The three largest Ohio-based banks yesterday reported dire financial results, led by a $2.2 billion loss in the fourth-quarter and for 2008 by Fifth Third Bancorp in Cincinnati.
Combined with losses from KeyCorp, of Cleveland, and Huntington Bancshares, of Columbus, the three banks lost $3.1 billion in the October to December period and $3.8 billion for the year.
The losses resulted from loan defaults, subprime lending woes, and other economic challenges facing the industry.
The stock of two of the banks suffered yesterday. Huntington's stock dropped 31 percent in value to close at $3.20 a share; Fifth Third's sank 29 percent to $2.85. But Key gained 35 cents, up 5 percent, to $7.04.
Fifth Third, with 1,307 branches in 12 U.S. states, disclosed its third straight quarterly loss, as the Midwest regional bank set aside money to cover bad loans and wrote down its banking business following recent acquisitions.
Its outlook was clouded by the bank's CEO saying loan losses of $500 million in the current first quarter "seems probable at this point, and that's taking a fairly pessimistic view of economic trends."
The bank's fourth-quarter losses were mostly associated with commercial residential builder and developer loans and consumer residential real estate loans and concentrated in Michigan and Florida.
"We experienced credit challenges earlier than others, given our geography, and I believe the actions we have taken will better position us for the remainder of this cycle," CEO Kevin Kabat said on a conference call.
"The environment is extraordinarily difficult right now."
Fifth Third bought First Charter Corp. last year and has suffered mounting credit losses as the economy has deteriorated. In the latest quarter, it took a goodwill impairment charge of $965 million and a charge of $800 million for loans sold or transferred to a held-for-sale portfolio. It nearly tripled its reserve for loan and lease losses, to $2.8 billion.
For the year, the bank lost $3.94 a share, compared with a profit of $1.1 billion, or $1.99 a share, in 2007
"While we like the longer-term potential earnings power of Fifth Third, core asset quality trends continue to deteriorate, and we simply are having an increasingly difficult time justifying buying the stock ...," said David George, analyst at Robert W. Baird & Co, which cut its rating on the bank to "neutral" from "outperform."
Last year, Fifth Third obtained $3.45 billion from the U.S. Treasury's Troubled Asset Relief Program. It also eliminated most of its dividend after losses rose from its exposure in the Midwest, hard hit by the auto industry's troubles, and Florida, a center of the real estate downturn.
Fifth Third had $120 billion in assets at yearend.
KeyCorp said it lost $524 million in the fourth quarter and $1.5 billion for the year, citing ongoing woes in the economy and a large, noncash accounting charge.
The quarterly loss of $1.13 a share on continuing operations far exceeded Wall Street expectations. A survey of analysts by Thomson Reuters forecast the loss would be 2 cents a share. It was the bank's third consecutive quarterly loss.
A substantial part of the loss was tied to a noncash, after-tax charge of $420 million, or 85 cents a share, to account for a revaluing of its National Banking unit, which is involved in corporate investing. By comparison, KeyCorp had a profit from continuing operations of $22 million, or 6 cents a share, for the fourth quarter of 2007.
Its provision for loan losses was $594 million for the fourth quarter of 2008, compared to $363 million a year earlier.
For the full year, it had a loss of $3.36 a share. For the previous year, the bank had a profit of $941 million, or $2.38 a share.
CEO Henry L. Meyer said, "We stand in pretty good shape and we're not looking at needing to raise additional capital."
KeyCorp received $2.5 billion in federal aid in the final three months of 2008. Its year-end assets were $104.5 billion.
Huntington Bancshares said it lost $417 million for the fourth quarter and $114 million for the year, hurt by a charge tied to a troubled New Jersey lender. The company also slashed its dividend to a penny from 13.25 cents.
The loss in the fourth quarter was $1.20 a share, compared with a $239 million loss, or 65 cents, a year earlier. For the year, it lost 44 cents a share compared with a profit of $75 million, or 25 cents a share, in 2007.
Results included a $454 million pretax charge, or 81 cents per share, to write off much of a commercial lending relationship with Franklin Credit Management Corp., a Jersey City, N.J., specialist in "scratch and dent" home loans, which go to problem borrowers.
The bank has received $1.4 billion in federal aid.