UPDATE 4-Fifth Third posts $2.2 billion loss, shares plunge
* 4th-quarter loss $3.82 per share
* $965 million charge for impairment of goodwill
* CEO says 1st-quarter loan losses of $500 mln probable
* Shares fall as much as 27 percent (Adds CEO and analyst comments, loan loss forecast, share fall)
NEW YORK, Jan 22 (Reuters) - Fifth Third Bancorp (FITB.O) posted a fourth-quarter loss of $2.2 billion on Thursday, its third straight loss, as the large Midwest regional bank wrote down its banking business following recent acquisitions.
Fifth Third shares fell as much as 27 percent to their lowest level in a decade after the bank's chief executive said loan losses of $500 million in the current first quarter "seems probable at this point, and that's taking a fairly pessimistic view of economic trends."
The bank's fourth-quarter losses were primarily associated with commercial residential builder and developer loans and consumer residential real estate loans and concentrated in Michigan and Florida.
"We experienced credit challenges earlier than others, given our geography, and I believe the actions we have taken will better position us for the remainder of this cycle," CEO Kevin Kabat said on a conference call.
"The environment is extraordinarily difficult right now."
Cincinnati-based Fifth Third bought First Charter Corp last year and has suffered mounting credit losses as the economy has deteriorated.
In the latest quarter, it took a goodwill impairment charge of $965 million and a charge of $800 million for loans sold or transferred to a held-for-sale portfolio. It nearly tripled its reserve for loan and lease losses, to $2.8 billion.
The company said the writedowns and other charges were taken "to address areas of the loan portfolio exhibiting the most significant credit deterioration."
The fourth-quarter net loss amounted to $3.82 per share, compared with a year-earlier profit of $16 million, or 3 cents a share.
Excluding goodwill, the loss was $2.13 per share, according to Reuters Estimates. On that basis, analysts' average forecast was for a break-even quarter.
"While we like the longer-term potential earnings power of Fifth Third, core asset quality trends continue to deteriorate, and we simply are having an increasingly difficult time justifying buying the stock...," said David George, analyst at Robert W. Baird & Co, which cut its rating on the bank to "neutral" from "outperform."
Fourth-quarter net interest, or lending, income rose 14 percent to $897 million. Net interest margin -- the difference between what the bank earns on loans and pays on deposits -- climbed to 3.46 percent from 3.29 percent a year earlier.
Noninterest income was up 26 percent to $642 million, while noninterest expense, such as salaries and equipment, more than doubled to $2.02 billion.
Net charge-offs, or loans the bank does not expect to be repaid, totaled $1.6 billion. Nonperforming loans and leases more than doubled to $2.27 billion.
Last year, Fifth Third obtained $3.45 billion from the U.S. Treasury's Troubled Asset Relief Program. It also eliminated most of its dividend after losses rose from its exposure in the Midwest, hard hit by the auto industry's troubles, and Florida, a center of the real estate downturn.
Fifth Third, which operates 1,307 branches in 12 U.S. states, had $120 billion in assets at year-end. Its deposits rose 8 percent in the fourth quarter to $78.01 billion.
Shares of Fifth Third were off 88 cents at $3.11 in morning trade on the Nasdaq Stock Market and touched a low of $2.91 earlier in the session. Through Wednesday, the shares had fallen 83 percent in the last year, compared with a 64 percent decline in the KBW Bank Index .BKX. (Additional reporting by Jonathan Stempel; Editing by Lisa Von Ahn and John Wallace)
