Fifth Third CEO: Banks partly to blame for woes

CINCINNATI — Fifth Third Bancorp’s chief executive sought to reassure shareholders Tuesday as the troubled regional bank copes with dramatically lower stock prices and dividends.

CEO Kevin Kabat told shareholders at their annual meeting of circumstances he said contributed to the current economic crisis, including the collapse of the real estate market. He acknowledged a general lack of oversight in the financial system and said banks, including Fifth Third, “bear their fair share of blame.”

“We are all now paying the price for these mistakes and their correction,” he said.

Fifth Third has faced considerable strain because of broad exposure to failing real estate markets in Florida, Michigan and Ohio. But Kabat said the bank has taken action to address the challenges, including loan defaults and credit costs, that contributed to the bank’s $2.2 billion loss last year.

“The bottom line is that we have learned from the past,” he said.

Kabat stressed that the bank has a strong capital position that should improve from the sale of a majority stake in Fifth Third’s payments-processing business to Advent International. The $561 million sale was announced last month.

But some shareholders remained concerned.

“We certainly didn’t buy the stock to lose a bunch of money,” said Donald Bornhorst, 70, of Morning View, Ky.

Bornhorst said he voted for a shareholder proposal that would have authorized hiring an investment banking firm to seek a sale or merger of Fifth Third. For a second year, the proposal failed to win shareholder approval.

Jack Couzins, 71, of Cincinnati, who also voted for the proposal, said nothing he heard during the meeting reassured him.

“Things have gotten so bad that anything would be an improvement,” Couzins said. “The stock is selling for what the dividend used to be, and I feel stupid to say I own 40,000 shares.”

But Ralph Jones of Cincinnati, who bought 8,000 shares of Fifth Third a little over a month ago, said he had confidence in the bank.

“I think they know what they’re doing,” he said.

Shares in Fifth Third closed at $3.96, up 31 cents or 8.5 percent, in trading Tuesday. The stock has ranged from $1.01 to $23.75 over the last 52 weeks.

The company plans to report its first-quarter earnings Thursday. On average, analysts polled by Thomson Reuters expect a loss of 27 cents per share.

Kabat also told shareholders the bank is waiting for results of a government “stress test” that regulators will use to determine which banks are healthy, which need more capital, and which might fail if the recession worsens.

Fifth Third received a $3.4 billion injection last year from the government’s bank investment program.