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UPDATE 1-Fifth Third Bancorp profit falls on charges
October 18, 2012 / 11:19 AM / in 5 years

UPDATE 1-Fifth Third Bancorp profit falls on charges

Oct 18 (Reuters) - Fifth Third Bancorp’s third-quarter profit fell as the U.S. regional bank set aside more money to cover mortgage repurchase requests and paid debt extinguishment costs over a redemption of trust preferred securities.

Third-quarter net income available to common shareholders fell 5 percent to $354 million, or 38 cents per share, from $373 million, or 40 cents per share, a year earlier.

Cincinnati, Ohio-based Fifth Third said after-tax results include $16 million in charges related to an increase in mortgage representation and warranty reserves.

The lender said the increase in the reserves was a result of additional information received from government-backed mortgage financier Freddie Mac regarding future repurchase requests.

Freddie Mac-backed loans represent more than half of Fifth Third’s mortgage servicing portfolio.

Freddie Mac and its larger peer, Fannie Mae, have been pressing U.S. banks to buy back soured home loans made during the housing boom.

The loans had been bundled into mortgage-backed securities and bought by outside investors, who now allege they do not meet guarantees made by the banks when they were sold.

Fifth Third also recorded after-tax charges of $27 million related to debt costs, and a negative adjustment on the valuation of the warrant it owns in payment processor Vantiv Inc .

Vantiv, which went public in March, is jointly owned by the bank and private equity firm Advent International.

The bank’s shares closed at $15.13 on Wednesday on the Nasdaq. They have risen by nearly a third in the last 12 months.

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