Fifth Third Bancorp (FITB) has concluded the repurchase of $100 million shares and is on the verge of completing the sale of $1.3 billion worth of bank notes.
On Dec 14, 2012, Fifth Third Bancorp entered into an accelerated share repurchase agreement with Credit Suisse International – a division of Credit Suisse Group (CS). The agreement was a part of its previously announced capital plan that got the Federal Reserve’s nod in August last year and encompassed the repurchase of $100 million worth of shares.
On Feb 25, 2013, Fifth Third was notified by Credit Suisse that on Feb 22, 2013, it has completed purchasing shares under the aforementioned agreement. A total of 6,267,410 shares were repurchased upon implementation of the deal and an additional 127,760 shares were bought back upon completion.
Overall, 6,395,170 shares were repurchased, at an average price of $15.6368, under the deal. Since Oct 2012, the company has bought back $575 million worth of shares.
In the same SEC filing, the company declared that it was raising $1.3 billion in debt by selling notes. The selling of these notes began on Jan 25 and is anticipated to close in March. The sale includes $600 million notes due Feb 28, 2018 carrying an interest rate of 1.45%, $400 million of 0.90% senior fixed rate notes maturing on Feb 26, 2016, and $300 million of senior floating rate notes with an interest of 3-month LIBOR plus 0.41% and due date of Feb 26, 2016.
These bank notes will be redeemable by Fifth Third Bank, in whole or in part, on or after the date – 30 days prior to the maturity date. The redemption price will be 100% of the principal amount plus accrued and unpaid interest through the redemption date.
Upon the issuance of these notes, Fifth Third’s borrowing under its global bank note program will amount to $2.3 billion. Fifth Third also increased its borrowing capacity in the program from $20 billion to $25 billion under the amended global bank note program.
The Fed’s objection to a number of elements in Fifth Third's capital plan, including increases in its quarterly common dividend and the initiation of common share repurchases, had put the company on the back foot and deteriorated its competitive position to some extent. Therefore, a positive development on that front is encouraging and this is expected to inspire investors’ confidence in the stock.
Fifth Third currently retains its Zacks Rank #2 (Buy). Other major regional banks that are performing well include BankUnited, Inc. (BKU) and State Street Corporation (STT), carrying Rank #1 (Strong Buy) and #2, respectively.
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