Regional bank Fifth Third Bancorp 2Q profit rises 58 pct; adjusted earnings top expectations

7/18/2013

CINCINNATI — Regional banking company Fifth Third Bancorp’s second-quarter net income rose 58 percent, thanks partly to the sale of shares of its Vantiv payment processing subsidiary.

Cincinnati-based Fifth Third today reported net income available to common shareholders of $594 million, or 66 cents per share, for the three months ended June 30. That compares with $376 million, or 40 cents per share, a year earlier.

Excluding benefits tied to the Vantiv stock sales, earnings were 44 cents per share. That beat Wall Street expectations for 42 cents per share, according to FactSet.

“We produced strong performance in nearly every line item,” CEO Kevin Kabat told analysts during a conference call. “Corporate banking revenue, mortgage net revenue, deposit service charges and card and processing revenue were up mid-single digits.”

He said that despite changes in the mortgage business, the second quarter was still strong in that area.

“Fifth Third beat estimates almost entirely due to its mortgage business,” said Matt McCormick, a banking analyst and portfolio manager for Bahl & Gaynor Investment Counsel in Cincinnati. “However, management guidance on lower loan growth may cause investors to lower their future expectations.”

Fifth Third said average loan growth would be in mid-to-low single digits, as opposed to previously expected mid-to-high single digits, and lowered net interest income growth estimates to 3.35 percent from 3.4 percent, McCormick said.

Net interest income, or income from loans and deposits, for the second quarter fell 1.6 percent to $885 million compared with last year.

But Kabat told analysts that Fifth Third’s ability to generate loan growth and solid revenue results combined with expenses discipline and credit improvement “give us confidence that our strategies are working.”

Net charge-offs of bad loans fell 62 percent to $112 million, from $181 million in the same quarter last year. They were also down from $133 million in the bank’s first quarter of this year.

Earnings from fees and other charges, known as noninterest income, rose 56 percent to $1.06 billion, partly because of a $242 million benefit from sales of Vantiv shares. Fifth Third spun off Vantiv in an initial public offering in March 2012 and has continued to sell its remaining stake.

Fifth Third’s business has rebounded after the nation’s financial and housing crisis hit key markets in Florida and Michigan particularly hard.

In June, Fifth Third raised its second-quarter cash dividend on common shares to 12 cents per share.

Fifth Third shares fell 5 cents to close at $18.94.

Fifth Third operates more than 1,300 banks in 12 states: Ohio, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, North Carolina, Tennessee and West Virginia.