trade for 1.2 times their reported June 30 tangible book value of $11.89, and for nine times the consensus 2013 earnings estimate of $1.51 a share. The consensus 2012 EPS estimate is also $1.51. Based on a quarterly payout of eight cents, the shares have a dividend yield of 2.32%. Stifel Nicolaus analyst Christopher Mutascio rates Fifth Third a "Buy," with a $17 price target, and said following the earnings release that "although we expected 2Q12 expenses to fall due to the seasonality of employee benefit expense typically recorded in 1Q, the drop was more than we had expected and was the primary driver of the quarterly beat." Mutascio said "total loan yields decreased 8 basis points sequentially with the commercial loan and auto loan portfolios bearing the brunt of the decrease," which was "only partially offset by a 6 basis point decrease in liability costs," but Fifth Third's "management expects net interest income to be relatively stable in 3Q12 and the net interest margin to compress another 2-3 basis points." Jefferies analyst Ken Usdin also rates Fifth Third a buy, with a lower target of $16, and said on Thursday that "forward guidance for 3Q (pre-provision of$585mm) is solid, with most of the strength likely related to mortgage." Usdin also said that "third quarter net interest income guidance ($900mm)looks a little light as earning asset growth is lower-than-expected," and "could be a result of lackluster loan growth as end-of-period loans were only up 0.3%." The analyst said that Fifth Third's forward guidance of "$970mm-$975mm of expenses... is higher-than-expected, perhaps the result of potential expense related to better mortgage banking." FBR analyst Paul Miller rates Fifth Third "Outperform," with a $17 price target, and said on Thursday that the company's "capital position is well above Basel III requirements, and management has been vocal about its intention to return capital to shareholders." Fifth Third has resubmitted its capital plan to regulators, proposing "a dividend hike and share repurchase increase above what it had requested
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