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Fifth Third's


first-quarter earnings fell almost 17% from a year ago as higher expenses and a decline in net interest income cut into profits.

Fifth Third earned $363 million, 65 cents a share, compared with $405 million, or 72 cents a share, in the same quarter last year. Analysts had been forecasting net earnings of 64 cents a share in the latest quarter, according to Thomson Financial.

Total revenue fell 2.2% to $1.34 billion, slightly missing the Thomson Financial estimate of $1.35 billion.

The company's core revenue contributor, net interest income, fell to $718 million from $759 million in the first quarter last year. Noninterest income inched up to $617 million from $607 million in the first quarter last year.

Net charge-offs were also slightly higher than the first quarter last year, at $73 million compared to $63 million in 2005. The company's provision for bad loans was $78 million in the first quarter compared to $67 in the same quarter in 2005.

Fifth Third was hit by rising expenses, with its noninterest expense rising 4% over the same quarter last year. The increase in expenses was primarily due to new hires and branch expenditures, a trend the company expects will continue in throughout the year.

"Cost-saving initiatives will be somewhat mitigated by continuing investment in certain high-opportunity markets, including the expected addition of approximately 50 net new banking centers in 2006," the release said.

"Fifth Third's focus for the remainder of 2006 will be on continuing to drive deposit growth and market-share improvement, maintaining growth in high-quality consumer and commercial loans, enhancing and growing our fee businesses and controlling expenses," said George A. Schaefer Jr., the CEO. "I believe that sustained performance in these areas will once again result in value creation for shareholders. The competitive strength of Fifth Third's employees, demonstrated even in difficult years, combined with an expanded infrastructure make me extremely optimistic about the future. On behalf of our management team, employees and board members, we thank our shareholders for their continued confidence."