Market Overview

MB Financial Acquisition Makes Fifth Third A Buy, Wedbush Says In Upgrade

Share:
MB Financial Acquisition Makes Fifth Third A Buy, Wedbush Says In Upgrade
Related FITB
Macquarie Downgrades Wells Fargo, Comerica, Sees Peak Bank Margins Ahead
Benzinga's Top Upgrades, Downgrades For September 4, 2018
MB Financial gets stockholder approvals for merger with Fifth Third (Seeking Alpha)
Related MBFI
Fifth Third Is Worth A Premium Despite Sluggish Loan Growth, Argus Says In Bullish Initiation
Baird's Bearish Case For Fifth Third Bancorp Comes To An End After M&A Deal
MB Financial gets stockholder approvals for merger with Fifth Third (Seeking Alpha)

Wedbush upgraded Fifth Third Bancorp (NASDAQ: FITB) and outlined its projections for the bank's growth potential in the wake of its acquisition of MB Financial (NASDAQ: MBFI).

The Analyst

Analyst Peter Winter upgraded Fifth Third from Neutral to Outperform and increased the price target from $31 to $34.

The Thesis

The acquisition of MB Financial appears beneficial, Winter said in the upgrade note. (See the analyst's track record here.)

 “MBFI is very [complementary] given very little commercial banking overlap and FITB has a stronger consumer bank; but MBFI has better branch locations,” the analyst said. 

The deal increases Fifth Third's share in Chicago, its largest market, Winter said. As a merged entity, Fifth Third will rank No. 2 in retail deposits, No. 4 in total deposits and No. 2 in middle-market banking in the Chicago area, he said.

In order to reduce the risk of customer and employee attrition, Fifth Third will retain MB Financial’s senior management and bankers, the analyst said. 

The Fifth Third-MB tie-up is expected to close in the first quarter of 2019 and generate $255 million in pretax savings, Winter said. 

“Management identified $100 million in cost saves from legacy FITB with most of it being realized in 1Q19. Plus there is approximately 40 to 50 percent of earnings to be realized from its original $800 million target on [the bank's profit improvement program] Project NorthStar."

A run-off of commercial loans — $5 billion over two years — is in the rearview mirror, making Fifth Third's year-over-year comparisons easier and reducing its credit risk in the next downturn, according to Wedbush. 

Price Action

Fifth Third shares were up 0.65 percent at $29.62 at the time of publication Tuesday, while MB Financial shares were 0.17 percent higher at $48.54. 

Related Links:

Fifth Third Is Worth A Premium Despite Sluggish Loan Growth, Argus Says In Bullish Initiation

Analyst Says Things Could Get Worse For Deutsche Bank's Stock

Latest Ratings for FITB

DateFirmActionFromTo
Sep 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Sep 2018WedbushUpgradesNeutralOutperform
Jul 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for FITB
View the Latest Analyst Ratings

Posted-In: bank stocks bankingAnalyst Color News Upgrades Price Target M&A Analyst Ratings Best of Benzinga

 

Related Articles (FITB + MBFI)

View Comments and Join the Discussion!

Morgan Stanley: State Street's Purchase Of Charles River Makes Strategic Sense

Tropical Storms And Trade Storms: Oil, Dollar Rise On Weekend Tumult