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) --

Fifth Third Bancorp

(FITB) - Get Free Report

said it is experiencing higher levels of

mortgage repurchase requests

from government-sponsored enterprises and expects expenses related to the putbacks to increase this quarter, a company executive said Tuesday.

Fifth Third management said at the Barclays Capital Global Financial Services Conference that the company was experiencing increased claims, file requests and likely losses this quarter from mortgage repurchases. The Cincinnati-based bank has modeled higher third-quarter repurchase reserves as a result.

Fifth Third did not disclose a specific figure for the expected increase in repurchase reserves.

Fifth Third had expenses totaling approximately $18 million toward mortgage repurchases in the second quarter, down more than half the amount of related expenses in the first quarter, according to CEO Kevin Kabat's slide presentation.

That being said, Kabat acknowledged that consumer loan demand was improving. The company's auto loan origination business remains "solid," he said. Fifth Third is also retaining some of the "higher quality" mortgage originations so that the bank is likely to post positive loan growth for the third quarter overall, he said.

On the commercial side, trends in Fifth Third's commercial and industrial (C&I) loan category are also seeing improvement.

Fifth Third is not the only bank experiencing mortgage repurchase pain.

Wells Fargo's (WFC) - Get Free Report

CFO Howard Atkins reiterated on Monday at the conference that the big San Francisco-based bank's loan $1.4 billion mortgage repurchase reserves were "adequate."

Other banks including

JPMorgan Chase

(JPM) - Get Free Report


Bank of America

(BAC) - Get Free Report

and a host of regional banks have stepped up reserves this year in order to compensate for the potential losses.

Fifth Third shares were falling modestly on Tuesday. The stock is down 21% from its 52-week-high of $15.95 reached on April 21. However, the stock is up 28% from the end of 2009.

--Written by Laurie Kulikowski in New York.

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Laurie Kulikowski


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