Critical Analysis: Fifth Third Bancorp (NASDAQ:FITB) and Old National Bancorp (NASDAQ:ONB)

Old National Bancorp (NASDAQ:ONB) and Fifth Third Bancorp (NASDAQ:FITB) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, valuation, risk, earnings, dividends, analyst recommendations and institutional ownership.

Institutional and Insider Ownership

83.7% of Old National Bancorp shares are held by institutional investors. Comparatively, 83.8% of Fifth Third Bancorp shares are held by institutional investors. 0.7% of Old National Bancorp shares are held by company insiders. Comparatively, 0.5% of Fifth Third Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

Old National Bancorp has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500. Comparatively, Fifth Third Bancorp has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500.

Profitability

This table compares Old National Bancorp and Fifth Third Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Old National Bancorp	21.60%	11.80%	1.34%
Fifth Third Bancorp	15.89%	12.39%	1.20%

Earnings and Valuation

This table compares Old National Bancorp and Fifth Third Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Old National Bancorp	$3.74 billion	2.52	$669.26 million	$2.25	10.93
Fifth Third Bancorp	$11.39 billion	4.21	$2.52 billion	$2.92	18.10

Fifth Third Bancorp has higher revenue and earnings than Old National Bancorp. Old National Bancorp is trading at a lower price-to-earnings ratio than Fifth Third Bancorp, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Old National Bancorp and Fifth Third Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Old National Bancorp	0	2	12	0	2.86
Fifth Third Bancorp	0	3	19	1	2.91

Old National Bancorp currently has a consensus target price of $29.79, indicating a potential upside of 21.13%. Fifth Third Bancorp has a consensus target price of $60.73, indicating a potential upside of 14.88%. Given Old National Bancorp’s higher probable upside, equities research analysts clearly believe Old National Bancorp is more favorable than Fifth Third Bancorp.

Dividends

Old National Bancorp pays an annual dividend of $0.58 per share and has a dividend yield of 2.4%. Fifth Third Bancorp pays an annual dividend of $1.68 per share and has a dividend yield of 3.2%. Old National Bancorp pays out 25.8% of its earnings in the form of a dividend. Fifth Third Bancorp pays out 57.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Fifth Third Bancorp has raised its dividend for 14 consecutive years. Fifth Third Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Fifth Third Bancorp beats Old National Bancorp on 13 of the 18 factors compared between the two stocks.

About Old National Bancorp

Old National Bancorp operates as the bank holding company for Old National Bank that provides various financial services to individual and commercial customers in the United States. It accepts deposit accounts, including noninterest-bearing demand, interest-bearing checking, negotiable order of withdrawal, savings and money market, and time deposits; and offers loans, such as home equity lines of credit, residential real estate loans, consumer loans, commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing. The company also provides debit and automated teller machine cards, telephone access, online banking, and other electronic and mobile banking services; cash management, private banking, brokerage, trust, investment advisory, and other traditional banking services; wealth management, investment, and foreign currency services; and treasury management, merchant, and capital markets services, as well as community development lending and equity investment solutions. The company was founded in 1834 and is headquartered in Evansville, Indiana.

About Fifth Third Bancorp

Fifth Third Bancorp operates as the bank holding company for Fifth Third Bank, National Association that engages in the provision of a range of financial products and services in the United States. It operates through three segments: Commercial Banking, Consumer and Small Business Banking, and Wealth and Asset Management. The Commercial Banking segment offers credit intermediation, cash management, and financial services; lending and depository products; and cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing, and syndicated finance for business, government, and professional customers. The Consumer and Small Banking segment provides a range of deposit and loan products to individuals and small businesses; home equity loans and lines of credit; credit cards; and cash management services. This segment also engages in the residential mortgage that include origination, retention and servicing of residential mortgage loans, sales and securitizations of loans, and hedging activities; indirect lending, including extending loans to consumers through automobile dealers, motorcycle dealers, powersport dealers, recreational vehicle dealers, and marine dealers; and home improvement and solar energy installation loans through contractors and installers. The Wealth & Asset Management segment provides various wealth management services for individuals, companies, and not-for-profit organizations. It offers retail brokerage services to individual clients; and broker dealer services to the institutional marketplace. This segment also provides wealth planning, investment management, banking, insurance, and trust and estate services; and advisory services for institutional clients comprising middle market businesses, non-profits, states, and municipalities. The company was founded in 1858 and is headquartered in Cincinnati, Ohio.