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Fifth Third Shares Pull Back on Lower Guidance

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.

FITB ChartFITB data by YCharts

Interested in more on Fifth Third Bancorp? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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