Nomura Securities Downgrades Fifth Third Bancorp (FITB) to Reduce
- Top 10 News for 10/17 - 10/21: Merger Rumors Abound; CEOs Depart; Tesla Kicks Autopilot Up A Notch
- Wall Street ends little changed; Microsoft hits record
- AT&T (T) in Advanced Talks to Acquire Time Warner (TWX) - DJ
- Rockwell Automation (ROK) Said to Attract Takeover Interest from Schneider Electric - Source
- British American Tobacco Offers to Acquire Remaining Shares of Reynolds American (RAI) for $56.50/Share
Get daily under-the-radar research with StreetInsider.com's Stealth Growth Insider Get your 2-Wk Free Trial here.
Nomura Securities downgraded Fifth Third Bancorp (NASDAQ: FITB) from Neutral to Reduce.
Analyst Bill Carcach commented, FITB has outperformed KEY by ~16pp from its January lows and is ahead of the BKX YTD, but we expect a combination of disappointing loan growth, securities reinvestment headwinds, and negative EPS revisions to drive a reversal in FITB’s outperformance:
- FITB’s loan growth has been on a downward trajectory since 3Q15, driven by decelerating commercial, home equity, auto, and credit card loan growth. Looking ahead, the consensus is looking for growth to accelerate in 2016 / 2017, but we see downside to expectations
- FITB faces the greatest reinvestment risk in our coverage universe, with its securities portfolio accounting for 26% of its net interest income last quarter and securities yields that are ~2-3x that of current US Treasuries. We estimate that FITB would face the greatest EPS headwinds if it were to reinvest securities maturing in less than one year at current rates.
- We see 4% downside to 2016 and 2017 consensus EPS expectations for FITB, which currently trades at a two-turn premium to KEY despite having a weaker return outlook for 2017. While we get that the market is excited about “Project North Star”, we believe shares have gotten ahead of themselves; in contrast, we believe that skepticism over KEY’s ability to deliver on FNFG cost saves has weighed on shares, but we fully expect KEY to execute. We see value in being underweight FITB vs. KEY.
Shares of Fifth Third Bancorp closed at $20.69 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- RBC Capital Raises Price Target on Benchmark Electronics (BHE) Following In-Line 3Q
- Jefferies Cuts Price Target on Boston Beer Co. (SAM) to $140 Following Weak 3Q
- Jefferies Cuts Price Target on Reliance Steel (RS) Following 3Q EPS Miss and Guidance
Create E-mail Alert Related CategoriesAnalyst Comments, Downgrades
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!