Fifth Third's $10.9B Comerica deal received well by investors, boosts some regional bank stocks

[The entrance to Comerica Bank headquarters]
JHVEPhoto

Fifth Third's (NASDAQ:FITB [https://seekingalpha.com/symbol/FITB]) agreement to acquire Comerica [https://seekingalpha.com/news/4501930-fifth-third-to-acquire-comerica-in-10_9b-all-stock-deal] (NYSE:CMA [https://seekingalpha.com/symbol/CMA]) in a deal valued at ~$10.9B, a move that will create the U.S.'s ninth-largest Bank. It also highlights the more business-friendly regulatory approach adopted by the Trump administration.

The agreement comes after Pinnacle Financial Partners' (PNFP [https://seekingalpha.com/symbol/PNFP]) merger with Synovus Financial [https://seekingalpha.com/news/4471936-pinnacle-financial-synovus-to-combine-in-deal-value-at-86b], a deal valued at $8.6B, PNC Financial's (PNC [https://seekingalpha.com/symbol/PNC]) pact to purchase [https://seekingalpha.com/news/4492996-pnc-financial-to-acquire-firstbank-holding-for-41b]FirstBank Holding for about $4.1B, and Columbia Banking System's (COLB [https://seekingalpha.com/symbol/COLB]) $2B deal for Pacific Premier Bancorp. [https://seekingalpha.com/news/4434429-columbia-banking-system-to-buy-pacific-premier-bancorp-in-all-stock-deal-valued-at-20b]

Regional bank stocks have moved up, with the KBW Nasdaq Regional Banking Index (KRX [https://seekingalpha.com/symbol/KRX]) rising 1.2% in Monday afternoon trading.

Smaller regional banks stocks are climbing more than the super-regional names. Webster Financial (WBS [https://seekingalpha.com/symbol/WBS]) advanced 2.9%, Banc of California (BANC [https://seekingalpha.com/symbol/BANC]) +2.5%, Metropolitan Bank Holding (MCB [https://seekingalpha.com/symbol/MCB]) +2.4%, and First Horizon (FHN [https://seekingalpha.com/symbol/FHN]) +2.5%. Recall that in 2022, TD Bank (TD [https://seekingalpha.com/symbol/TD]) had agreed to acquire First Horizon, but that deal fell apart [https://seekingalpha.com/news/3965456-td-bank-first-horizon-end-134b-merger]in 2023 when it was discovered that TD was under investigation over the failure of its anti-money laundering controls.

The stocks of super-regionals, which would be seen as prospective buyers, were mostly in the red. Truist Financial (TFC [https://seekingalpha.com/symbol/TFC]) rose 0.1%, PNC Financial (PNC [https://seekingalpha.com/symbol/PNC]) dipped 0.9%, U.S. Bancorp (USB [https://seekingalpha.com/symbol/USB]) fell 0.5%, KeyCorp (KEY [https://seekingalpha.com/symbol/KEY]) -0.2%, Regions Financial (RF [https://seekingalpha.com/symbol/RF]) -1.3%, and M&T Bancorp (MTB [https://seekingalpha.com/symbol/MTB]) -1.0%.

As is usual in acquisitions, the stock of the company being acquired, Comerica (NYSE:CMA [https://seekingalpha.com/symbol/CMA]), jumped. In this case by 15%, while the acquirer's shares, Fifth Third (NASDAQ:FITB [https://seekingalpha.com/symbol/FITB]) -0.8%, slipped.

For Fifth Third (NASDAQ:FITB [https://seekingalpha.com/symbol/FITB]), the acquisition will boost its assets to $288B from $210B as of June 30, 2025, and is expected to enhance its scale, profitability, and geographic reach. "Bottom Line: Given strategic rationale, reasonable expense synergy expectations, and muted capital implications/limited impact to TBV (tangible book value), we view the deal for FITB positively as the bank builds scale in attractive markets," Evercore ISI analyst John Pancari wrote in a note to clients.

CFRA analyst Alexander Yokum acknowledges the accretive nature of the acquisition, benefits of scale, and added strength to its commercial banking operations. However, he has concerns about Comerica's (NYSE:CMA [https://seekingalpha.com/symbol/CMA]) "operational challenges, including stagnant loan growth with Q2 2025 balances remaining at 2019 levels, elevated deposit costs, and geographic concentration in Michigan (59% of deposits) and California (24%)." In addition, Fifth Third (FITB [https://seekingalpha.com/symbol/FITB]) is likely to face integration challenges while it strives to turn around Comerica's underperformance, Yokum said.

22V Research's Bill Hebel says the combination, from a strategic standpoint, "makes sense from a few perspectives." It solidifies Fifth Third's (FITB [https://seekingalpha.com/symbol/FITB]) position in the Midwest, doesn't interrupt its Southeast buildout, gives it a foothold in Texas as FITB adds 150 new locations in the state separate from the acquisition, increases its density in fast-growing markets, and offers more fee-based opportunities in Commercial Payments and Wealth & Asset Management, he said.

MORE ON FIFTH THIRD BANCORP, COMERICA

* Fifth Third Acquisition of Comerica [https://seekingalpha.com/article/4828085-fifth-third-acquisition-of-comerica]
* Fifth Third Bancorp (FITB) M&A Call Transcript [https://seekingalpha.com/article/4828060-fifth-third-bancorp-fitb-m-and-a-call-transcript]
* Comerica: Solid Q2, But Structural Concerns Remain (Downgrade) [https://seekingalpha.com/article/4803100-comerica-solid-q2-but-structural-concerns-remain-downgrade]