BB&T, Fifth Third Join Surprising Bank Profit Parade

BB&T Corp. (BBT) and Fifth Third Bancorp (FITB) reported strong second-quarter earnings and were able to grow revenue despite the weak economy.

The quarterly profit at BB&T rose 46% from a year earlier, to $327 million, and Fifth Third's rose 75%, to $337 million. Both banks set aside less money for future losses from delinquent loans, but both also reported rising revenue from the first quarter, despite the weak economy.

The two banks' results add to what has been a surprisingly good quarter for banks: Profits, business loan demand and, in many cases, revenue are up even at banks that had a tough time in recent quarters convincing investors that they can grow.

The source of rising revenues varies. BB&T reported that insurance commissions rose, as did investment banking income. At Fifth Third, mortgage banking revenue and fees from processing credit card transactions rose. Some banks earlier this week reported more commercial and industrial loans, which are particularly made to mid-sized businesses.

Barclays Capital analyst Jason Goldberg said in a research note, earnings at the 16 big banks he follows that have so far reported results have met or exceeded estimates. "This has never happened before" in more than 16 years covering banks as a sell-side analyst, Goldberg wrote.

Similarly, Keefe, Bruyette & Woods said in a report that of the 30 banks that reported and are covered by the brokerage, 80% beat estimates; almost all are profitable. A year earlier 55% beat, and in the first quarter that percentage was 63%.

Bank stocks rose for the third consecutive day. Shares of BB&T, of Winston-Salem, N.C., rose 2.3%, to $26.22, and Fifth Third, of Cincinnati, rose 2.76%, to $12.66.

Challenges remain for the industry. Increased demand for business loans may not necessarily keep leading to higher profits, as the interest rates banks are charging for such loans are falling. Further, consumers continue to pay back loans. Despite improvements in demand for auto, student and credit-card loans, overall consumer loans are only inching up slightly.

Revenue at BB&T rose 7% from the first quarter, to $2.1 billion, though it fell almost 11% from a year earlier as gains on investment securities plummeted. Fifth Third's revenue rose 3.9% from the first quarter and 1.2% from a year earlier, to $1.5 billion.

BB&T reported a 44 cents profit per share, a penny ahead of analyst estimates, according to Thomson Reuters; Fifth Third reported 35 cents a share, compared to analysts estimates of 27 cents. Huntington's profit rose to 16 cents a share, analysts had forecast 15 cents. "These results were the strongest we reported since 2007," Fifth Third Chief Executive Kevin Kabat told investors during a conference call.

Both banks said banking fees rose.

At Huntington Bancshares Inc. (HBAN), a large Ohio bank, profit nearly tripled from the prior year, to $145.9 million. Revenue from the prior quarter rose 2.8%, to $659.1 million, largely on the back of fee growth from its deposit accounts and higher usage of its online banking products.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

--David Benoit and Corrie Driebusch contributed to this article.

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