Fifth Third Corporate Bonds and Leverage Analysis

FITB -  USA Stock  

USD 36.38  0.06  0.17%

Fifth Third's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Fifth Third's financial risk is the risk to Fifth Third stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Please check the analysis of Fifth Third Fundamentals Over Time.

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Fifth Third Total Debt is projected to increase significantly based on the last few years of reporting. The past year's Total Debt was at 16.46 Billion. The current year Debt to Equity Ratio is expected to grow to 8.59, whereas Long Term Debt is forecasted to decline to about 13.1 B.

Fifth Current Financial Burden

Fifth Third's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Fifth Third's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Fifth Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Fifth Third's stakeholders.

Asset vs Debt

Equity vs Debt

Given the importance of Fifth Third's capital structure, the first step in the capital decision process is for the management of Fifth Third to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Fifth Third Bancorp to issue bonds at a reasonable cost.

Fifth Third Bond Ratings

Fifth Third Bancorp bond ratings play a critical role in determining how much Fifth Third have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Fifth Third's borrowing costs.
Overall Bond Rating
Adequate
Average S&P Rating
BBB
Piotroski F Score
5  Healthy
Beneish M Score

Fifth Third Bancorp Debt to Cash Allocation

As Fifth Third Bancorp follows its natural business cycle, the capital allocation decisions will not magically go away. Fifth Third's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company currently holds 17.9 B in liabilities with Debt to Equity (D/E) ratio of 7.9, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations.

Fifth Third Long Term Debt Over Time

Fifth Third Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Fifth Third uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Fifth Third Debt Ratio

    
  9.3   
It appears most of the Fifth Third's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Fifth Third's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Fifth Third, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Fifth Third debt ratio should be compared their industry average or other competing firms.
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Fifth Third Corporate Bonds Issued

Fifth Third issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Fifth Third Bancorp uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most Fifth bonds can be classified according to their maturity, which is the date when Fifth Third Bancorp has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Issue DateMaturityCouponRef Coupon  Rating
FIFTH THIRD BANCORP03/04/200803/01/20388.255.375
BBB
FIFTH THIRD BANCORP03/07/201203/15/20223.52.0
BBB+
FIFTH THIRD BANCORP11/20/201301/16/20244.32.25
BBB
Fifth 10012021 287509/05/201410/01/20212.8752.0
A-

Fifth Third Bancorp Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Fifth Third, understanding its historical liability is critical in projecting Fifth Third's future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Fifth Third uses its financing power over time.

Understaning Fifth Third Use of Financial Leverage

Fifth Third financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Fifth Third's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Fifth Third assets, the company is considered highly leveraged. Understanding the composition and structure of overall Fifth Third debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.
Please read more on our technical analysis page.
Last ReportedProjected for 2021
Long Term Debt14.9 B13.1 B
Total Debt16.5 B17.7 B
Issuance Repayment of Debt Securities-60 M-61.6 M
Debt to Equity Ratio 7.86  8.59 
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. Fifth Thirds common stock is traded on the NASDAQ Global Select Market under the symbol FITB. Fifth Third operates under BanksRegional classification in the United States and is traded on NASDAQ Exchange. It employs 19819 people.

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Please check the analysis of Fifth Third Fundamentals Over Time. Note that the Fifth Third Bancorp information on this page should be used as a complementary analysis to other Fifth Third's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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When running Fifth Third Bancorp price analysis, check to measure Fifth Third's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Fifth Third is operating at the current time. Most of Fifth Third's value examination focuses on studying past and present price action to predict the probability of Fifth Third's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Fifth Third's price. Additionally, you may evaluate how the addition of Fifth Third to your portfolios can decrease your overall portfolio volatility.
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The market value of Fifth Third Bancorp is measured differently than its book value, which is the value of Fifth that is recorded on the company's balance sheet. Investors also form their own opinion of Fifth Third's value that differs from its market value or its book value, called intrinsic value, which is Fifth Third's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Fifth Third's market value can be influenced by many factors that don't directly affect Fifth Third Bancorp underlying business (such as pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Fifth Third's value and its price as these two are different measures arrived at by different means. Investors typically determine Fifth Third value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Fifth Third's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.