Fifth Third: It's Really Not That Bad Out There

Nov. 02, 2020 8:29 AM ETFifth Third Bancorp (FITB)4 Comments
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WG Investment Research


  • Fifth Third's stock has significantly underperformed the broader market so far in 2020.
  • The bank reported Q3 2020 results that were actually well-received by the market, unlike most of the other banks that I follow.
  • The operating environment for Fifth Third will be challenging through at least the end of 2020, but the backdrop is really not that bad.
  • We're long Fifth Third, and we have no plans to reduce our stake in the near future.

Fifth Third's (NASDAQ:FITB) stock has significantly underperformed the broader market over the last year, and it has been pretty much the same story so far in 2020.

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The COVID-19 (and low interest rate) environment is going to be a significant headwind for Fifth Third, and the other regional banks, through at least the end of 2020 but I think that investors with a time horizon longer than a year or two should seriously consider staying the course.

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Fifth Third reported Q3 2020 results that beat on the bottom-line but that fell short of the top-line estimate. The bank reported Q3 2020 adjusted EPS of $0.78 (beat by $0.19) on revenue of $1.9B (missed by $90mm).

Source: Q3 2020 Earnings Press Release

The highlights:

Source: Q3 2020 Earnings Slides

Fifth Third reported strong return metrics (e.g., ROA well-above 1% and ROE above 10.5%) and the bank's net interest margin ("NIM") was actually better-than-expected, unlike many other financial institutions that I follow. Moreover, the bank's credit losses were below management's guidance.

On the other hand, the bank's quarterly results were negatively impacted by several factors (e.g., COVID-19 related expenses & restructuring charge) and management expects for these headwinds to stay in place through at least the end of the current fiscal year. However, any way you slice it, Fifth Third's Q3 2020 results were impressive from almost top to bottom, especially considering the backdrop. Additionally, nothing that I read in the earnings report changed my mind about Fifth Third being a solid long-term investment - as I described in "FITB: It Will (Likely) Take Time For The Story To Play Out", the bulls will likely be rewarded for staying the course through this period of uncertainty.

Looking Ahead, It's Really Not That Bad Out There

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This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long FITB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

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