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CINCINNATI ( TheStreet) -- Fifth Third Bancorp ( FITB - Get Report) Thursday reported second-quarter earnings that were well ahead of Wall Street expectations as credit costs showed substantial improvement. In a press release before the opening bell, the bank reported net income of $192 million for the three months ended June 30, up from a loss of $10 million in the first quarter, but down a year-ago profit of $882 million. Last year's quarter included a gain of $1.8 billion from an asset sale. After the payment of preferred dividends, Fifth Third earned $130 million, or 16 cents a share, in the latest quarter. That beat the average estimate of analysts polled by Thomson Reuters for a profit of 2 cents a share in the June period. The stock was moving higher in premarket action, adding 39 cents, or 3.5%, to $11.67 on volume of roughly 66,000, according to Nasdaq.com. Based on Wednesday's close at $11.28, the shares were up 15.7% so far in 2010. The profit in the latest quarter was Fifth Third's first since last year's second quarter. "Second quarter results marked a solid return to profitability, reflecting continued strong pre-provision earnings and significant further improvement in credit results," said Kevin Kabat, the bank's president and CEO, in the press release. "Credit trends remained favorable, reflecting the benefit of our actions to aggressively address problems and continued efforts to improve the quality of originations and proactively resolve credit issues." The bank said its net charge-offs fell 25%, or $148 million, on a sequential basis to $434 million in the June quarter from $582 million in the March period. Fifth Third said this was its lowest level of net charge-offs since the second quarter of fiscal 2008. Non-performing assets declined 5% on a sequential basis, while total delinquencies fell 17%. Fifth Third gave investors its initial read on the impact of the historic financial reform legislation signed into law by President Obama on Wednesday, saying it believes certain elements, in particular rule changes related to debit interchange fees, will have a negative impact on revenue and earnings. The bank also commented on capital requirements.
Capital treatment of trust preferred securities will be impacted on a phased-in basis in 2013, which we expect to deal with through capital management over time," said Kabat in the release. "We look forward to receiving clarity on these issues through rule-making and on changes to the Basel capital framework for financial institutions, which we also would currently expect to be manageable for Fifth Third and to have a relatively lower impact on us given our business model compared with large and global banks." The bank didn't comment on the $3.4 billion in TARP funds it still needs to pay back in its press release. although it could face questions about the timing its repayment plans on its conference call later Thursday. -- Written by Michael Baron and Maria Woehr in New York.