Fifth Third Bancorp (FITB: 13.23 +1.15%) reported Thursday a net loss of $2.2 billion — or $3.94 per share — for all of 2008. These losses reflected a quarterly loss of $2.2 billion — or $3.82 per share — for the fourth quarter, a leap from the $81 million loss reported for the third quarter. These losses were "driven primarily by goodwill impairment, credit actions, higher credit costs and market valuation adjustments," according to the earnings statement published by the bank.

The more than $3.4 billion invested Dec. 31 in Fifth Third by the Treasury Department through the capital purchase program vehicle within the Troubled Asset Relief program helped the bank to increase its tangible equity ratio to 7.86 percent, raise its tier 1 capital ratio to 10.59 percent, and boost its total capital ratio to 14.79 percent, according to the statement. The investment was offset, however, by a significant increase in Fifth Third's loan loss reserve to a total $2.8 billion, resulting in an allowance-to-loan-and-lease ratio of 3.3 percent, up from the 2.4 percent reported in the third quarter. The reserve also made for an allowance-to-nonperforming-loan ratio of 123 percent, up from the 79 percent achieved in the third quarter, the bank reported.

"Economic conditions have deteriorated across our footprint and have placed both our consumer and commercial loan portfolios under significant stress, as evident in our bottom line results for the year," said chairman, president and CEO Kevin Kabat. "The resultant decline in our stock price during the quarter, and the evaluation of goodwill, led to our recording of goodwill impairment of $940 million after-tax during the quarter." He went on to remind investors that the goodwill impairment is a non-cash charge and doesn't affect the bank's capital ratios.

Fifth Third reported an "aggressive" approach to counter problematic consumer loans — modification on a massive scale. The bank reported that, of the total $547 million in "restructured" loans occupying the books for all of 2008, fourth-quarter modifications accounted for $218 million in loans. "Modifying these loans is beneficial not only to our shareholders but is also consistent with the needs of our customers, and result in a greater likelihood of payment and more value ultimately received by Fifth Third," officials said in the earnings statement. "We understand that these actions significantly impacted our bottom line results, but we believe the actions taken in 2008 to mitigates risks and fortify the balance sheet will benefit our shareholders and customers in 2009 as this credit cycle progresses."

A look into Fifth Third's mortgage business
Fifth Third reported $9.3 billion average residential mortgage loan portfolio for the quarter, a continued slight easing off on the business through all of 2008. The first-quarter 2008 mortgage portfolio totaled nearly $10.4 billion — a figure that has declined every quarter since. Non-performing assets accounted for $259 million of the residential mortgage portfolio. The decreased mortgage business also showed in Fifth Third's mortgage banking business net revenue, which swung into at a $29 million loss for the quarter. Mortgage loan charge-offs eased slightly from the previous quarter from $77 million to $68 million, while home equity charge-offs also dropped slightly to $54 million, possibly reflecting the decline in overall mortgage business. Losses in Michigan and Florida represented 80 percent of losses related to these charge-offs, according to the report.

Read the report.

Write to Diana Golobay at diana.golobay@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Friedman, Billings, Ramsey analyst Paul Miller made waves Tuesday by suggesting that Bank of America Corp. (BAC: 7.29 -0.14%) needs more than $80 billion in new common equity capital, thanks to a ballooning balance sheet of assets tied to its acquisitions of Countrywide Financial and Merrill Lynch. Miller suggested that BofA would also need to cut its dividend to preserve capital, and moved his target price to $5/share.

Shares of Bank of America slumped 29 percent, closing at $5.10 on Tuesday; shares were at $5.82, up more than 14 percent, when this story was published. Nonetheless, Tuesday's close was the lowest share price for the North Carolina-based bank since 1990. Other major commercial banks swooned, as well, including Wells Fargo & Co. (WFC: 29.60 +1.89%).

BofA reported a fourth-quarter net loss of $1.79 billion, or 48 cents a share, on Friday morning last week; the bank begins the year with $61.7 billion of tangible common equity, supporting $2.4 trillion of tangible assets, Miller's note said according to a MarketWatch report. That's well below the 6 to 9 percent ratio that Miller believes is needed.

"It would take over $80 billion of new common equity to reach even the low end of the range, and we believe Bank of America simply is not generating sufficient capital internally in this environment to put a dent in this size capital hole," his note read in part.

BofA’s mortgage, home equity and insurance services segment itself reported a net loss of $2.5 billion during Q4, as home equity credit costs continued to soar.

Write to Paul Jackson at paul.jackson@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

President Obama's Treasury Secretary-designate Tim Geithner called for aggressive action in tackling the economic downturn during his testimony before the Senate Finance Committee at his confirmation hearing Wednesday morning.

"Senators, the ultimate costs of this crisis will be greater, if we don not act with sufficient strength now," Geithner's testimony read. "In a crisis of this magnitude, the most prudent course is the most forceful course."

Geithner, currently president of the Federal Reserve Bank of New York, called for the support of Obama's proposed stimulus plan — which he said the President is expected to present in the next few weeks. "[W]e must act quickly to provide substantial support for economic recovery and to get credit flowing again," Geithner said.

In his testimony, the Treasury Secretary-designate vowed to restructure the $700 billion rescue plan enacted by Congress in October, saying a revised TARP plan must contain "tough conditions to protect the taxpayer and transparency to allow the American people to see how and where their money is being spent and the results those investments are delivering."

Geithner said he would get to work on an exit plan, a way to wind down as soon as possible the government's now-tireless efforts to prop up financial markets. He also promised to develop a fiscal plan that offers long-term stability.

Geithner didn't offer too many details as to how he would accomplish the plans he outlined, suggesting that jumping-the-gun — a tendency of many legislators in the recent past — wasn't the way to go.

In considering whether to confirm Geithner as the nation's top financial officer, the Senate panel will question Geithner about his plans to rebuild financial markets. But the panel is also expected to smooth over concerns that surfaced last week — which ultimately delayed Geithner's hearing.

His original confirmation hearing, set for last week, hit a roadblock after reports found he failed to pay more than $34,000 in taxes for social security and medicare during his time as a senior official at the International Monetary Fund from 2001-2003, including a small payment in 2004 after he left.

"These were careless mistakes. They were avoidable mistakes," Geithner said Wednesday. "But they were unintentional…I take full responsibility for them. I have gone back and corrected these errors and paid what I owed…I want to apologize…"

Considering Geithner would oversee the IRS, many have questioned the mistake. Ranking member of the Finance Committee, Sen. Chuck Grassley (R-Iowa), said he was weighing the risks tied to the problems in the economy against what he called the "troubling fact" that Geithner didn't pay a portion of his back taxes in a timely fashion, according to a CNNMoney.com report.

Committee chairman Max Baucus (D-Mont), however, said in his opening statement that he's confident Geithner is up to the "formidable challenges" the economy faces.

"I'm interested in hearing his explanation for the tax stuff, but that's minor next to the other issues," New York University finance professor Roy Smith told CNNMoney. "What I want to know is what he's learned from the first half of the TARP."

Write to Kelly Curran at kelly.curran@housingwire.com

Disclosure: The authors held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Citigroup Inc. (C: 30.87 +1.61%) CEO Vikram Pandit, along with chairman Winfried Bischoff and CFO Gary Crittenden, declined retention and incentive awards, according to a recent filing through the Securities and Exchange Commission. The announcement came in concert with recent statements that Pandit and Bischoff — along with Robert Rubin, who ended up resigning in early January, anyway — would take no bonuses for 2008. Citi's other executive committee members received stock awards set to vest under the condition that the price of Citi's common stock shares meet specified targets during the next four years. Half of the awards bear a price target of $17.85 and the other half targets $10.61. These awards were granted "for the benefit of eligible Citi employees…with incentive compensation in excess of $100,000," according to the SEC filing.

Citi is the recipient of $45 billion through the Treasury Department's Troubled Asset Relief Program (the only other institution to receive that much is Bank of America Corp. (BAC: 7.29 -0.14%)), with $25 billion initially injected Oct. 28 as a transaction within the Capital Purchase Program (CPP). The second injection of $20 billion came around with the creation of another TARP vehicle, the Targeted Investment Program, which so far has only made two injections — Citi's additional $20 billion and the $20 billion supplement to CPP funds given Jan. 16 to BofA. Although it's been repeatedly argued by outgoing Treasury secretary Henry Paulson that only healthy banks were given capital injections, the question remains — after almost three months of capital injections in these banks and consensus from both BofA and Citi officials that 2009 offers a bleak outlook — whether they will stay afloat on their own or require even more funding going forward.

Citi's rocky start in 2009
A source within Citi confirmed to HousingWire in early January that the bank was not considering the sale of its Smith Barney brokerage unit days before the announcement in mid-January that Citi had entered an agreement with Morgan Stanley (MS: 18.56 +2.26%) to launch a joint venture of Citi's brokerage business and Morgan's wealth management business. Then, days later, Citi posted an $8.29 billion fourth-quarter loss — bringing the total net 2008 loss to $18.7 billion — and subsequently reported it would reorganize itself into two businesses, essentially undoing the '98 merger between Citicorp and Travelers Group.

If Citi isn't teetering on the edge of collapse, it certainly seems to be buckling down amid steep losses. The fact that Pandit and leading executives have decided to forgo bonuses and other incentives suggests some kind of acknowledgement that the capital just isn't there anymore. It's been argued by critics that the late-'90s merger, Citigroup had simply become too large to manage. Even with The Travelers Companies Inc. (TRV: 38.72 +0.94%) having spun off of the massive company in 2002, taking the insurance underwriting business with it, a giant banking entity still stood in the wake. Considering the massive fourth-quarter losses and restructuring plans reported recently, critics' fears of an unmanageable giant corporation don’t seem entirely unfounded.

Write to Diana Golobay at diana.golobay@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.