Fifth Third Bancorp (NASDAQ:FITB) reported that its 1Q profit surged 20%. The positive valuation adjustment and profit earned on the sale of residential mortgage loans helped the company to offset a drop in mortgage banking. The profit came at $382 million compared to $318 million in the same quarter, a year ago.
On a per-share basis, earnings jumped to 44 cents from 36 cents. The revenue in the quarter came at $1.51 billion compared to $1.45 billion in the same quarter, a year ago. The analysts had expected the bank to post a profit of 37 cents per share on revenue of $1.45 billion.
The performance
Fifth Third Bancorp 1Q results include a pretax position valuation adjustment worth $70 million on the warrant it holds in Vantiv Inc. Also, there is a pretax gain of $37 million on the sale of residential mortgage loans. The mortgage banking revenue dropped 21% to $86 million from a year ago.
Like other firms, the company mortgage business has remained under pressure due to a prolonged low interest rates. The companies have limited interest income that has prompted them to opt for cost-cutting measures. Sequentially, mortgage revenue jumped 41%.
The drop in margins
Fifth Third reported that net interest margin which is an important measure of lending profitability declined to 2.86% from 3.22% a year ago. The lender stated that net interest income was adversely affected by previously disclosed changes to deposit advance product. Also, fewer operating days in the quarter affected the performance.
The investment advisory revenue jumped 6% to $108 million from a year earlier. The growth can be attributed to jump in personal asset management fees and higher securities and brokerage fees. Fifth Third noninterest expense declined 3% to $923 million. The management stated in January that noninterest income can decline due to seasonal factors.
