Fifth Third's Profit Jumps on Fees and Commercial Growth -- Update
October 20 2015 - 10:26AM
Dow Jones News
By Lisa Beilfuss
Fifth Third Bancorp said profit in its third quarter rose as a
positive valuation adjustment and a jump in fee revenue helped
offset a higher loan-loss provision and increased expenses.
The profit fell short of Wall Street projections, though,
pushing shares down 1.4% in morning trading.
The Cincinnati-based regional bank reported a profit of $381
million, up from $340 million a year earlier. Per-share earnings
rose to 45 cents from 39 cents. Excluding a valuation adjustment on
a warrant the bank holds in Vantiv Inc., among other items, the
per-share profit was 39 cents. Revenue, a combination of net
interest income and noninterest income, increased 13% to $1.62
billion.
Analysts estimated 40 cents in profit per share and $1.51
billion in revenue, according to Thomson Reuters.
Like other regional banks in recent weeks, Fifth Third credited
growth in its commercial business for improved results. Corporate
banking revenue rose 4% from a year ago, driven by a 17% jump in
capital markets fees. Total fee-based revenue surged 37% in the
period, also thanks to a 16% rise in mortgage banking fees.
Higher revenue from fees helped offset the effects of prolonged
low interest rates. Fifth Third's net interest margin--an important
measure of lending profitability that is tied to interest
rates--fell to 2.89% from 3.10% a year earlier. From the second
quarter, though, Fifth Third managed to keep the measure steady
amid a slightly lower short-term cash position.
In the face of low rates, Fifth Third, like other regional
banks, has worked to cut costs to support profit. The lender sold
29 retail locations during the quarter and Chief Executive Greg
Carmichael said the company is on track to complete its branch
consolidation effort by the middle of next year.
Noninterest expense in the quarter fell modestly from the
previous quarter, though expenses rose about 6% from a year earlier
as compensation expenses increased and as the bank set aside a
higher provision for loan losses. That provision more than doubled
to $156 million from the year-earlier period, due to the
restructuring of student-loan-backed commercial credit in addition
to a broadening economic slowdown, stress on capital markets and
the prolonged downturn in commodity prices, the bank said.
Loan growth moderated from the second quarter but remained
strong, according to analysts at Sterne Agee CRT, rising 2.8% from
the year-earlier period.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 20, 2015 10:11 ET (14:11 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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