A Tour Of 4 Midwestern Regional Banks: Fifth Third Bancorp (FITB), Comerica Incorporated (CMA)

Page 1 of 2

Fifth Third Bancorp (NASDAQ:FITB)Cincinnati based Fifth Third Bancorp (NASDAQ:FITB) has a well-earned reputation as a conservative, well run institution. Despite having much of its asset base in two of the states (Michigan and Florida) most devastated in last decade’s recession, Fifth Third Bancorp (NASDAQ:FITB) has only been unprofitable one year in the last twenty, in 2008. In contrast, 2012 proved that the roughly $120 billion asset bank is back to its pre-recession levels. The year was capped by a strong fourth quarter coming in at $390 million, or $0.43 per share. This was a 30% jump from the fourth quarter of 2011, and also a few cents above the $0.41 per share that analysts had forecast.

Overall in 2012, earnings came to $1.54 billion, or $1.66 per share, up 41% from the $1.18 in 2011. Lowered loss provisions and excellent loan growth, especially on the mortgage side of things, brought about the stout earnings. $1.66 per share equaled a 1.32% return on assets, and an 11.1% return on equity, solid numbers both. Yet, the issue for any well performing bank from my standpoint is whether there is reason to expect improvement in key metrics as we look ahead over the next few years. With Fifth Third Bancorp (NASDAQ:FITB), unless there is an improved credit curve, I don’t see how revenue and profit pictures can meaningfully grow.

Mortgage originations grew in 2012 to $25.2 billion, a 35% jump from the $18.6 billion in 2011. The bank’s overall loan portfolio grew by about $4 billion, or by 5% to almost $84 billion at the end of 2012 versus 2011. Fifth Third Bancorp (NASDAQ:FITB)’s common capital at year end 2012 stood at 9.5%, which while well over the regulatory minimum, stood below most of its peer banks’ levels.

At the recent Citigroup Inc. (NYSE:C) conference, Fifth Third Bancorp (NASDAQ:FITB) noted that in 2012, it paid out a total of 62% of its profits to shareholders in the forms of stock buybacks and dividends. That payout total is relatively comfortable for a bank of Fifth Third’s stability, and we can expect that ratio to grow slowly, if at all in coming years. Therefore, since I don’t see much in the way of earnings improvements over the next year or two, I don’t see much room for increasing the size of the dividend or buybacks. I think Fifth Third is a suitable choice for very conservative investors, but for those looking for capital growth, it might be best to look elsewhere.

Comerica Incorporated (NYSE:CMA) Bank continued its recovery from the recessionary years with an improved 2012. Earnings came to $521 million, or $2.67 per share, a jump of nearly 30% from the $2.09 posted a in 2011. The earnings improvement was led by a $65 million dollar drop, or about 45% plunge in its provision for loan losses. Also relatively strong loan growth of 7% over the course of the year aided net interest income to eke out a $75 million, or 4.5% gain.

But what I like most about Comerica Incorporated (NYSE:CMA) is it still has plenty of room to improve earnings further. In the Sandler O Neill West Coast Conference in early March, Comerica management stated goals of a return on assets in excess of 1.3%, and an efficiency ratio of under 0.60%. In 2012 the bank’s return on assets was just 0.83% and its efficiency ratio was 0.69%. Comerica Incorporated (NYSE:CMA) will achieve those improvements by continuing the recent path of taking assets out of its slow growth Michigan market, and reinvest those assets in faster growing Texas and California. Indeed, in 2012 the bank’s Michigan loan portfolio fell by 2%, while the Texas and California loan books grew by 10% and 13%, respectively.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!