Magazine article American Banker

5th Third to Take Merger Charge of $250 Million

Magazine article American Banker

5th Third to Take Merger Charge of $250 Million

Article excerpt

Fifth Third Bancorp plans to take a second-quarter charge of $250 million related to the acquisition of Old Kent Financial Corp., and an analyst said integration expenses have been running higher than she had expected.

The plans for the charge were revealed in a late-Friday filing with the Securities and Exchange Commission. The Cincinnati banking company said it expects to take more Old Kent-related charges in later quarters.

The aim is to maintain a "smooth" integration and preserve "future revenue opportunities," Fifth Third said in the filing.

Old Kent, of Grand Rapids, Mich., was Fifth Third's biggest acquisition; the company has a history of smaller deals.

Analysts said the big second-quarter charge is consistent with the conservative style of Fifth Third's management.

In an interview Monday, chief financial officer Neal Arnold said most of the integration expense is related to overlapping computer systems. "I wouldn't call this a meaningful increase," he said. "It is not at all a surprise." Expenses will return to normal when the integration is complete, he said.

But Marni Pont O'Doherty, an analyst with Keefe, Bruyette & Woods Inc., said in a research note that "expense levels look to be higher" than her firm had initially forecast.

Fifth Third predicts that the integration, which it expects to complete this fall, will cost around $300 million in all. It plans to take the $250 million charge in the second quarter because "the bulk of the integration costs are up-front," Mr. …

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