Fifth Third rises on confidence boost

NEW YORK (Reuters) - Fifth Third Bancorp (FITB.O) shares rose as much as 8.7 percent on Monday after federal regulators allowed the large U.S. Midwest regional bank to take over deposits from a failed lender, easing concern about Fifth Third's own financial health.

Regulators on Friday closed Florida's Freedom Bank FBBF.OB, the 17th U.S. bank to fail this year, and said Fifth Third would take over its insured deposits. The failure is expected to cost the Federal Deposit Insurance Corp's insurance fund between $80 million and $104 million.

Shares of Cincinnati-based Fifth Third had lost nearly two-thirds of their value since December, as investors fretted about mounting loan losses in states hard hit by the housing downturn, including Ohio, Michigan and Florida.

Yet Fifth Third got a boost last week when it said it will obtain $3.45 billion of capital from the U.S. Treasury Department's billion bank recapitalization plan.

Investors are worried that some banks might be deemed too unhealthy to qualify for government capital.

Scott Siefers, an analyst at Sandler O'Neill & Partners LP in New York, said adding deposits from Freedom will bolster Fifth Third's top-10 deposit market share in Florida, and give it a top-four share in the Bradenton, Sarasota and Venice area "at a time when funding has rarely been so important.

"Additionally," he added, "the implicit vote of confidence from regulators having approved Fifth Third as the buyer could give the stock a near-term boost."

In late morning trading on the Nasdaq, Fifth Third shares were up 56 cents, or 5.2 percent, at $11.41, after earlier rising to $11.79.

(Reporting by Jonathan Stempel; Editing by Derek Caney)