Fifth Third, At Fourth and One (FITB)

October 21, 2008 by Douglas A. McIntyre

Fifth_third_logoThose hoping for any magic recovery at Fifth Third Bancorp (NASDAQ: FITB) are going to have to wait a little longer.  The troubled regional bank is trading lower Tuesday eventhough everyone should have been expecting light earnings.  Fifth Third has posted a loss of -$0.14 EPS while First Call had estimates for a profit of $0.18 EPS.  Fifth Third said it was considering applying for relief funds under the $700 billion bank bailout TARP plan.

The company’s loss was $81 million after items, and this compares to awhopping profit of $325 million, or $0.61 per share, in the same quarter of2007.  The loss was mainlyblamed on higher credit costs and market valuations.  The lossprovisions were $941 million rather than an amount of only$139 million in the same quarter last year, and the high concentrationof those losses is Michigan and Florida.  Its charge off rate has alsogrown by 150% to 2.17%.

There are roughly $123 million in charges spread out among theFannie/Freddie write-offs and the Visa-Discover settlement and the lifeinsurance policies.

The good news is that net interest income rose over 40% to $1.07billion, but about $215 million was due to accounting adjustments. 

This company does need the TARP help, even if it comes at a price.Shares are trading down 14% at $10.50 pre-market, while the 52-weektrading range is $7.96 to $31.52. Two years ago this was north of a$40.00 stock. 

You can forget about trying to make forward calculations on the P/Eratios here now that the "E" is a "-" and this is going to cause manyestimates to come crashing down all over again.  About all traders andinvestors can hope for here is that these crummy numbers should havebeen factored in much better than what analysts had as officialnumbers.  Interestingly enough, it doesn’t look like any of theanalysts were expecting losses.

Jon C. Ogg
October 21, 2008