Fifth Third Bancorp (NYSE:FITB) reported second-quarter earnings on Friday that came in just below Wall Street expectations, although investors welcomed strong revenue growth, improving credit metrics and continued business momentum.
The bank’s shares gained 1.58% in pre-market trading following the results.
Diluted earnings per share for the quarter ended June 30 were $0.83, narrowly missing the consensus estimate of $0.84. Adjusted earnings per share were $1.02 after excluding $0.19 per share of merger-related charges and other one-off items.
Comerica acquisition drives revenue growth
Revenue on a fully taxable-equivalent basis jumped 46% year over year to $3.28 billion, reflecting a full quarter of contributions from the Comerica acquisition.
Net interest income increased 48% from a year earlier to $2.22 billion, while noninterest income climbed 41% to $1.06 billion.
The bank’s net interest margin improved by six basis points from the previous quarter to 3.36%.
Credit quality continues to strengthen
Net charge-offs fell to 0.30% of average loans, marking their lowest level since the second quarter of 2023.
“Fifth Third’s second quarter was another step toward the earnings power we committed to deliver by year-end,” said CEO Tim Spence. “Our core business continues to grow, with momentum across our fee businesses, led by wealth and asset management, commercial payments, and capital markets.”
Average loans and leases reached $178.7 billion during the quarter, increasing 45% year over year as the Comerica acquisition and organic commercial lending both contributed to growth.
Deposits increase while expenses reflect merger costs
Average deposits rose 42% from the prior year to $231.5 billion.
The bank said its Comerica Southwest marketing campaign generated $2.5 billion in consumer deposits, exceeding internal expectations.
The provision for credit losses declined to $129 million from $227 million in the previous quarter, while the allowance for credit losses represented 1.76% of total portfolio loans.
Noninterest expense increased 67% year over year to $2.11 billion, largely reflecting $203 million in merger-related charges.
Despite the higher costs, the adjusted efficiency ratio improved to 57.1%, compared with 61.9% in the previous quarter.