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Annotated article summary from this weekend's Barron's; receive all our Barron's summaries by signing up here:

On the Road to Repair by Vito J. Racanelli

Summary: With assets of $100 billion, Fifth Third Bancorp (FITB) is one of America's biggest banks. A number of factors have lead to a share-price drop from almost $70 in 2002 to a present $40.50: 1) The inverted yield curve has narrowed the loan/deposit interest differential. 2) Its focus on Old-Economy (slow-growing) markets. 3) Accounting errors that led the Fed to find fault with its risk controls in 2002. But the Street may be ignoring a turnaround in progress: 1) Its recent selling of low-yielding securities will lead to higher-yield investments. 2) Thorough management changes, including a decentralization of its 19 affiliates, each of which has its own CEO. 3) Regional bank consolidation that is likely to accelerate. 4) At some point the curve will revert and margins will improve. Its new management is gaining credibility, and Citigroup analyst Keith Horowitz says calls Fifth Third "one of the better values in regional banks." T. Rowe analyst Mike Holton figures its upside is "into the 50s." Fifth Third shares have moved above their 50- and 200-day moving average. Insiders have been upping their purchases, suggesting the skeptics may be losing the battle. And just two of the analysts who follow Fifth Third rate its shares a Buy -- making it a contrarian's dream.

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Fifth Third 26 02 2007

Source: Fifth Third Bancorp: A Contrarian's Dream - Barron's