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Investing.com - Fifth Third Bancorp has posted third-quarter earnings that topped estimates, as the regional bank was bolstered by a drop in deposit costs which drove interest income higher, although it flagged a loss that was reportedly linked to a loan to bankrupt auto dealer Tricolor.
Ohio-based Fifth Third and many of its peers have been pushing to ratchet down deposit costs across their portfolios in the wake of a renewed Federal Reserve interest rate cutting cycle.
During the three months ended in September, net interest income -- or the difference between what a bank makes from loans and pays out to customers for deposits -- rose by 7% versus the previous year to $1.53 billion. Bloomberg consensus forecasts had seen the figure at $1.52 billion.
"This improvement was due to the benefits from proactive deposit and wholesale funding management decreasing interest-bearing liabilities costs by 61 basis points, improved earning asset mix, and the benefit of fixed-rate asset repricing," Fifth Third wrote in a statement.
Adjusted non-interest income came in $789 million, also surpassing Wall Street expectations, thanks to higher fees which boosted Fifth Third’s wealth and asset management units.
Against this backdrop, net income available to common shareholders jumped by 14% to $608 million, or diluted earnings per share of $0.91, versus forecasts of $0.87.
The results come as jitters over regional U.S. lenders have grown in recent days, with investors particularly flagging worries around the credit health of these companies following the high-profile collapses of U.S. auto parts supplier First Brands and car dealership Tricolor earlier this year.
Fifth Third unveiled a $178 million loss related to the impairment of its $200 million asset-backed finance loan to Tricolor, Reuters reported. Net charge-offs, the debts the bank believes it is unlikely to recover, came in at $339 million for the quarter.