Downgrades
* Christopher Marinac of FIG Partners downgraded his rating on Cincinnati-based Fifth Third Bancorp's stock to "market-perform" from "outperform" and lowered the price target to $35.50 from $38.50.
The analyst attributed the downgrade to Fifth Third's "surprise" acquisition of Chicago-based MB Financial Inc., a transaction valued at $4.7 billion. Although Fifth Third calls the MB Financial deal a "strategically important acquisition," the analyst feels that "investors may balk at the pricing, long [tangible book value] earnback, and the timing after management downplayed M&A on its late April 2018 investor conference call."
* Fifth Third's stock rating was also downgraded by Nomura's Bill Carcache to "reduce" from "neutral."
The analyst lowered the company's price target to $31 from $36.
Carcache believes that the market will not be receptive to Fifth Third's acquisition of MB Financial, and that the company's shareholders will bear a high cost as it uses its stock.
Industry reports
* David George of Baird also wrote about Fifth Third's acquisition of MB Financial, saying that the deal strengthens the buyer's position in the fragmented and historically competitive Chicago market, but the pressure on Fifth Third's shares reflects the tangible book value dilution of about 7.7%. The analyst has an "underperform" rating on Fifth Third's stock and a price target of $32.
* Michael Young of SunTrust Robinson Humphrey, while commenting on Fifth Third's acquisition of MB Financial, said the deal is anticipated to "add scale in the Chicago region and catapult the combined entity's market share to [second] place in retail deposits and middle market banking." The analyst would not rule out the chances of additional larger M&A in the industry, as the U.S. Congress is likely to pass a bill that would change the threshold for becoming a systemically important financial institution.
Young has a "buy" rating on MB Financial's stock and a price target of $48.
* Evercore ISI analyst John Pancari commented on Fifth Third's acquisition of MB Financial, writing that MB Financial has "managed a quality commercial franchise in the market and in our view is viewed as a sought after partner in the geography."
The analyst has an "underperform" rating on Fifth Third's stock and a price target of $34.
* Hovde Group's Brian Zabora wrote that MB Financial's sizable position in the Chicago metropolitan statistical area was a significant factor in driving a substantial premium for the transaction. Zabora further wrote that "this deal, along with the potential for regulatory reform this week, will increase investor interest in the larger community banks."
The analyst has a "market perform" rating on MB Financial's stock and price target of $45.
