Fifth Third Bancorp (FITB) said that it will use available cash to redeem $862.5 million in outstanding trust-preferred securities next month.
The Cincinnati company is the latest banking company to announce plans to repurchase trust-preferred securities in preparation for new capital standards that will begin being phased in next year. Banks with at least $15 billion in assets as of Dec. 31, 2009, will no longer be able to count trust-preferred securities as part of Tier 1 capital under a provision in the Dodd-Frank Act.
The $117 billion-asset Fifth Third said Monday that its trust-preferred securities were issued by Fifth Third Capital Trust VI with a current distribution rate of roughly 7.3%.
Other banks that have said they would redeem their trust-preferred securities include BB&T (BBT), Bank of America (BAC) and PNC Financial Services Group (PNC). Industry observers expect the number of banking companies making this move to increase in coming months.
