Morningstar | Expense Controls and Success of MBFI Acquisition Remain Key for FifthThird
Fifth Third’s reputation as a solidly profitable bank took a hit during the financial crisis. With a strong line of fee-income businesses, the bank was regularly reporting returns on equity that exceeded 17% before 2007. In 2007, primarily because of weakness in some of the bank’s most significant markets--Ohio, Michigan, and Florida--loan losses began to pile up. Although management could not prevent the impact of operating in hard-hit economies, a generally increasing appetite for risk compounded the bank’s problems. Over the course of 2008-09, loan-loss provisions ate up more than 100% of net interest income. Although the bank’s footprint includes some potentially slow-recovering economies, credit issues have subsided and now appear to be under control.We think Fifth Third has emerged from the crisis as one of the Midwest’s more stable banking franchises, with strong deposit share across several large cities in Ohio and Michigan, where its deposit share runs between 21% and 28%. We believe the bank is also entering a new stage of better cost controls as project “North Star†comes to a close. This should set up the bank for a consistent sub-60% efficiency ratio. We expect all of these improvements to progress, with or without the bank's current stake in Vantiv.With interest rates finally beginning to normalize, we expect net interest margins will continue to expand and net interest income will grow at a steady pace. Better card analytics, increased capital markets and M&A offerings, and bolt-on acquisitions should help drive growth in fee income. Partnerships with financial technology firms, such as GreenSky, should also help increase loan and fee growth over the next several years. We think the bank still has further to run with its expense discipline, and positive operational leverage should be maintained for the foreseeable future. There may also be further boosts from positive regulatory developments coming down the pike as well, and with a portion of the Vantiv stake still remaining, share buybacks could continue at a higher pace. All of these developments should put Fifth Third in a position to do well, even as it finishes selling off its Vantiv stake.Fifth Third Bancorp is a bank holding company. Through its subsidiaries, the company provides financial products and services to the commercial, financial, retail, governmental, educational, energy and healthcare sectors. The company's segments are: Commercial Banking, which provides credit intermediation, cash management and financial services; Branch Banking, which provides a range of deposit and loan products to individuals and small businesses; Consumer Lending, which includes the company's residential mortgage, automobile and other indirect lending activities; and Wealth and Asset Management, which provides a range of investment alternatives for individuals, companies and not-for-profit organizations.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.