CINCINNATI - Fifth Third Bank has reached a settlement with the Consumer Financial Protection Bureau (CFPB), agreeing to pay a total of $20 million in fines to resolve allegations related to its sales practices and auto finance servicing activities. The regional bank will pay $15 million for sales practices issues and an additional $5 million for matters concerning its auto finance servicing.
The settlement, announced today, puts an end to the litigation over sales practices and a separate investigation into the bank's auto finance servicing. The issues in question involved a limited number of accounts opened from 2010 to 2016 and an auto collateral protection insurance program that the bank had already voluntarily discontinued in January 2019.
As part of the agreement, Fifth Third will maintain its current policies and develop further compliance plans. Moreover, the bank will collaborate with the CFPB's supervisory team to create and implement remediation plans for affected customers, extending beyond those whom the bank has already compensated.
Susan Zaunbrecher, Fifth Third's chief legal officer, stated that the bank had proactively addressed these legacy issues and prioritized customer-centric practices. The settlement allows the bank to focus on delivering long-term value for shareholders, customers, employees, and communities.
Fifth Third, a bank with a history dating back to 1858, is recognized for combining technological innovation with a commitment to community impact. The bank has been named among the World’s Most Ethical Companies by Ethisphere for several years, underscoring its dedication to ethical practices.
The bank's parent company, Fifth Third Bancorp (NASDAQ:FITB), trades on the NASDAQ Global Select Market under the ticker "FITB." This settlement concludes the legal and regulatory challenges related to the highlighted practices, as per the bank's recent press release statement.
In other recent news, Fifth Third Bancorp has been the subject of several analyst revisions and strategic developments. Citi reaffirmed its Neutral rating on Fifth Third Bancorp, maintaining a price target of $40.00, while Wells Fargo sustained its Overweight rating and a steady $42.00 price target.
The bank's estimated earnings per share for 2024 saw a 5-cent increase to $3.25, slightly below the consensus, due to an improved credit outlook and expected reserve release. Still, the estimated EPS for 2025 has been reduced by 15 cents to $3.65, reflecting the anticipation of higher funding costs.
Fifth Third Bancorp also drew attention from Wolfe Research and JPMorgan, both of which upgraded the company's rating to 'Outperform' and 'Overweight', respectively. Despite these upgrades, Baird Equity Research downgraded the company to 'Neutral', citing the stock's fair valuation after notable performance.
In terms of recent developments, Fifth Third Bancorp implemented a new general ledger accounting system and announced plans to repurchase between $300 million to $400 million in common stock during the second half of 2024. These are recent developments and the future performance of Fifth Third Bancorp may be influenced by various factors including market trends, regulatory environments, and the company's strategic decisions.
InvestingPro Insights
In the wake of Fifth Third Bank's settlement with the CFPB, it's worth noting the bank's financial resilience and commitment to shareholder value. According to InvestingPro data, Fifth Third Bancorp currently boasts a market capitalization of $24.27 billion, reflecting investor confidence. The bank's P/E ratio stands at 11.32, with a slight adjustment to 11.26 over the last twelve months as of Q1 2024, indicating a potentially favorable valuation compared to industry peers.
InvestingPro Tips reveal that Fifth Third has a commendable track record of raising its dividend for 13 consecutive years and maintaining dividend payments for 50 consecutive years, demonstrating a strong commitment to returning value to shareholders.
Moreover, 13 analysts have revised their earnings upwards for the upcoming period, hinting at an optimistic outlook for the bank's financial performance. Furthermore, while the bank does suffer from weak gross profit margins, analysts predict the company will remain profitable this year, as it has been over the last twelve months.
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