Fifth Third Third-Quarter Profit Little Changed

NEW YORK (Reuters) - Fifth Third Bancorp (FITB.O), a large U.S. Midwest bank, said on Friday that third-quarter profit was little changed as an increase in loan losses offset growth in fee-related income.

Net income fell to $376 million from $377 million a year earlier. Profit per share rose to 71 cents from 68 cents because Fifth Third had fewer shares outstanding.

Analysts on average forecast profit of 68 cents per share, according to Reuters Estimates.

Chief Executive Kevin Kabat in a statement said Cincinnati-based Fifth Third wasn't "completely immune" to market disruptions that have caused credit losses to rise industrywide but that it was spared most of their effects. Still, he said "credit continues to be a challenge."

Fifth Third set aside $139 million for bad loans, up 60 percent, and said net charge-offs increased 46 percent to $115 million. Nonperforming assets increased 72 percent to $706 million. The bank cited deteriorating credit conditions in commercial construction, commercial mortgages, and consumer home equity and auto loans for some of the increases.

Fee income rose 9 percent to $722 million, with double-digit gains in payment processing, corporate banking and deposit service charges. Lending income rose 6 percent to $760 million, as net interest margin rose to 3.34 percent from 2.99 percent. Expenses rose 6 percent to $816 million.

Fifth Third operates mainly in the Midwest, but has been expanding in Florida. It has 1,181 banking offices and about $104 billion of assets.

Shares of Fifth Third closed Thursday at $30.48 on the Nasdaq. The shares are down 26 percent this year, compared with a 12 percent drop in the Philadelphia KBW Bank Index .BKX.

(Reporting by Jonathan Stempel)