Fifth Third Bancorp to Sell Perpetual Preferred

Regional Banker Fifth Third Bancorp (NASDAQ:FITB) will be offering a new preferred stock.

The issue will have typical banking company terms–qualified, but non cumulative and will be a fixed rate issue.

The company currently has 2 issues outstanding, 1 of which is the old MB Financial issue which they acquired recently. These issues can be seen here.

The preliminary prospectus can be see here

mcg had this new issue announced 1st on the reader alert page.

13 thoughts on “Fifth Third Bancorp to Sell Perpetual Preferred”

  1. Not so hypothetical choice ….

    FITBI 6.625% coupon, SY 5.83%, YTC 3.22% in 4.3 years. Would reset to 5.84% on call date at present LIBOR.

    or

    FFFKP 4.95% coupon, SY 4.95% (assume it trades @25), 4.95% YTC in 5 years.

    The difference in YTC between the 2 issues (1.73%) compounds over the remaining life of the first to be called bond. If both are held to maturity and called on their call date, the difference in return is substantial.

    Do a calculation: Invest 10k in both issues at indicated prices, and compound (with reinvestment) until call date. See how much money you have in each case.

    Illustrates why YTC needs to be considered.

      1. If you Prefer–they are perpetual, but on perpetuals you have to make an assumption of a redemption on the 1st possible call date. This is actually ‘yield to worst’. If they are never called, of course, calculations mean nothing.

      2. If You Prefer – I think the reading in between the lines point being made is that yes, even though both are perpetuals, both have call dates and don’t get sucked into thinking FITBI is teh better choice because of its better current yield because no matter where interest rates are in 4.3 to 5 years, it has a higher likelihood of actually being called than reset…. Even though in today’s environment the issuer would save money when FITBI reset, they could also most likely be able to refinance with terms better than 5,84% (witness today’s 4.95% pricing) so the impact of YTC is important because you have the high likelihood, and certainly higher likelihood than today’s 4.95% issue, of losing the nearly 4 point premium you pay to buy today’s better current yield.. BTW, Bob, what officially is “SY?” Don’t know what the initials stand for…

      1. They already have jumped almost 40 bps in a very short time. They are sending this to market like the 10 yr is still 1.45%. Not a good buy in my mind. The lag effect is showing here.

  2. Has anyone heard any further rumors about EZT being called? The hard to borrow rate has been rising up to over 17% now so it feels like there must be some information out there.

    1. Scott–this was discussed as a possibility on the site, but all talk was just speculative because of the new preferred Entergy Texas just sold.

    2. With the the 1st Call Date having passed in June, I can’t imagine paying the $27.12 it closed at today (let alone the $28+ it went for in August). But then again I’m not a fund manager investing other people’s money, I’m investing my money, so ELU at $25.14 and a 4.7% coupon seems the way to go.

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