By Jeff McKinney
The Cincinnati Enquirer
The drag on Fifth Third Bancorp's stock recently is further proof that Wall Street doesn't like uncertainty.
And that might be particularly true with Fifth Third, the Cincinnati banking giant whose industry-leading stock lost some of its shine since last fall, when regulators began investigating its internal accounting.
The bank last week said the Federal Reserve Bank of Cleveland has wrapped up its review of the matter, which includes bookkeeping errors that caused Fifth Third to take a $54 million write-off against third-quarter profit. The issue involves investments the bank made via its treasury operations, not customer accounts.
Since that inquiry began in mid-November, the value of Fifth Third's stock has dropped 15.9 percent, with the stock closing at $52.60 Friday. In contrast, the value the Standard & Poor 500 Banks Index - which includes Fifth Third and 28 other banks considered its peers - dropped 4.6 percent in that time.
Moreover, the drop at Fifth Third came when the bank posted a powerful 49 percent gain in profits in 2002 over 2001, suggesting that the bank's fundamental operations are not the main culprit chipping away at the stock.
While Fifth Third said it would not speculate on the short-term drop in its stock price, the company is anxious to resolve the investigation.
Fifth Third expects to receive the Fed's report - as well as possibly what penalties, fines or moratoriums it might face - in late February or early March. The Securities and Exchange Commission and state authorities also are investigating.
"Our employees have invested a significant amount of time and effort on this review, and while I cannot predict the contents of the review, we will continue to focus on strengthening our controls," Fifth Third spokeswoman Robbie Jenningssaid.
Banking analyst Fred Cummings of McDonald Investments in Cleveland said he's still bullish on Fifth Third because the company will continue to perform well. Cummings expects Fifth Third to rake in profits of $1.8 billion this year, up from $1.6 billion last year
Yet, he said the review has hurt the stock: "No question about that ... this thing definitely has lowered the stock valuation since it began."
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