Before the credit bubble burst Fifth Third Bancorp had not reported a loss in 36 quarters, nearly a decade, but in the bank's fiscal fourth quarter 2008 it posted its third straight.
Fifth Third Bancorp reported Thursday a net loss of $2.2 billion — or $3.94 per share — for all of 2008. These losses reflected a quarterly loss of $2.2 billion — or $3.82 per share — for the fourth quarter, a leap from the $81 million loss reported for the third quarter.
The losses were on write-downs of on loans sold or transferred to held-for-sale of $800M, goodwill impairment charge of $965 million; based on its declining stock price and loan loss reserve swelling to $2.36B from a paltry $287M a year ago, according to the earnings statement published by the bank.Overall, net charge-offs on loans either sold or transferred to held-for-sale during the fourth quarter totaled $800 million, which reflected a reduction in the value of loans sold or transferred to approximately 33 cents of their contractual balances. Fifth Third also significantly increased its reserve for loan and lease losses to $2.8 billion, resulting in an allowance to loan and lease ratio of 3.31 percent, up from 2.41 percent in the third quarter, and an allowance to nonperforming loans ratio of 123 percent, up from 79 percent in the third quarter.
The Treasury Department invested more than $3.4 billion into banks preferred stock on Dec. 312008 under TARP, but the bank still has significant mortgage exposure. Then Fifth Third suspended bonuses and slashed its quarterly dividend to a penny as required by conditions of TARP.Fifth Third reported $9.3 billion average residential mortgage loan portfolio for the quarter, a continued slight easing off on the business through all of 2008. The first-quarter 2008 mortgage portfolio totaled nearly $10.4 billion — a figure that has declined every quarter since. Non-performing assets accounted for $259 million of the residential mortgage portfolio. The decreased mortgage business also showed in Fifth Third’s mortgage banking business net revenue, which swung into at a $29 million loss for the quarter. Mortgage loan charge-offs eased slightly from the previous quarter from $77 million to $68 million, while home equity charge-offs also dropped slightly to $54 million, possibly reflecting the decline in overall mortgage business.
The bank was also subject to some government arm-twisting, being forced to take over the assets of two failing banks during the year.Fifth Third’s net loss applicable to shareholders was $2.18 billion, or $3.82 a share, compared with a gain of $16 million, or 3 cents, a year earlier. Nearly half the loss was to write off good will because the value of its banking business fell. The Cincinnati-based lender suffered disproportionate credit weakness in Michigan and Florida. Fifth Third took over deposits of a failed Florida lender, Freedom Bank, last fall.
In addition the bank took a hit on its attempt to profit from its employees insurance plan or BOLI.Reported results for the fourth quarter also included $40 million pre-tax, or $0.05 per share after-tax, in other-than-temporary impairment (OTTI) charges on securities, a non-cash estimated charge of $34 million pre-tax, or $0.06 per share after-tax, to lower the current cash surrender value of one of our BOLI policies
The CEO sums things up this way“Economic conditions have deteriorated across our footprint and have placed both our consumer and commercial loan portfolios under significant stress, as evident in our bottom line results for the year,” said chairman, president and CEO Kevin Kabat.
What Kevin meant top say was that the worm has turned, the bubble has burst, and Fifth Third will likely never produce a significant string of consecutive profitable quarters. if and when Fifth Third Bancorp does return to profitability it will almost certainly be vestige of its present self.
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