Sector Snap: Regional Banks

Fifth Third Bancorp was among the sector's top gainers Tuesday, with shares rising 79 cents, or 5.9 percent, to $14.18.

Earlier in the day, the Cincinnati-based bank said it lost $202 million, or 37 cents per share, during the second quarter. But the results included charges of $270 million, or 42 cents per share, related to the tax treatment of certain leveraged lease holdings and 2 cents of acquisition-related items.

Excluding those charges, Fifth Third would have earned 7 cents per share in the latest period.

Analysts polled by Thomson Financial, on average, had expected Fifth Third to just break even. Analysts do not always include special charges such as those incurred by Fifth Third in their estimates.

Nearly all banks are facing mounting losses from rising defaults on loans, especially those tied to residential real estate. Banks have been forced to set aside more cash to cover current and expected loan losses. But Fifth Third said it expectes to return to profitability in the third quarter.

SunTrust Banks Inc. also posted worse results in the second quarter than the year-ago period as it ramped up loan-loss provisions, but adjusted earnings of 78 cents per share beat analysts' expectations for profit of 64 cents per share.

The better-than-expected results helped push SunTrust shares up $1.37, or 4 percent, to $35.51.

Both KeyCorp and Regions Financial Corp.'s earnings fell below analysts' average estimates, but shares still rose.

Key shares climbed 31 cents, or 2.7 percent, to $11.81, while Regions shares edged up 5 cents to $10.45.

Cleveland-based Key lost $1.13 billion, or $2.70 per share, during the second quarter, with $1 billion in losses tied to the tax treatment of its leveraged lease portfolio. Analysts were expecting losses of $2.57 per share.

Key also increased its loan-loss provision to $647 million during the quarter from $53 million during the second quarter last year.

Profit at Regions fell 55 percent to $206.4 million, or 30 cents per share. Excluding the impact of merger-related expenses, Regions earned 39 cents per share, missing analysts' average 42-cent estimate.

The Birmingham, Ala.-based bank set aside $309 million for loan losses, compared with $60 million during the year-ago period. Regions also said it will slash its dividend to 10 cents from 38 cents to help conserve capital.