Morgan Stanley Raises FITB To $16 From $15

Fifth Third Bancorp FITB posted 4Q10 operating EPS of $0.32, “+3c above our estimate and 8c ahead of the street,” Morgan Stanley reports. “The beat was driven by reserve bleed, while PPOP was in line with our forecast. FITB also announced its intention to repay TARP ($3.4 bn), financed with 50% ($1.7 bn) equity, in line with our expectation,” Morgan Stanley writes. “We expect the TARP repayment to set the stage for FITB to increase its dividend, and we forecast the payout ratio increasing to 19% in 2011 from 8% in 2010. We remain EW, as the stock already reflects significant credit improvement in 2011. “Our above-consensus 2011 EPS estimate edges down -1c, or -1%, to $1.11, as stronger top line is offset by higher share dilution. We make a $1 increase in our price target to $16.” Fifth Third Bancorp closed Wednesday at $14.61.