Wells Fargo Sees Fifth Third Bancorp (FITB) Outperforming PNC (PNC)

January 29, 2013 11:30 AM EST
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Price: $26.29 +1.15%

Rating Summary:
    11 Buy, 21 Hold, 5 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Wells Fargo made a couple notable changes in the Large Cap U.S. Bank sector Tuesday. The firm upgraded Fifth Third Bancorp (NASDAQ: FITB) from Market Perform to Outperform ($17-$19 valuation range), while downgrading PNC (NYSE: PNC) from Outperform to Market Perform.

The firm notes the price to tangible book value ratio (TBV) valuation for the two has have recently converged and they now expect relative outperformance at Fifth Third Bancorp given: "(1) stronger PPNR momentum at FITB supported by superior PPNR margins; (2) we forecast FITB's core ROTCE will stay at 14% through 2014 as PNC's declines to 12%; (3) we expect materially higher 2013 capital returns at FITB (76% total payout ratio vs. 40% at PNC) given FITB's higher capital ratios; (4) FITB's leverage to C&I loan growth and a recovery in Midwestern manufacturing; and (5) FITB's ability to generate shareholder value via Vantiv stake monetization.

Wells raised 2013/2014 EPS ests for FITB to $1.67/1.80 from $1.65/1.70 based on recent management guidance and enhanced capital return potential.

For an analyst ratings summary and ratings history on Fifth Third Bancorp click here. For more ratings news on Fifth Third Bancorp click here.

Shares of Fifth Third Bancorp closed at $16.18 yesterday.

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