Mortgage revenue totaled $258 million in the fourth quarter, increasing from $200 million the previous quarter and $156 million a year earlier, as the company continued to take advantage of the mortgage loan refinance boom, in a time of historically low interest rates.
The company's corporate banking revenue increased 13% sequentially and 38% year-over-year to $114 million in the fourth quarter, while service charges on deposit accounts were up 5% quarter-over-quarter to $134 million. Deposit account service charges were down 1% from a year earlier.
Fifth Third's fourth-quarter provision for loan and lease losses was $76 million, increasing from $65 million the previous quarter and $55 million a year earlier, as the company was realizing less benefit from the improvement in credit quality, as expected at this point in the economic recovery. Loan loss reserves declined by $101 million in the fourth quarter, boosting earnings.
The company continued to report strong loan growth, with period-end total portfolio loan balances growing by 3% sequentially to $85.782 billion, while (non-real estate) commercial and industrial (C&I) loans were up 8% from the previous quarter to $36.038 billion, as of Dec. 31.
Fifth Third's fourth-quarter return on average assets was 1.33%, improving from 1.23% in the third quarter and 1.08% in the fourth quarter of 2011. The company's return on tangible common equity during the fourth quarter was 14.1%, increasing from 12.8% the previous quarter and 11.9% a year earlier.
Fifth Third's shares closed at $15.55 Wednesday, trading for 1.3 times their reported Dec. 31 tangible book value of $12.33, and 9.8 times the consensus 2013 EPS estimate of $1.59. The consensus 2014 EPS estimate is $1.66.
Based on a quarterly payout of 10 cents the shares have a dividend yield of 2.57%. The company repurchased roughly $650 million worth of common shares during 2012, including $175 related to gains from sales of Vantiv shares. The company's 2012 capital plan authorized another $125 million in share buybacks for the first quarter of 2013.
Jefferies analyst Ken Usdin in a note following the earnings release called Fifth Third's fourth-quarter results a "solid beat" of the consensus estimate, and said that "forward guidance for 2013 is better than expected and should support [the] consensus."
Usdin did say that "the outsized growth rate in C&I will likely raise some questions, as the bulk of it appeared to come towards quarter end," adding that the company's planned run-off of commercial real estate loans "is still meaningful, but declines appear to be slowing."
The analyst rates Fifth Third a "Buy," with a $17 price target, estimating that Fifth Third will earn $1.50 a share in 2013.
Interested in more on Fifth Third Bancorp? See TheStreet Ratings' report card for this stock.
Written by Philip van Doorn in Jupiter, Fla.