Cincinnati-based Fifth Third Bancorp became the latest U.S. bank to flex its second-quarter earnings muscle Friday by posting an increase in net income of $192 million, up by 7%.

Excluding special charges and adjusting for a three-for-two stock split on June 20, Fifth Third's operating earnings per share were 46 cents, in line with estimates. The $45 billion-asset bank, the fifth among the biggest banks to release earnings for the quarter, kept unbroken a string of profit reports from the major banks that have either matched or exceeded estimates.

Fifth Third chairman and chief executive officer George A. Schaefer Jr. said the strong period was helped by increases in fee revenue and retail and commercial deposit growth. Credit quality "remained at some of the best levels in our history," he added.

Analysts said the company has few weak spots.

"This is what people have come to expect from Fifth Third," said Timothy Willi, an analyst with A.G. Edwards & Sons. He said the bank had good credit quality and lower than expected expenses.

"With all the investor concerns out there about credit, it was a relief to investors to see that they reported a decline in nonperforming assets," said Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc. "The only soft spot was in the margin and net interest income, but they are managing well in this rate environment and are continuing to post very impressive growth numbers."

Operating income does not include a one-time $33.5 million charge tied to Fifth Third's merger with CNB Bancshares Inc., a deal it completed in the quarter.

Net interest income rose nearly 5% because of 15% growth in average earning assets and a decrease of 35 basis points in net interest margin, dampened by rising interest rates. Fifth Third's fee-based businesses boosted noninterest income by 13%, excluding securities gains.

Nonperforming assets made up .64% of total loans, leases, and other real estate owned, compared with .63% last quarter. Net chargeoffs dropped 25%, to $17.2 million.

Results from five of the nation's top 25 banking companies are telling a more upbeat story than what analysts had predicted.

SunTrust and BB&T, for example, enjoyed strong loan growth and benefited from cost savings initiatives and a healthy increase in deposits, respectively. Both matched analyst estimates.

Still, it is early in the reporting season, and even amid the positives there are signs that not all is rosy. Though SunTrust beat estimates by two cents, it did so only after analysts had trimmed two cents off their estimates in recent weeks as they braced for a less than perfect quarter.

J.P. Morgan's results, which at earnings of $2.90 per share trounced estimates of $2.45, were also somewhat deceptive, powered as they were by surging profits from investment banking and proprietary trading activities that offset a slump in its bond business.

As a result, early earnings reports have elicited a mixed response from some analysts.

"Margins are little worse than people expected, but they will probably only get better from here," said Thomas McCandless, an analyst with CIBC World Markets. "Chargeoffs and nonperformers look better than expected, but it's going to deteriorate a lot in this quarter and the next."

Mr. Willi said some companies might have been unfairly lumped in when credit-quality issues surfaced, with warnings from Winston-Salem, N.C.-based Wachovia Corp. and San Francisco-based Unionbancal.

"Some of these announcements may have put some bad karma out there, and people expected that we would see that with all banks," he said. "I don't know that that was necessarily fair or accurate."

Related link:

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.