With assets over $116.0 billion and around 21,500 employees, Fifth Third Bancorp (FITB) has been consistently ranked among the top 20 banks in the country on numerous metrics. The Cincinnati-based company operates 18 affiliates, with 1,298 full-service banking centers, including 93 bank Mart locations and 2,329 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri and Georgia.

Fifth Third reported a loss of $0.04 per share on a core basis on account of higher credit costs. Results were significantly below our expectations. Deteriorating credit quality and significant exposure in the Florida market resulted in rating downgrades, as well. We expect nonperforming assets and delinquencies to continue to trend upward, as well as loan loss provisions.

Though acquisitions have contributed some strength to the key metrics, based on 3Q08 results, we have lowered our FY08 and FY09 earnings expectations, as well as our price target, with our recommendation remaining at Hold. Our new six-month target of $12.75 per share equates to approximately 0.70x our projected book value of $18.50 per share six-months out (now March 2009), or 34.3x our 2008 earnings estimate of $0.38 per share. With $0.60 per share annual dividend, this price target implies an 5.7% expected total return over that period.