Merger costs eat into Fifth Third’s 2Q profit

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Fifth Third Bancorp in Cincinnati reported a noisy second quarter, as merger-related expenses took a bite out of its bottom line.

Net income fell 25% from the same quarter last year to $453 million. Earnings per share of 57 cents missed the mean estimate of analysts surveyed by FactSet Research Systems by 8 cents.

The second quarter included $109 million in expenses related to Fifth Third’s integration of MB Financial in Chicago, which it bought in March. Had that not been a factor, earnings per share would have come in at 71 cents, the company said.

Net interest income rose 22% year over year to $1.2 billion. The net interest margin expanded 16 basis points to 3.37%.

Loans and leases held on the bank’s portfolio increased 19% to $110.1 billion, as the merger added to Fifth Third’s balance sheet. Commercial loans and leases rose 25% to $71.7 billion, while consumer loans grew 9% to $38.3 billion.

Average deposits climbed 20% to $124.3 billion, largely because of the merger.

Noninterest income fell 11% to $660 million. Many fee income categories, including corporate banking revenue and mortgage banking revenue, grew on a yearly basis, but other noninterest income fell 63% to $93 million. This was mainly because the company had recorded a $200 million gain from selling part of its stake in the payments processor Worldpay in the year-ago quarter.

Noninterest expenses increased 24% from the same period last year to $1.2 billion. The two biggest drivers were compensation and benefits, which rose 17% to $641 million, and technology and communications, which more than doubled to $136 million. Most of that was also related to the MB Financial acquisition.

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