Mortgage Business Hemorrhage Continues at Fifth Third

Fifth Third Bancorp (FITB) posted $50m net income for Q109, indicating a recovery from the $2.14bn net loss reported for Q408. The bank touted $18bn in new and renewed credit in the quarter, mainly due to “particularly strong relationships” with customers, CEO Kevin Kabat said today in an investor call. The bank boasted an average portfolio loan balance of $9.2bn in residential mortgage loans, down 2% from the previous quarter and down 12% from the year-ago period. The data illustrates the continued easing off on the business through last year. The Q108 mortgage portfolio totaled nearly $10.4bn — a figure that has declined every quarter since. If Fifth Third’s mortgage business is bleeding, however, it is not holding back the bank. Officials touted high mortgage origination volumes during the quarter, which drove a $1.2bn increase in the warehouse of residential mortgages held-for-sale. Mortgage banking business net revenue swung away from fourth quarter’s loss, posting $134m no-interest income. On the not-so-rosy side of the bank’s mortgage business, residential mortgages accounted for $265m in non-performing assets, up from $259m in the previous quarter. Residential mortgage loan charge-offs totaled $75m for the quarter, up from $68m in the previous quarter and up 120% from $34m in the year-ago period, while home equity loans accounted for $72m in charge-offs. Fifth Third’s loan loss provision totaled $733m in the quarter, down from $2.36bn in Q408. The allowance represented 128% of non-performing loans and 3.71% of total outstanding loans and leases compared with 3.31% in the previous quarter. Bank officials said in the earnings statement the increase in the allowance for loan and lease losses reflected growth in nonperforming assets and overall delinquencies, suggesting nonperforming assets and charge-offs may also increase in coming months. Fifth Third shares traded at $3.82, up 3.52%, as this story went to press. Read the earnings statement. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.