Magazine article American Banker

Fifth Third Disclosure Sends Its Stock Higher

Magazine article American Banker

Fifth Third Disclosure Sends Its Stock Higher

Article excerpt

Fifth Third Bancorp said Tuesday that it had identified the bookkeeping error in its securities portfolio that had forced it to take an $82 million pretax charge in the third quarter.

A review being conducted by an outside firm indicates that the actual cost may be lower, it said.

On Sept. 10 the Cleveland company disclosed that it would take the charge to offset losses stemming from a mistake it had made processing Treasury securities. In a filing with the Securities and Exchange Commission on Tuesday, Fifth Third said the error rose out of booking funds from securitizations into a Treasury clearing account rather than a mortgage receivables account.

The company said it had checked 97% of the transactions involved and determined that no customer funds or accounts were affected.

Fifth Third said regulators were still conducting an "informal" investigation. The company said it is still committed to its deal to buy Franklin Financial Corp., which was announced July 23 but which regulators put a hold on Nov. 15. It is scheduled to close April 1.

Susan L. Roth, an analyst with Credit Suisse First Boston, wrote in a research note that investors and regulators should find the news encouraging.

Investors seemed to be paying attention. Fifth Third shares, which have plummeted since the September announcement, were up 4.37% on Tuesday, outperforming the banking sector as well as the overall market. The American Banker index rose 2.75%, and the Standard & Poor's 500 1.39%.

In addition, Fifth Third, which bucked the trend of slow loan growth in the third quarter, said in its filing that loan growth this quarter has been stronger than anticipated. …

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