Why Fifth Third's Stock Plunged Over 20% in the Last Week
Fifth Third Bancorp (NASDAQ: FITB) has been fighting battles on a few different fronts in the past few weeks.
Like just about every other company currently operating, it's been dealing with the negative financial impact of the COVID-19 pandemic.
Beyond that, it's also been hurt by the Federal Reserve lowering the prime interest rate to the 0% to 0.25% range. Lower interest rates reduce the amount of yield banks earn on loans, thus reducing their profitability. Interest rates at 0% to 0.25% obviously drastically reduces profit margins. That, in turn, has led to investors selling off bank stocks this week, as my Foolish colleague Joe Tenebruso explained. Firth Third made the bulk of its income, $1.2 billion in the fourth quarter, in net interest income. Its net interest margin, which is the difference between what the bank earns in interest from loans versus what it pays out to customers, is 3.27. That margin will probably shrink as a result of the Fed's actions.
Source Fool.com
