Fifth Third Bancorp plans to take a second-quarter charge of $250 million related to the acquisition of Old Kent Financial Corp., and an analyst said integration expenses have been running higher than she had expected.

The plans for the charge were revealed in a late-Friday filing with the Securities and Exchange Commission. The Cincinnati banking company said it expects to take more Old Kent-related charges in later quarters.

The aim is to maintain a "smooth" integration and preserve "future revenue opportunities," Fifth Third said in the filing.

Old Kent, of Grand Rapids, Mich., was Fifth Third's biggest acquisition; the company has a history of smaller deals.

Analysts said the big second-quarter charge is consistent with the conservative style of Fifth Third's management.

In an interview Monday, chief financial officer Neal Arnold said most of the integration expense is related to overlapping computer systems. "I wouldn't call this a meaningful increase," he said. "It is not at all a surprise." Expenses will return to normal when the integration is complete, he said.

But Marni Pont O'Doherty, an analyst with Keefe, Bruyette & Woods Inc., said in a research note that "expense levels look to be higher" than her firm had initially forecast.

Fifth Third predicts that the integration, which it expects to complete this fall, will cost around $300 million in all. It plans to take the $250 million charge in the second quarter because "the bulk of the integration costs are up-front," Mr. Arnold said.

Expenses naturally rise after an acquisition, said Henry C. Dickson, an analyst at Lehman Brothers. He raised his per-share estimate of Fifth Third's 2001 operating earnings by $5, to $75.

"This is a reflection of the strong disciplined business model Fifth Third has built," Mr. Dickson wrote in his research note. "We think that the track record should continue."

Mr. Dickson said he believes expenses will drop in the fourth quarter, after conversions are completed. "It takes time," he said.

Fifth Third gave a broader glimpse of its second-quarter profit trends in Friday's SEC filing. The company said that commercial loans would increase in the "low double digits" and that deposit-gathering campaigns in its new markets are succeeding beyond original expectations.

Investment advisory revenues are expected to increase 10% over last year, despite ongoing weakness in financial markets.

Fifth Third bought Old Kent on April 2 and began converting Old Kent branches in five markets, in Indiana, Illinois, and Michigan. The Fort Wayne, Ind., conversion began last month. Work is to start this week on the second market, Chicago, where 110 branches will be converted. The process will then move on to Detroit, northern Michigan, and Grand Rapids, and is scheduled to be over by October.


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