Fifth Third Plans Stock Offer to Plug Stress Test Gap

Fifth Third Bancorp said it plans to sell up to $750 million of common stock and exchange preferred shares into common stock, after regulators ordered it to plug a $1.1 billion capital shortfall so it could withstand a potentially deep recession.

The Cincinnati-based lender  said its common stock offering will be "at the market."  Fifth Third will at the same time offer holders of $1.1 billion of convertible preferred shares the chance to swap their shares for common stock and cash.

Fifth Third shares fell 11 cents to $7.60 after-hours, after dropping 10 cents in regular trading on the Nasdaq.

Fifth Third was one of 19 large banks to undergo government "stress tests," and was one of 10 told to raise capital. Its $1.1 billion shortfall is roughly one-fourth of its market value, which is about $4.4 billion, and the offerings would dilute the investments of current shareholders.

Treasury Secretary Timothy Geithner earlier Wednesday told the Senate Banking Committee that the 19 banks have raised or set plans to raise more than $56 billion, including $34 billion of equity capital.

Fifth Third said its offerings would better position it to establish a timeline to repay its $3.4 billion infusion from the government's Troubled Asset Relief Program.

The bank ended March with $119.3 billion of assets, and roughly 1,311 banking offices in several midwestern and southeastern states.

Merrill Lynch and and Morgan Stanley are arranging the common stock offering, and JPMorgan is arranging the exchange offer.

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