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Fifth Third Unit to Acquire Leading Healthcare Advisory Firm

Zacks Equity Research

On Feb 5, Fifth Third Bancorp FITB announced plans to acquire Coker Capital Advisors through its subsidiary, Fifth Third Securities. Though the deal is subject to regulatory approvals, the bank expects to close it in first-quarter 2018.

Shares of Fifth Third fell 3.4% over last two trading sessions, reflecting investors’ reaction to the company’s declining fee income.

However, the bank’s initiatives to build up fee income businesses are encouraging. Its fourth-quarter 2017 results reflected declining non-interest income due to poor mortgage and corporate banking revenues. Thus, its efforts to expand in different industries such as healthcare and insurance might lend some support.

Coker Capital serves middle market healthcare industry by providing mergers and acquisitions, capital raising and other strategic advisory services. Founded in 2009, the company has offices in Atlanta, Charlotte and New York.

Fifth Third’s Healthcare vertical has been providing banking platforms to middle-market and corporate clients. Further, with the addition of Coker Capital, significant value would be added in terms of experience and services.

Per the terms, Coker Capital will join Fifth Third offices in Atlanta, Charlotte and New York. Also, the leadership team of the acquired firm will report to Rob Schipper, Fifth Third’s head of Investment Banking.

Lars Anderson, executive vice president and chief operating officer of Fifth Third said, “With a shared client-first culture, deep industry expertise and a strong focus on the middle market, Coker Capital is a great strategic fit for our team.”

Coker Capital’s partners reflected similar views on the deal by saying, “Our exclusive healthcare focus, combined with the strength of the Fifth Third team, will bring added value to the market to help our clients achieve their objectives.”

Fifth Third’s move to tap the emerging market of healthcare industry bode well for the long term. Also, its strong balance sheet position keeps it well poised to undertake opportunistic growth measures.  

Moreover, improving environment for U.S. banks in the form of rising interest rates, lower tax rates and expectations of softer regulations in 2018, is likely to support the company’s financials in quarters ahead.

Shares of Fifth Third have gained 16.7% over the past six months, outperforming 13.5% rally for the industry it belongs to.

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks worth considering in the same space are Bank of America Corporation BAC, State Street Corporation STT and KeyCorp KEY. All these stocks carry a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Bank of America has increased 10.8% for the current year, in the last 30 days. The company’s share price has increased 37.6% in the past year.

State Street has witnessed 5.8% upward earnings estimate revision for 2018, in the last 30 days. Its share price has risen 35.1% in the past year.

KeyCorp’s shares have gained 17.9% in a year and its earnings estimates for 2018 have moved up 7% in the last 30 days.

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