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Mixed Results at Fifth Third

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Fifth Third Bancorp swung to a quarterly profit as originations increased on a quarterly basis. But mortgage banking revenue fell as agency repurchases of securitized loans put a dent in income.

The Cincinnati-based firm reported Thursday that second-quarter home-loan originations were $3.8 billion, edging up from $3.5 billion three months earlier but sinking from a revised $7.2 billion a year earlier.

The mortgage servicing portfolio ended last month at $51 billion. The portfolio grew from $50 billion on March 31 and $43.5 billion on June 30, 2009.

Fifth Third closed out the second quarter with $7.7 billion in residential loans, less than $7.9 billion at the end of the prior quarter and $8.5 billion a year ago.

Home-equity holdings were $12.0 billion, also lower than $12.2 billion at the end of the first quarter and $12.5 billion on June 30, 2009.

Commercial mortgage assets declined to $11.5 billion from $11.7 billion on March 31 and $12.4 billion on June 30, 2009. Commercial construction loans fell to $3.0 billion from $3.3 billion at the end of the first quarter and $4.5 billion a year prior.

Mortgage banking net revenue fell to $114 million from the first quarter’s $152 million and the second-quarter 2009’s $147 million.

“Second quarter 2010 results were negatively affected by $6 million, or 3 bps, of higher premium amortization, including the effect of GSE repurchases of delinquent loans out of mortgage-backed securities,” the report said.

Net servicing revenue prior to MSR valuation adjustments was $29 million, lower than the first quarter’s $31 million but a major improvement from the second-quarter 2009’s $ 2 million.

The bank swung to a second-quarter profit of $192 million from a $10 million first-quarter loss. A year ago, profits were $882 million.

President and Chief Executive Officer Kevin Kabat explained that the improvement in earnings reflected “continued strong pre-provision earnings and significant further improvement in credit results.”

Fifth Third said headcount finished June at 20,479, higher than 20,038 at the end of March but lower than 20,702 on June 30, 2009.

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