Fifth Third Has Done Well In The Market, But Conditions Are Still Tough

Fifth Third (NASDAQ:FITB) has been a relatively strong name this year within the group of banks I follow closely, with the shares outperforming the likes of BB&T (NYSE:BBT), U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), and PNC (NYSE:PNC) since my last update on this Cincinnati bank. While this probably sounds like sour grapes, I wonder if this has been part of a "flight from quality" as names like Comerica (NYSE:CMA) and Regions (NYSE:RF) have also been doing better in part on less fear about energy credits and more optimism regarding the opportunities down the road from cost cuts and higher rates.

I struggle to make the valuation really work now. Even assuming that Fifth Third is on the higher end of the range in terms of ROE improvements over the next five to 10 years, I still don't see it being up there with the likes of U.S. Bancorp or Wells Fargo. I think Fifth Third is more likely to generate mid single-digit earnings growth, and that supports a fair value around $21 to $23.

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Fifth Third Has Done Well In The Market, But Conditions Are Still Tough