Fifth Third Gets a Boost from M&A in Both Banks and Fintech

Courtesy of Mohammed Hijas

Fintech partnerships paid off for Fifth Third Bank this quarter.

The largest gains came from the bank’s ownership stake in the payment processing company Worldpay, formerly Vantiv. The sale of five million shares of common stock of Worldpay resulted in a $205 million pre-tax gain. As of June 30, the earnings report notes, Fifth Third owns 3.3% of Worldpay, representing a value of approximately $840 million.

Smaller gains came from Greensky, a lending solution. A net positive for Fifth Third bank’s stock of $0.17 was in part due to $11 million pre-tax gain generated from Fifth Third’s stake in GreenSky, including a $16 million pre-tax gain from the fintech’s IPO, filed in May. This offset a $5 million net loss in investment securities, due to an ownership stake in the fintech.

CEO Greg Carmichael spoke about how acquisitions will bolster revenue gains moving forward and help the bank get a foothold in a regional market.

“During the second quarter we announced the acquisition of MB Financial, which will create a leading retail and commercial franchise in the attractive Chicago market,” Carmichael said. “Combining forces will allow us to build scale in the strategically important Chicago market.”

Quickly executing the merger is integral to Fifth Third’s strategy.

“We are looking forward to completing the merger as soon as possible so that we can begin realizing the substantial cost and revenue synergies we have identified.”

Fifth Third acquired MB Financial in May in a $4.7 billion deal, the purchase initially sent the bank’s stock price down but Carmichael assured stockholders the move would ultimately result in cost savings.

Fifth-Third posted revenue of $1.8 billion for 2Q18, up 17% year over year. Net income is down from last quarter, $586 million for 2Q18 compared to $704 million in 1Q18, but up from this time last year when net income was $367 million 2Q17.

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