Fifth Third's Profit Jumps on Fees and Commercial Growth

By Lisa Beilfuss 

Fifth Third Bancorp said profit in its third quarter rose as a jump in fee revenue helped offset a higher loan-loss provision and increased expenses.

Results beat Wall Street projections.

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. 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 lightly 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.

Shares, down about 7% this year, were inactive premarket.

Write to Lisa Beilfuss at [e-mail]

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(END) Dow Jones Newswires

October 20, 2015 08:06 ET (12:06 GMT)

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