Fifth Third profits down 10% for first quarter
Fifth Third - 1Q16 profit of $312m, down 10% YoY, though net interest income was up 7%, YoY, to $909m; the results beat estimates. CEO Greg Carmichael has said that the bank had a solid performance considering the economic headwinds and is looking to invest in technology to improve its edge.
Alexander Coolidge

acoolidge@enquirer.com

Fifth Third on Thursday reported a $312 million profit for the first quarter ended March 31 – a 10 percent decrease from the same period last year.

Net interest income was $909 million, up 7 percent, while non-interest income 1 rose percent to $637 million. All told, total revenues were $1.5 billion, up 4.3 percent.

Last year, the Cincinnati-based regional bank earned a $346 million profit on revenues of $1.5 billion.

The results beat market profit and revenue expectations. Wall Street analysts expected Fifth Third to post a $280 million profit before one-time items on nearly $1.5 billion in total revenues, according to Bloomberg.

Fifth Third shares rose 0.8 percent or 14 cents to close at $18.53 on Thursday.

CEO Greg Carmichael said Fifth Third is investing in technology to improve its edge even as the industry struggles amid still low interest rates and a tepid economy. Bank executives, however, said noninterest expenses would be lower than previously forecast, up 4.25 to 4.5 percent, down from an earlier range of 4 to 5 percent.

"We had solid performance in a challenging quarter," Carmichael said. "We believe these investments will help us generate attractive and more stable returns through business cycles."

Carmichael credited the Federal Reserve's December interest rate increase with boosting lending revenues. Fee income also rose modestly, thanks to robust revenue growth from the bank's corporate banking unit that offset the impact from a smaller one-time gains from its stake in credit and debit card processor Vantiv.

Carmichael said the bank nabbed additional business aiding commercial clients amid an uptick in mergers and acquisitions.

Still, Fifth Third also benefited from $56 million worth of one-time pre-tax gains, including a $47 million increase in the value of its remaining Vantiv stake, an $8 million gain on the sale of St. Louis branches and $1 million from a gain on a Visa swap. The bank also paid a one-time $14 million expense for a employee buyout early this year that 160 employees accepted, but that is expected to save the company $9 million annually.

The bank industry has been under pressure from historically low interest rates that makes lending less profitable. A lackluster economy also makes for sluggish demand for loans. While the Federal Reserve has begun to raise interest rates, more increases – and a better lending environment – are expected to take several months.

Meanwhile, Fifth Third's costs for compliance and IT spending have risen, prompting some expense cutting elsewhere.

Total non-interest expenses were $986 million, up 7 percent or $63 million.

Early this year, Fifth Third extended a buyout offer to 775 employees, but also is in the process of hiring 200 IT workers.

The bank is also wrapping up its branch restructuring, announced last summer, that is cutting 105 or 8 percent of retail offices. The cuts will shrink the company's footprint to 10 states from Michigan to Florida as it exits Pennsylvania and Missouri retail operations. The bank closed 41 branches in 2015, had planned to close 34 in the March quarter and close the last 32 by June.