Fifth Third Changes The Plan, But The MB Financial Deal Looks Sound (Albeit Pricey)

By and large, bank investors tend to crave and reward consistency, predictability, and conservatism, so it is not that unusual to see the market punish, at least temporarily, surprising moves. To that end, Fifth Third’s (FITB) acquisition of MB Financial (MBFI) seems like a well-reasoned, if expensive, deal that augments Fifth Third’s operations in positive ways. And yet, even though good (just good, not “great”) execution on this deal seems likely to drive more accretion than a buyback would have, investors still sold the shares on the news (with the stock regaining some of that the next day).

I’ve had my reservations about the stock because of valuation, but the shares have been quite strong until the deal announcement – beating peers/rivals like KeyCorp (KEY), Huntington (HBAN), U.S. Bancorp (USB), PNC Financial (PNC), and JPMorgan (JPM) over the past year. Although I still don’t see the value in these shares that many investors apparently do, I think the MB Financial deal is an understandable deviation in the company’s strategy and a solid move on balance.

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Fifth Third Changes The Plan, But The MB Financial Deal Looks Sound (Albeit Pricey)