Fifth Third Earnings Tumble 80%

By Lisa Cornwell

Fifth Third Bancorp reported Thursday that fourth-quarter earnings fell 80 percent due to losses resulting from the sale of securities and other actions taken in a restructuring of the company’s balance sheet.

The report came two days after the banking firm announced that longtime Chief Executive George Schaefer Jr. will step down in April.

Fifth Third earned $66 million, or 12 cents a share, for the quarter ended Dec. 31, compared with $332 million, or 60 cents a share, in the same quarter a year ago.

Analysts surveyed by Thomson Financial expected 7 cents per share.

Net interest income, the spread between the amount the company earns on loans and the amount paid on deposits, rose 1 percent in the fourth quarter to $744 million from $735 million a year ago, the company said. But non-interest income dropped 66 percent to $219 million from $636 million, due to securities losses and losses on related derivatives.

“Clearly it was a tough quarter and a tough year, with a charge related to our balance sheet actions reducing earnings by about 53 cents,” Schaefer told analysts on a conference call.

Schaefer, 61, who has served as CEO of the $105.8 billion company since January 1991, told analysts he believes he is handing successor Kevin Kabat, currently Fifth Third’s president, a company that has its problems behind it, including the restructuring of its balance sheet.

Kabat said Fifth Third expects to re-establish the high performance it achieved in the past: “It won’t be easy, but it never has been in the past.” Earnings for 2006 declined 23 percent to $1.2 billion, or $2.13 a share, compared with $1.5 billion, or $2.77 a share, for 2005. Analysts had estimated $2.09 a share.

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