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Fifth Third Continues Mortgage Streak (Update 1)

Tickers in this article: BAC C FITB
  • Fourth-quarter EPS of 43 cents beats the consensus estimate of a 41-cent profit.
  • Mortgage revenue rises 38% sequentially.
  • Period-end total commercial loans increase by 5% sequentially; C&I loans by 8%.
  • Net interest income declines; net interest margin narrows.
  • Fourth quarter ROA of 1.33%, ROTCE of 14.1%, both increasing sequentially and year-over-year.

Updated with midday market action and comments from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Fifth Third Bancorp (FITB) of Cincinnati on Thursday announced another quarter of very strong mortgage revenue growth and solid increases in commercial and industrial loan balances.

The company reported fourth-quarter net earnings available to common shareholders of $390 million, or 43 cents a share, increasing from $354 million, or 38 cents a share in the third quarter, and $305 million, or 33 cents a share, in the fourth quarter of 2011.

For all of 2012, Fifth Third reported earnings available to common shares of $1.541 billion, or $1.66 a share, increasing from $1.094 billion, or $1.18 a share, in 2011.

The fourth-quarter results beat the consensus estimate of a 41-cent profit, among analyst polled by Thomson Reuters. The fourth-quarter results reflected a number of one-time items, including a $157 million gain on the sale of Vantiv (VNTV) shares, which amounted to $102 million after taxes, adding 11 cents a share to earnings. Fifth Third's former payment processing subsidiary completed its initial public offering in March. Fifth Third held a 33% stake in Vantiv as of Dec. 31.

Negative after-tax one-time items for the fourth-quarter included:

  • $87 million, or nine cents a share, for debt extinguishment.
  • $12 million, or a penny a share, on a reduced valuation for a warrant to purchase Vantiv shares.
  • $10 million, or a penny a share, "related to the valuation of a Visa total return swap."
  • $19 million, or two cents a share, to increase mortgage putback reserves, "due to new Freddie Mac (FMCC) guidance for potential 2004-06 repurchase claims."

The net effect of the one-time items was a two-cent reduction in earnings, underlining a solid quarter for Fifth Third.

Fifth Third's shares were up 5% in midday trading, to $16.26, while the KBW Bank Index (I:BKX) was up slightly to 53.60, with all 24 index components showing gains, except for five, including Bank of America (BAC) , which was down 4% to $11.33, and Citigroup (C) , which was down 3% to $41.25.

Bank of America reported a fourth-quarter profit of $700 million or $.03 a share, beating the consensus EPS estimate by a penny, after the company pre-announced a large mortgage putback settlement with Fannie Mae (FNMA) and a major contribution to the $8.5 billion foreclosure settlement between federal regulators and the nation's largest loan servicers.

Citigroup reported fourth-quarter earnings of $1.2 billion, or 38 cents a share. Excluding credit valuation and debit valuation adjustments, Citi earned $2.2 billion or 69 cents a share, missing the consensus estimate of 96 cents. Citigroup's earnings were lowered by charges related to its restructuring announced in the fourth quarter, as well as a declining release of loan loss reserves.