Fifth Third's Profit Falls on Payments Unit's Decline, Legal Costs

Fifth Third Bancorp (FITB) said a drop in the value of a payments subsidiary, and higher legal costs, led to a 25% year-over-year drop in its quarterly profit.

The Cincinnati company also cut its full-year outlook for fee income, citing weaker mortgage revenue.

The $129 billion-asset company said first-quarter net income fell 25% from a year earlier, to $309 million, or 36 cents per share. The average estimate of analysts polled by Bloomberg was 41 cents.

Fifth Third said a decline in the value of its warrant in Vantiv, a payments-processing business, cost it $23 million in after-tax profit. Fifth Third has been gradually cutting its stake in the unit and currently owns about 25% of the business, Tayfun Tuzun, chief financial officer, said during a conference call.

An increase in Fifth Third's litigation reserve charges produced a $33 million after-tax decline in net income.

Together, the decline in the Vantiv warrant value and the higher legal costs cut Fifth Third's net income by 7 cents per share in the first quarter.

Mortgage banking revenue fell 50% to $109 million. The weakness will persist throughout the year, the company said, and it said its full-year noninterest income will decline by mid- to high-single-digit percentage points.

Fifth Third shares fell 2.5% in Wednesday morning trading to $21.32.