UPDATE: Nomura Initiates Coverage on Fifth Third Bancorp with Neutral Rating, $17 PT on Limited EPS Growth
In a report published Wednesday, Nomura initiated coverage on Fifth Third Bancorp (NASDAQ: FITB) with a Neutral rating and $17.00 price target.
Nomura noted, “Initiating coverage with Neutral rating. We expect Fifth Third to show stable trends in 2013 with flattish NII and expenses, a modest pickup in core fee revenue, and a solid 115bps ROA. All this leads to positive operating leverage of 100bps in our model, in line with consensus. The stock is trading in line with peers on P/B and is at a discount on P/E, but we see limited multiple expansion because of meager EPS growth and the boost from capital returns is already baked into consensus estimates, which call for a 70% combined payout ratio. Fifth Third has a solid capital position with an 8.8% Basel III T1C ratio, which places it at the upper end of its bank peers. The bank continues to see improving credit trends and NPAs were down 12% QoQ in 4Q12. We expect Fifth Third‟s credit improvement to continue and more reserve releases to come.”
Fifth Third Bancorp closed on Tuesday at $16.51.
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