Fifth Third Bancorp (NASDAQ: FITB) shares touched a 52-week high of $43.85 on Thursday following the Federal Reserve's announcement of a 50-basis points interest rate cut.
The FITB stock closed slightly lower at $43.64, gaining nearly 18% over the past six months. It has outperformed its industry, the S&P 500 Index and its close peers like Comerica Incorporated (NYSE: CMA) and Bank of America Corporation (NYSE: BAC) in the same time frame.
Six-Month Price Performance
Image Source: Zacks Investment Research
Key Drivers Behind FITB Stock's New 52-Week High
A major factor for this upward movement of FITB stock can be attributed to the Federal Reserve's aggressive start to monetary policy easing.
On Wednesday, the central bank signaled two additional rate cuts this year to support the economy. Fed officials further indicated plans for four more cuts in 2025 and two in 2026.
The interest rate cut is a positive development for banks, including Fifth Third, CMA and BAC, which have been struggling with rising funding cost pressures. While higher rates have led to a significant jump in banks' net interest income (NII) the same led to increased funding costs, which squeezed margins.
FITB's NII has witnessed a three-year (2020-2023) compound annual growth rate of 6.8%. However, the company's NII declined in the first half of 2024 due to higher funding costs.
So now that the Fed has cut the rates, funding costs will gradually stabilize and eventually start declining, thus supporting FITB's NII.
Other Factors Supporting FITB's Performance
Raised Guidance: At the Barclays Global Financial Services Conference, FITB raised its third-quarter 2024 outlook. The bank stated that total revenues are now expected to rise 2-3% sequentially in the third quarter from its baseline of $2.2 billion compared with the previous guidance of a 1-2% increase. Also, management updated its non-interest income, now ...
