Average loans held in the bank's portfolio were up 1% sequentially and 5% year-over-year to $86.7 billion. Fifth Third continued its strong commercial and industrial loan growth, with loans of this category averaging $37.6 billion in the second quarter, rising 3% from the previous quarter and 15% from a year earlier.
Second-quarter noninterest income totaled $1.060 billion, increasing from $743 million in the first quarter and $678 million during the second quarter of 2012. In addition to gains on the Vantiv holdings of $242 million before tax, and the increase in mortgage revenue, Fifth Third reported a 4% increase (from the first quarter and year-over-year) in deposit account service charges to $136 million, while corporate banking revenue was up 7% from the first quarter and 4% year-over-year to $106 million.
"Nearly all fee income categories increased quarter-over-quarter," Fifth Third CEO Kevin Kabat said in the bank's earnings press release, adding "All major fee categories showed mid-single digit growth year-over-year."
Noninterest expense totaled $1.017 during the second quarter, increasing from $978 million in the first quarter and $937 million during the second quarter of 2012, "largely driven by [an] increase in litigation reserves," according to the company. Excluding $33 million in charges to increase litigation reserves and other smaller items, the company said "noninterest expense of $986 million increased $8 million, or 1 percent, compared with the first quarter of 2013 and increased $32 million, or 3 percent, compared with the second quarter of 2012."
Fifth Third's second-quarter return on average assets -- excluding the Vantiv gain -- was 1.30% and its return on average tangible common equity was 14.1%.
Jefferies analyst Ken Usdin rates Fifth Third a "buy," with a $21 price target, and in a note to clients on Thursday wrote "Lower fees look to be the primary [factor in the reduced outlook], as the company is now guiding for 'consistent fees' vs. 'low single-digit growth' previously. "
Usdin added that "Core expenses looked fine, with salaries, occupancy, and technology all pretty tight."
Fifth Third's stock closed at $18.99 Wednesday, returning 27% this year, following a 23% return during 2012. The shares trade for 1.3 times their reported June 30 tangible book value of $12.71, and for 10.9 times the consensus 2014 EPS estimate of $1.74. The consensus 2013 EPS estimate is $1.71.
Based on a quarterly payout of 12 cents, the shares have a dividend yield of 2.53%.
Fifth Third repurchased $539 million in common shares during the second quarter, lowering its average share count to roughly 851.5 million during the second quarter. The average share count was down 3% during the quarter and 7% year-over-year.
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-- Written by Philip van Doorn in Jupiter, Fla.