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Fifth Third Continues Strong Commercial Loan Growth (Update 1)

  • First-quarter net income to common shareholders of $413 million, or 46 cents a share.
  • Earnings beat the consensus EPS estimate of 39 cents.
  • Excluding special items, first-quarter EPS drops slightly to 44 cents.
  • Average commercial and industrial loans grow 6% sequentially.
  • Mortgage banking revenue drops 15% from Q4.
  • Expenses drop 16% from Q4, when the company paid $87 million, or 9 cents a share after tax, to repay FHLB debt.
  • Net interest margin down to 3.42% in Q1, from 3.49% the previous quarter and 3.56% a year earlier.

Updated from 7:41 a.m. ET with afternoon market action and comment from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Fifth Third Bancorp (FITB - Get Report) on Thursday reported continued strong growth of coveted commercial and industrial loans, with average balances in the first quarter increasing 6% sequentially and 16% year over year.

The Cincinnati-based regional lender reported first-quarter net income attributable to common shareholders of $413 million, or 46 cents a share, compared to $390 million, or 43 cents a share, in the fourth quarter, and $421 million, or 45 cents a share, in the first quarter of 2012.

The first-quarter results included a benefit of roughly $22 million, or 2 cents a share after taxes, on the valuation of the company's warrant holds in Vantiv (VNTV - Get Report), Fifth Third's former payment processing subsidiary, which was spun off in 2009.

The results for the first quarter of 2012 had been boosted by positive adjustments of roughly $90 million, or 10 cents a share after taxes, on Vantiv shares and warrants.

Excluding the special items, Fifth Third said its first-quarter earnings came to 44 cents a share, increasing 22% from a year earlier.

First-quarter tax-adjusted net interest income was $893 million, declining from $903 million in the fourth quarter and $907 million in the first quarter of 2012. Fifth Third said the sequential decline in net interest income mainly reflected the lower number of days in the first quarter. The year-over-year decline came from a lower net interest margin, which is the spread between the average yield on loans and investments and the average cost for deposits and borrowings.

The first-quarter net interest margin was 3.42%, narrowing from 3.49% the previous quarter and 3.56% a year earlier.

First-quarter noninterest income totaled $743 million, declining from $880 million in the fourth quarter, and from $769 million in the first quarter of 2012. The declines mainly reflected a $157 gain on the sale of Vantiv shares in the fourth quarter, and $115 million in gains from Vantiv's initial public offering in the first quarter of 2012.

Mortgage banking net revenue totaled $220 million in the first quarter, declining from $258 million in the fourth quarter, but increasing from $204 million in the first quarter of 2012. Mortgage loan originations in the first quarter were a record $7.4 billion, increasing from $7 billion the previous quarter and $6.4 billion a year earlier. Mortgage income declined because of a decline in gains on the sale of newly originated loans in the secondary market.

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