Fifth Third cuts losses to $160 million in 4Q, says credit picture improving

Fifth Third losses down sharply, shares jump

CINCINNATI — Fifth Third Bancorp reported that losses shrank in the fourth quarter with the credit picture improving, and the bank’s shares rose sharply Thursday.

The financial services company was stung during the housing crisis and while there has been a slow recovery in some markets, prices remain well off their highs, said CEO Kevin Kabat.

“A 5 percent increase after double-digit decreases still leaves a lot of people under water,” Kabat said. “All told, a much better operating environment than we’ve seen in some time, but the economy is not yet firing at all cylinders.”

Fifth Third, based in Cincinnati, reported a per-share loss of 20 cents for the three months ending Dec. 31, for a net loss of $160 million. A year ago, the company had a $2.2 billion loss in the fourth quarter, or $3.78 per share.

Analysts polled by Thomson Reuters, on average, expected a loss of 31 cents a share.

Shares rose nearly 9 percent, or $1, at $12.31 Thursday.

CEO Kevin Kabat said loan charge-offs, or loans written off as not being repaid, were $708 million, $48 million less than in the third quarter. Fifth Third reported improvement in both commercial and consumer loans, and said it sees that continuing. The bank expects charge-offs in 2010 to be less than in 2009.

Kabat told analysts in a conference call Thursday that loans 30 to 89 days past due and those 90 days or more past due were down significantly in the quarter, primarily due to fewer commercial delinquencies.

“While credit remains difficult and its impact remains significant, we are very pleased with the trend we saw in the fourth quarter,” Kabat said.

Kabat said the bank is starting to see more positive economic indicators, but that activity remains mixed.

“Many of our commercial clients are very nervous about investing in new projects,” he said.

For the year, Fifth Third reported a profit of $511 million, or 67 cents per share, after a 2008 loss of $2.2 billion, or $3.91 per share, after preferred dividends.

Fifth Third has 16 affiliates with 1,309 banks in 12 states, including Florida and Michigan, states hard hit by the recession’s housing slump and job losses.

Fifth Third’s chief risk officer, Mary Tuuk, told analysts that Fifth Third said Florida and Michigan continue to represent a disproportionate share of charge-offs.

“While Florida will remain a challenging market for some time, parts of our Michigan portfolio have begun to show signs of bottoming out,” Tuuk said.

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