By Lisa Beilfuss And Julie Steinberg
Fifth Third Bancorp said its first-quarter profit rose 20% as a
positive valuation adjustment and a gain on the sale of residential
mortgage loans helped offset a decline in mortgage banking.
Results beat Wall Street estimates.
The Cincinnati-based regional lender said its profit rose to
$382 million, from $318 million a year earlier. On a per-share
basis, earnings rose to 44 cents from 36 cents.
Revenue edged up to $1.51 billion from $1.45 billion a year
earlier.
Analysts polled by Thomson Reuters had expected the bank to
report a profit of 37 cents a share on revenue of $1.45 billion.
Shares were up about 1% in early morning trading.
The latest period's results included a $70 million pretax
position valuation adjustment on the warrant Fifth Third holds in
Vantiv Inc., and a $37 million pretax gain on the sale of
residential mortgage loans.
Mortgage banking revenue, however, slid 21% from a year ago to
$86 million.
Like other lenders, Fifth Third has faced pressure on its
mortgage business as prolonged low interest rates have limited
interest income and prompted cost-cutting. Sequentially, mortgage
revenue rose 41%.
Net interest margin, a key measure of lending profitability,
dropped to 2.86% from 3.22% a year earlier. The bank said that net
interest income was affected by previously announced changes to its
deposit advance product as well as fewer days in the quarter.
The bank reported record investment advisory revenue of $108
million, up 6% from a year earlier, as a result of an increase in
personal asset management fees and increased securities and
brokerage fees.
In the latest quarter, noninterest expense fell 3% to $923
million.
Executives warned in January that noninterest income, generated
from businesses like investment advisory and mortgage banking,
would be lower due in part to seasonal factors, and said net
interest income would decline over the period.
On a call with analysts on Tuesday, bank executives said they
expect net interest income to grow year over year, and expect it to
be higher in the second quarter than in the first. Net interest
margin is expected to drop slightly in the second quarter, but
remain relatively stable for the rest of the year.
Executives also said they are expecting higher noninterest
income in the second quarter than in the first quarter, driven by
card and processing revenue among other factors.
Write to Julie Steinberg at julie.steinberg@wsj.com
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