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Fifth Third's profit impacted by reps and warrants reserve

Fifth Third Bancorp (FITB) cut into a portion of its profits in the third quarter to cover expenses tied to representation and warranty issues or putback risk.

The bank noted in its third-quarter earnings that its profit was partly impacted by $24 million in charges attributed to an increase in the company's reps and warrants reserve.

Banks like Fifth Third create reserves specifically to brace for the potential of buy-back risk.

The firm's profit fell to $354 million, or 38 cents a share, for the period. That is down from earnings of $376 million, or 40 cents a share, in the second quarter. It's also lower than the $373 million, or 40 cents, recorded a year earlier. 

Still, the company's CEO Kevin Kabat said the third quarter brought stronger mortgage banking revenue.

"We had success across our commercial bank and consumer lending businesses, with double-digit growth in corporate banking revenue, up 16% year-over-year, and mortgage banking revenue, up 13% year-over-year."

Mortgage loans increased 16% from last year, Kabat said, while commercial and industrial loans grew by 15% over last year.


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