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Fifth Third's Mortgage Revenue Doubles (Update 1)

  • Fifth Third Bancorp reports first-quarter earnings per share of $45 cents.
  • Analysts were expecting EPS of 36 cents.
  • Mortgage banking net revenue doubles to $204 million.
  • Commercial and industrial loans grow 5% sequentially.

Updated with comments from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) - Fifth Third Bancorp (FITB - Get Report) on Wednesday reported a 100% year-over-year increase in net mortgage revenue, to $204 million.

The Cincinnati lender reported first-quarter net income available to common shareholders of $421 million, or 45 cents a share, increasing from $305 million, or 33 cents a share, during the fourth quarter, and $88 million, or 10 cents a share, during the first quarter of 2011. The company booked $153 million in discount accretion in the first quarter of 2011 when it redeemed $3.4 billion in preferred stock held by the government, for bailout assistance received through the Troubled Assets Relief Program, or TATP.

The first-quarter earnings came in ahead of the 36 cent EPS estimate among analysts polled by Thomson Reuters.

The company's first-quarter results included a $115 million pretax benefit (roughly $75 million, or eight cents a share, after tax) from gains from the initial public offering of Fifth Third's Vantiv (VNTV - Get Report) subsidiary, as well as a $36 million pretax charge ($23 million, or two cents a share, after tax), "from Vantiv debt termination-related charges recorded in equity method earnings."

The first-quarter results also included a "benefit of $46 million pre-tax (approximately $30 million after-tax, or $0.03 per share), from gains on the higher valuation of the warrant Fifth Third holds in Vantiv."

Excluding the above one-time items, first-quarter operating earnings of 36 cents would match the consensus estimate.

Fifth Third's average loan balances increased 2% during the first quarter, from the previous quarter, to $81.5 billion, with average commercial and industrial loans growing 5% during the quarter, to $31.4 million.

The company's net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was 3.61%, declining from 3.67% in the fourth quarter and 3.71% in the first quarter of 2011.

First-quarter net interest income was $903 million, declining from $920 million the previous quarter, but increasing from $884 million a year earlier, with the sequential decline "primarily attributable to lower yields on loans given the current interest rate environment partially offset by balance growth in C&I, commercial lease, residential mortgage, and auto loans."

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