It can be tricky to tie stock moves to specific news, but I'm willing to try with super-regional bank Fifth Third (Nasdaq: FITB). Chatter earlier this year suggested that the bank might be an acquisition target and that a strong showing of "no" votes for the board of directors might prompt a sale.
Well, investors are still behind the current board, or at least apathetic enough not to vote "no," since the company's slate of candidates got 86% of the vote. In response, though, the stock surrendered a few points of its merger speculation run-up. Any connection between the two is pure speculation, but it's at least food for thought.
Results for this first quarter of 2006 weren't great, but things seem to be leveling off. Revenue fell more than 2%, and earnings were down 10%, but that wasn't really unexpected. Though net interest income dropped 5% -- one of the weaker performances I've seen -- the net interest margin looks like it might be stabilizing. Fifth Third also seems to be controlling expenses better, though it remains committed to branch expansions.
In my view, the balance sheet was a similarly mixed message -- 10% average loan growth was solid, particularly with 12% growth in commercial and consumer loans. On the flip side, though, core deposits were up 6%, and transaction deposits were up 3%. While the bank can fund this rate of loan growth for now by running off its investment portfolio, I'd still like to see better deposit growth. (So would management, I'll bet.)
If you look hard enough, you can find a bank that will suit almost any investor's taste. Fifth Third, along with National City (NYSE: NCC), looks like a turnaround story. While the company has definitely had a rough stretch, I don't think it's beyond hope. There could be value here.
Nevertheless, for Fools seeking banks in better shape today, I'd suggest ideas like Wells Fargo (NYSE: WFC), Wachovia (NYSE: WB), or U.S. Bancorp (NYSE: USB).
For more financial Foolishness:
National City
and U.S. Bancorp are
Motley Fool Income Investor
recommendations.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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