Fifth Third Bancorp – Value Analysis (NASDAQ:FITB) : November 14, 2017

Capitalcube gives Fifth Third Bancorp a score of 46.

Our analysis is based on comparing Fifth Third Bancorp with the following peers – Huntington Bancshares Incorporated, PNC Financial Services Group, Inc., Wintrust Financial Corporation, Commerce Bancshares, Inc., TCF Financial Corporation, SunTrust Banks, Inc., Wells Fargo & Company, Bank of America Corporation and LCNB Corp. (HBAN-US, PNC-US, WTFC-US, CBSH-US, TCF-US, STI-US, WFC-US, BAC-US and LCNB-US).

Fundamental Overview

Fifth Third Bancorp has a fundamental score of 46 and has a relative valuation of UNDERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 1.21 is about median in its peer group.
  • We classify FITB-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • FITB-US has relatively high profit margins while operating with median capital turns.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • FITB-US‘s return on equity currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • FITB-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s equity capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • FITB-US might have enough interest coverage to take-on additional debt prudently.

Drivers of Margin

  • FITB-US‘s pre-tax margin suggests relatively low operating costs.
  • The company’s net interest income (net interest income/total revenues) of 54.62% is around peer median suggesting that FITB-US‘s lending operations does not benefit from any differentiating pricing advantage. However, FITB-US‘s pre-tax margin is more than the peer median (42.12% compared to 33.73%) suggesting relatively low operating costs.
  • The company’s proportion of fee based income (i.e. non interest income/total revenues) of 45.38% is around peer median. In addition, FITB-US‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 57.12x is also around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Fifth Third Bancorp engages in the provision of banking and financial services, offers retail and commercial banking, consumer lending services, and investment advisory services through its subsidiary Fifth Third Bank. It operates through the following segments: Commercial Banking, Branch Banking, Consumer Lending, and Wealth and Asset Management. The Commercial Banking segment offers credit intermediation, cash management, and financial services to large and middle-market businesses. The Branch Banking segment includes deposit, loan, and lease products to individuals and small businesses. The Consumer Lending segment comprises of mortgage, home equity, automobile, and indirect lending activities. The Wealth and Asset Management segment provides investment alternatives for individuals, companies, and not-for-profit organizations. The company was founded on October 7, 1974 and is headquartered in Cincinnati, OH.