What drove revenue?
Fifth Third Bancorp’s (FITB) revenue net of interest expense fell 3% in 2016 before gaining 15% in 9M17 (the first nine months of 2017). Net interest income grew 2% and 5% in 2016 and 9M17, respectively. Noninterest income fell 10% in 2016 before gaining 28% in 9M17.
What drove the diluted EPS?
Noninterest expense rose 3% in 2016 and decreased 1% in 9M17. As a result, income before income taxes fell 13% in 2016 before gaining 39% in 9M17. Diluted EPS fell 4% in 2016 before gaining 50% in 9M17. Share buybacks have further enhanced the EPS numbers. The 2017 EPS number has further benefitted from the sale of Vantiv shares.
Dividend yield and free cash position
The company has an impressive free cash flow position. The dividend yield of the company dropped in 2016 due to lower dividend growth and higher price gains, while the dividend yield remained uniform in 2017 due to higher dividend growth and lower price gains.
Fifth Third Bancorp’s dividend yield of 2% and PE of 16.9x compares to a sector average dividend yield of 1.9% and a PE of 23.3x. Prices gained 34%, 12%, and 7% in 2016, 2017, and on a YTD basis, respectively.
Company versus the broad indexes
The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.2% and a PE ratio of 24.6x. Prices gained 10%, 19%, and 5% in 2016, 2017, and on a YTD basis, respectively.
The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.1% and a PE ratio of 24.9x. Prices gained 13%, 25%, and 5% in 2016, 2017, and on a YTD basis, respectively.
The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x. It gained 8%, 28%, and 6% in 2016, 2017, and on a YTD basis, respectively.
Last year, the company saw two increases in the prime lending rate, the introduction of five mobile wallet options, the acquisitions of R.G. McGraw Insurance Agency and Epic Insurance Solutions & Integrity HR, and the launch of its digital estate planning and management tool. The company is looking forward to the potential deregulation of Dodd-Frank and Fed rate hikes in 2018.
The PowerShares DWA Financial Momentum Portfolio (PFI) has a PE of 16.7x and a dividend yield of 0.3%. The SPDR S&P Regional Banking ETF (KRE) has a PE of 17x and a dividend yield of 1.3%.