UPDATE:Fifth Third Bancorp Expects 3Q Loan Losses To Be $775 Million
17 September 2009 - 12:54AM
Dow Jones News
Fifth Third Bancorp (FITB) said it expects third-quarter losses
tied to defaulting loans to rise 24% from the second quarter, to
approximately $775 million.
Kevin Kabat, the Cincinnati bank's chairman and chief executive,
told investors at the Barclays Capital Global Financial Services
Conference that he expects losses from delinquent loans to
stabilize "in the next couple of quarters," but that his bank has
built a strong reserve for loan losses and that he does not expect
Fifth Third to need to add significantly to that reserve this
quarter.
He said Fifth Third is working on shifting the fees it charges
customers away from penalties and more toward services the bank
provides, perhaps a nod to one potential focus of President Obama's
plans to form a consumer protection agency.
Kabat also said he continues to be interested in acquisitions,
but sees weak loan demand.
“We expect conditions in Florida to remain difficult until the
end of the year," he said, but added that he sees signs of
improvement in Michigan; Florida and Michigan are two of the
markets that caused much pain to Fifth Third's loan portfolio.
In a filing with the Securities and Exchange Commission ahead of
Kabat's presentation, Fifth Third said it "currently expects net
charge-offs to include approximately $110 million in net
charge-offs related to (Shared National Credits) compared with $17
million in the second quarter."
Such losses from syndicated loans are "higher than we expected,"
Kabat said. However, the filing said the bank expects losses from
shared national credits to improve "significantly" in the fourth
quarter.
Fifth Third said it expects commercial loan losses to be
approximately $500 million to $525 million and consumer loan losses
to be approximately $250 million to $260 million. The bank expects
nonperforming loans, those for which repayment is doubtful, "to
increase approximately 20% from $2.8 billion at the end of the
second quarter to approximately $3.4 billion at the end of the
third quarter, with approximately $150 million of the growth
related to SNC credits," the bank said in its filing.
"Operating trends for the third quarter are expected to be
broadly in line with trends previously expected and communicated at
the time of our second quarter 2009 earnings announcement on July
23, 2009," Fifth Third's filing said.
Kabat said the bank remains interested in purchasing failed
banks from the Federal Deposit Insurance Corp. and other
acquisitions, though Fifth Third would only make acquisitions in
markets where it already has branches - the Midwest, Georgia, and
Florida - and only if they are sizable enough to improve the bank's
market share.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com