Fifth Third Earnings Top Views, Thanks to Valuation Adjustment

By Lisa Beilfuss 

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 profit of 37 cents a share on revenue of $1.45 billion.

The latest period's results included a $70 million pretax position valuation adjustment on the warrant Fifth Third holds in Vantiv, 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%.

Corporate banking revenue, meanwhile, fell 11% to $92 million. Card and processing revenue rose 5% to $71 million and investment advisory revenue edged 6% higher to $108 million.

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 Bancorp's deposit advance product as well as fewer days in the quarter.

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.

Shares, down 7% year-to-date through Monday's close, were inactive premarket.

Write to Lisa Beilfuss at [e-mail]

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