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KeyCorp (KEY) and Fifth Third Bancorp (FITB) reported more bad news from regional banks as losses continued to mount and the banks boosted credit-loss provisions.
The Ohio banks swung to fourth-quarter losses as Fifth Third recorded a $965 million goodwill write-down and KeyCorp had a $420 million one.
National City Corp. was the third main Ohio regional bank, but it was bought last year by PNC Financial Services Group Inc. (PNC) as part of the U.S. government's plan to try to pair weaker, struggling banks up with stronger buyers.
Fifth Third Swings To 4Q Loss On Increased Loan Losses
The Cincinnati bank - a Midwestern stalwart that, like many rivals, expanded into hot markets such as Florida during the housing boom and is paying for it now - posted a net loss of $2.14 billion, or $3.82 a share, compared with year-earlier net income of $16 million, or 3 cents a share. The latest results include write-downs and charges of $1.77 a share.
"Economic conditions have deteriorated across our footprint and have placed both our consumer and commercial loan portfolios under significant stress," said Chief Executive Kevin T. Kabat.
Loan-loss reserves surged to $2.36 billion from $941 million in the third quarter and $284 million a year earlier.
Net charge-offs - loans the bank thinks are no longer collectible - soared to 7.5% of average loans and leases excluding those held for sale from 0.89% in the prior year and 2.17% in the prior quarter. That came as the company sold or transferred to held-for-sale status some $1.6 billion in loans, resulting in some $800 million in charge-offs on them.
Nonperforming loans, those in danger of default, increased to 2.96% of total assets from 1.32% a year earlier, but fell from the third quarter's 3.3%.
Last month, the company - which received $3.4 billion from the Treasury Department's capital purchase program aimed at boosting liquidity for struggling banks - cut its quarterly dividend to a nominal 1 cent a share to conserve more than $300 million in capital a year.
KeyCorp Swings To Loss
The Cleveland-based bank, which wasn't a big subprime player but expanded aggressively into hot markets that are now deeply troubled, swung to a net loss of $554 million, or $1.13 a share, compared with prior-year net income of $25 million, or 6 cents a share. The latest results included an 85-cent hit from the goodwill write-down.
Revenue fell 16% to $1.05 billion.
Analysts surveyed by Thomson Reuters were looking for a 2-cent loss on revenue of $1.18 billion.
KeyCorp's loan-loss provision increased 64% from a year earlier and 46% from the third quarter to $594 million. Net charge-offs of average loans from continuing operations jumped to 1.77% from 0.67% and 1.43%, respectively, above the company's expectations. Nonperforming assets rose to 2.36% from 1.69% and 2.03%.
The bank received $2.5 billion through participation in the Treasury's Capital Purchase Program.
Fifth Third's shares closed Wednesday at $3.99 and KeyCorp's closed at $6.69. Neither had traded premarket. Both have slumped this month amid the sell-off in financial stocks.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [email protected]
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