Fifth Third's Profit Falls on Charge for Branch Closures

M&A

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Fifth Third Bancorp in Cincinnati reported a decline in second-quarter profit, as the costs to close branches offset loan growth.

The $142 billion-asset company said net income fell 30% to $292 million, or 36 cents per share, from a year earlier. Despite the decline, Fifth Third is headed in the right direction because loan growth accelerated from the first quarter, Scott Siefers, an analyst at Sandler O'Neill, wrote in a research note.

Net interest income fell 1% to $892 million, as the yield on interest-earning assets fell 25 basis points to 3.28%. The net interest margin fell 25 basis points to 2.9%. Fifth Third said that its move this year to lower the cost of small-dollar consumer loans hurt net interest income.

Average loans and loans and leases rose 2% to $92.7 billion. Commercial and industrial loans, Fifth Third's largest loan category, rose 4% to $42.8 billion, from a year earlier.

"Right now, commercial and industrial will dominate our loan growth," Tayfun Tuzun, Fifth Third's chief financial officer, said during a conference call.

Fee income fell 24% to $556 million, as Fifth Third booked a $97 million pretax charge to cover the costs of closing 105 branches.

Fifth Third last month said it would close or sell 100 branches and sell another 30 properties that had been slated for new branches. Since then, the company identified an additional five branches to close, raising the total to 105, Chief Operating Officer Greg Carmichael said in an interview. The new total raised Fifth Third's estimate of yearly cost savings from the closures to $65 million from $60 million.

The company also recorded a $17 million pretax positive valuation adjustment on its warrant in payments company Vantiv.

Noninterest expense fell 1% to $947 million on lower charges for litigation reserves.

Andy Peters

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