Signs Of Improved Momentum At Fifth Third Are Welcome

Cincinnati-based Fifth Third (FITB) has never really been my favorite regional bank. With a performance that matches the trailing 12-month performance for the regional indices, beats slightly on a two-year comp and trails modestly on a five-year comp, I can’t say that I regret that position all that much. In fairness to this bank, though, performance has been improving recently, and if management can skillfully reposition the bank for this next phase of the cycle and successfully integrate MB Financial (MBFI), there’s enough upside here to at least consider the name.

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Signs Of Improved Momentum At Fifth Third Are Welcome

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)

Investopedia: PNC Acquires Another Fixer-Up Bank Chain

For a well-run bank, PNC (NYSE:PNC) is not shy about taking on other banks' troubles in the name of market expansion. Having expanded into the Midwest and Florida with the acquisition of National City in 2008, PNC is moving into the Southeast region of the U.S. with the acquisition of Royal Bank of Canada's (NYSE:RY) U.S. banking operations. While a curious deal in some respects, it could represent a toe-hold for a firm quickly become a super-regional player. 

Terms of the Deal  
PNC will be paying $3.45 billion to Royal Bank of Canada for its U.S. operations, a regional bank with $25 billion in assets and 424 branches in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia. PNC will have the option of paying up to $1 billion of the deal price in its own stock, a move that would prospectively represent about 3% of the bank's stock. To raise the cash for the deal, PNC will likely need to issue instruments like debt and trust preferred securities (a form of preferred stock).

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http://stocks.investopedia.com/stock-analysis/2011/PNC-Acquires-Another-Fixer-Up-Bank-Chain-PNC-RY-TD-BMO-RF-SNV-CFR0621.aspx