Loan losses to hit Fifth Third in 4Q

Fifth Third Bancorp joined the line of banks warning Wall Street about the damage the mortgage crisis will wreak on their bottom line.

The bank said in a Tuesday filing with the Securities and Exchange Commission that it will take a $275 million provision for loan and lease losses, nearly double the $140 million provision it took last quarter to cover bad loans.

That will knock fourth-quarter earnings per share down to the range 24 cents to 27 cents, the bank said, with full-year earnings per share in the $2.19 to $2.22 range.

Analysts, on average, had expected fourth-quarter earnings per share of 65 cents, and $2.71 for full-year 2007.

The news caused Fifth Third's stock to fall 58 cents, or more than 2 percent, to $25.99 in late morning trading Wednesday. The stock has been in a downtrend and fallen 37 percent this year. It's down 63 percent since March 2002.

Losses in home equity loans are the primary causes for the higher provision, Fifth Third said in the filing. Commercial construction and commercial mortgage loans also contributed.

The news isn't a complete surprise. A Goldman Sachs analyst had said last month that Fifth Third was among a handful of banks most at risk for losses in its home equity loan portfolio.

R-G Crown, a Florida bank that Fifth Third acquired last month, also contributed to the bad loans. Fifth Third said R-G Crown's bad loans will account for $37 million of Fifth Third's nonperforming assets in the fourth quarter, or 5 percent of the expected 49 percent increase in nonperforming assets. Those are mostly in commercial loans.

Separately, Fifth Third also said it will hike its fourth-quarter cash dividend by 10 percent to 44 cents per share. That, combined with the decline in Fifth Third's stock this year, has moved its indicated dividend yield to 6.8 percent. That's more than triple the S&P 500's 1.9 percent rate and ranked 11th among all stocks in the S&P 500.

Cincinnati-based Fifth Third (NASDAQ: FITB) is the Tri-State's largest bank and among the nation's 15 largest banks, with $104 billion in assets.

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source: bizjournals.com