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Published: Wednesday, 7/23/2008

Red ink at banks includes $1.1B for Key, $202M for Fifth Third

ASSOCIATED PRESS

Investors who were growing optimistic after a string of upbeat bank results in recent days were jolted yesterday by large second-quarter losses at Wachovia Corp., the nation's fourth-largest bank, and major regional banks including Ohio's KeyCorp and Fifth Third Bancorp.

KeyCorp, of Cleveland, reported a loss of $1.1 billion, or $2.70 a share, compared with profit of $334 million, or 84 cents a share, a year earlier.

The results included a charge of $1 billion, or $2.43 a share, from a previously announced federal tax court ruling on a service contract lease transaction, which the bank said it would appeal.

Analysts polled by Thomson Financial, on average, expected a loss of $2.57 a share excluding one-time items.

Also weighing on KeyCorp's results was a loan-loss provision, or money set aside to cover bad loans, that swelled to $647 million, more than 12 times the $53 million provision for the same period a year ago.

KeyCorp posted a net interest loss of $100 million, compared with net interest income of $706 million last year.

The figure represents the difference between how much it costs a bank to borrow money and how much it receives from lending to customers.

Fifth Third, of Cincinnati, reported a loss of $202 million, or 37 cents a share, compared with profit of $376 million, or 69 cents a share, a year earlier.

The bank recorded charges of $270 million related to the tax treatment for its leverage lease holdings based on recent court rulings, and a charge of $13 million related to a recent acquisition.

Analysts polled by Thomson Financial, on average, expected the bank to break even for the period.

Net interest income was $744 million, compared with $745 million a year ago.

Wachovia, of Charlotte, N.C., had a loss of $8.9 billion, or $4.20 a share, because of charges and reserves for bad mortgage loans. For the year-ago period, it had a profit of $2.34 billion, or $1.22 a share.

It had $6.1 billion in write-downs to the value of its intangible assets and merger-related and restructuring charges of $128 million.

Analysts on average expected a loss of 78 cents a share.

The firm said it was eliminating 10,750 positions, including those held by 6,350 current workers.



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