Fifth Third's commercial loan growth helps boost 1Q earnings

Net income for Fifth Third Bancorp jumped nearly 11% in the first quarter from a year earlier to $760 million, due in large part to strong commercial loan growth, the bank said.

The $167.8 billion-asset bank said loan growth was better than expected. Average loans and leases held on the bank’s portfolio increased 6% to $97.8 billion. Its commercial loan portfolio grew by 8% to $61.8 billion, while its consumer portfolio expanded by 2% to $35.9 billion. Most loan categories, with the exception of home equity lending and commercial leasing, grew.

"Loan growth exceeded our previous expectations, we continued to manage expenses diligently, and credit quality metrics were solid,” the Cincinnati company's president and CEO, Greg Carmichael, said in a press release Tuesday.

Earnings per share of $1.12 were 55 cents higher than the mean estimate of analysts surveyed by FactSet Research Systems.

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Carmichael noted that Fifth Third purchased MB Financial in late March and said he expected to convert the majority of its systems in May. The acquisition added approximately $19.8 billion in assets, $13.5 billion in loans and leases and $14.5 billion in deposits to Fifth Third’s balance sheet.

Net interest income rose 8.6% to $1.1 billion, and the net interest margin expanded 10 basis points to 3.28%.

Total deposits increased 6% to $109.6 billion. Like most of its peers, Fifth Third saw deposits shift out of low-cost demand deposits and into more expensive interest checking and money market accounts.

Noninterest income rose 21% to $1.1 billion. Corporate banking revenue increased 27% to $112 million on growth in capital markets income and business lending fees. That helped to offset flat card revenue and a slight decline in mortgage banking revenue. Noninterest expenses increased 9% to $1.1 billion. Compensation and benefits rose 10% to $610 million, and technology and communications expenses rose 22% to $83 million.

Fifth Third's efficiency ratio improved to 50.2% from 52.9% a year earlier.

It increased its provision for loan losses to $89 million from $23 million a year ago. Nonperforming assets declined slightly to $497 million from $504 million. Net charge-offs declined to $77 million from $81 million year over year.

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