Fifth Third's Shares Are Back To Pre-Pandemic Levels, But There Could Still Be Upside

Another of my “it’s not really that bad” calls on undervalued banks back in the late summer/early fall of 2020, Fifth Third (FITB) has outperformed as investors have gained more confidence on the economic outlook for 2021 and banks as a whole. Up more than 50% from my last article and outperforming its peers by about 15% since then, higher estimates have been driven in large part by an improved credit outlook.

Although I expect core earnings to accelerate significantly from the low starting point of 2020 results, my core growth expectations aren’t really that high, as I think Fifth Third will be a low single-digit growing on a long-term core earnings basis. There’s certainly room for outperformance there, but as is I think Fifth Third is a little undervalued below the mid-$30’s. With the bank’s ability to deploy a lot of cash into lending as rates improve and likely richer reserve releases than many peers, I think the odds of beat-and-raise quarters are better here than for many peers.

 

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Fifth Third's Shares Are Back To Pre-Pandemic Levels, But There Could Still Be Upside