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Fifth Third 3Q net income falls on charges

CINCINNATI -- Fifth Third Bancorp reported Thursday that its third-quarter net income fell because of one-time expenses related to debt repayment and accounting issues.

Still, the Cincinnati-based bank reported improving lending business trends, and beat analysts' expectations for revenue while missing earnings projections by only a penny.

Fifth Third's net income available to common shareholders fell to $354 million, or 38 cents per share, from $373 million, or 40 cents per share, a year earlier.

The results include charges of $26 million for repaying debt, $16 million to reflect a lower value in its investment in the payment processor Vantiv Inc. _ a publicly held company _ and $24 million set aside to repurchase bad mortgages.

The bank's revenue rose to $1.58 billion from $1.57 billion in the third quarter of 2011. Analysts polled by FactSet had expected earnings of 39 cents per share on revenue of $1.57 billion.

CEO Kevin Kabat said corporate banking and mortgage banking revenue both grew in double digits, and portfolio quality continued to improve. Credit trends got better, with net charge-offs, or loans written off as uncollectable, down to $156 million, the lowest level in five years. They were $181 million in the previous quarter and $262 million in the third quarter one year ago, and the bank said past-due loans were also declining.

Kabat told analysts Thursday that loan continued to grow in most categories, and he expects loan growth "to be a bit stronger in the fourth quarter as we close in on year-end and the (presidential) election moves behind us."

Fifth Third reported residential mortgage loans were up 16 percent and commercial and industrial loans were up 15 percent, compared with last year.

Earnings from deposits and loans, or net interest income, rose 1 percent to $907 million from $902 million a year ago, and Kabat said the interest-rate environment remains extremely challenging.

Kabat said that, overall, Fifth Third expects to produce "similarly strong results in the fourth quarter" and that Fifth Third's ability to generate capital gives it the capital needed "to support balance-sheet growth while continuing to return capital to shareholders in a prudent manner."

Shareholders have said they want to see higher dividends.

The company last month announced an increase in the cash dividend paid on common shares from 8 cents to 10 cents per share.

Matthew McCormick, portfolio manager and banking analyst with Bahl & Gaynor Investment Counsel, said Fifth Third had "a solid release overall and management did a better job of maintaining net interest margins than their peers."

Net interest margin measures the difference between a bank's interest income and the amount of interest paid out to its lenders, relative to the bank's assets.

Fifth Third has been rebounding from the housing market slump in key states such as Florida and Michigan.

Fifth Third shares closed down a penny at $15.12. They have traded in a 52-week range of $10.89 to $16.16.

The bank has $117 billion in assets and operates 1,320 banking centers in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina.

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AP writer Dan Sewell in Cincinnati contributed to this report.

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