Fifth Third, Dayton and Cincinnati’s largest bank, reported Jan. 17 for 2012 its second-best ever profits of $1.5 billion available to common shareholders. Boosting the bottom line were the lowest level of net charge-offs since 2007, or bad loans written off as uncollectible, which dropped to $147 million at the end of last year. Fifth Third’s delinquency rates have sunk to levels not seen since 2004.
Executives say the financial crisis is largely over — liquidity is restored, and no immediate threats pose a risk to the banking system — but the nation still deals with the aftermath of government regulations and a slowly recovering economy overall. Policies are keeping interest rates low.
“I think we’ve been successful in continuing to grow our bank despite the fact that we’ve been having to deal with the financial crisis and the economy that we’re in,” said Dan Poston, Fifth Third CFO.
Huntington made record profits of $641 million in 2012, the Columbus company said Jan. 17. In 2009 Huntington deployed a new “fair play” strategy to win over customers’ primary checking accounts to improve its funding mix. As a result in 2012, the bank added 133,000 new consumer households and 12,700 commercial relationships, which helped it achieve something few banks are doing right now—increase net interest margin to 3.41 percent at the end of last year.
Banks’ main income source is the difference in interest collected on loans and earned on investments, and the interest paid on deposits. Record low interest rates pressure the interest margin, forcing banks to compete for customers and look to cost cutting and fee income to drive revenues.
“Huntington continues to view the economic climate with cautious optimism. As a whole, the industry is recapitalized at this point,” said Mark Reitzes, regional president.
Cleveland’s KeyCorp reported lower 2012 profits of $827 million on major expenses including a cost cutting initiative, branch acquisitions in Western New York and investments in technology and payment systems. Key is in a two-year effort to cut $150 to $200 million in operating costs, causing 19 underperforming branches to close in 2012.
This year Key is focused on ways to gain and expand customer relationships, a moderate risk profile, investment opportunities, efficiencies, and capital management, said CEO Beth Mooney on an earnings conference call Jan. 24.
“There’s an old saying that you can’t shrink yourself to prosperity, and we must continue to find ways to generate more customers and more revenues,” Mooney said.
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