CINCINNATI (AP) -- Fifth Third Bancorp reported Thursday that its first-quarter net income fell 25 percent, mostly on increased legal costs and a decline in its investment in its former Vantiv payment-processing subsidiary.
The Cincinnati-based company says net income fell to $309 million, or 36 cents per share, for the three months ended March 31. That is down from earnings of $413 million, or 46 cents per share, a year ago. Analysts surveyed by FactSet expected 42 cents per share, on average.
CEO Kevin Kabat told analysts in a conference call that a negative valuation of $36 million for the Vantiv investment and $51 million in litigation reserve charges reduced earnings per share by approximately 7 cents. Large credits related to three commercial loans resulted in about $60 million in charge-offs.
"We expect a return to previous charge-off trends, although results may be lumpy from time to time," he said. "Regulatory and litigation costs in this environment are challenging, although we're not expecting them to remain at this level."
Earnings from fees and other charges, or noninterest income, fell 24 percent, to $564 million. Net interest margin, the difference between what the bank earns on interest and what it pays out, was 3.22 percent, down from 3.42 percent a year earlier.
"It was a lackluster quarter," Shannon Stemm, a bank analyst with Edward Jones. "There was not a lot to get excited about, but nothing that stood out that overly concerns us."
Net interest income and fee income -- the two big drivers of bank income -- have both been under pressure. The low interest rate environment has affected net interest income, while a weakness in mortgages has impacted fee income, she said.
Kabat said the bank saw some loan growth and solid fee income results for the quarter, with corporate banking revenue up 11 percent. Commercial real estate average balances continued their rebound, driven primarily by construction loans, he said.
The lower levels of fee income relative to what was expected showed more than the normal seasonal softness in areas including debit and ATM activity due to severe weather in January and February, but activity picked up in March, he said.
"I don't know that we will able to get that lost activity back, but certainly the March trend continued into April and much more in line with what we've seen historically."
Shares closed at $20.95, down 90 cents, or 4.12 percent. Its shares had been up almost 4 percent so far this year through Wednesday's close.
Fifth Third operates more than 1,300 banking centers in 12 states.
Associated Press writer Dan Sewell contributed to this report.