FIFTH THIRD BANCORP Bank investigates $82 million mistake

An Ohio bank is under pressure from shareholders and regulators.
COLUMBUS (AP) -- A darling of Wall Street for its profitability and efficiency, Fifth Third Bancorp now finds itself trying to explain what led to an $82 million mistake in its bond portfolio and the resulting fallout.
The multimillion dollar accounting error at the third-largest Ohio-based bank was discovered last summer during a change in computer systems. A group of 40 executives at the bank's Cincinnati headquarters continue working to find out exactly what happened.
"To my knowledge, there isn't anybody who can say, 'Call so-and-so in Cincinnati, they've got the complete answer,"' Don Shackelford, a veteran Columbus banker who retired from Fifth Third's corporate board of directors this year, told The Columbus Dispatch.
"What it isn't is like some guy going to Brazil with [the] money," Shackelford said.
No customer losses
No customers lost money because of the mistake.
In September, the bank announced that it would take an $82 million pretax charge against earnings in the third quarter because of the error, which arose a result of logging incorrect values for mortgage-backed securities and other assets.
"This was a pretty big screw-up," said Rick Wayman, an analyst who follows Fifth Third for Columbus-based Researchstock.com.
Shackelford told the newspaper the problems started with a computer conversion last summer after Fifth Third completed its $4.9 billion acquisition of Old Kent Financial Corp., based in Grand Rapids, Mich.
A string of hurdles followed for the bank that for decades has had a sterling image.
USix shareholder lawsuits were filed against the bank in U.S. District Court, arguing in part that the bank didn't have the infrastructure and financial controls needed for such a rapid expansion with Old Kent. Shares are down 15 percent this year.
UThe Federal Reserve Bank of Cleveland and Ohio's Division of Financial Institutions ordered the bank to hire an outside consultant to review management performance and internal controls.
URegulators required the bank to pay deposit-insurance premiums expected to amount to $14 million a year to further back its deposits. They also ordered the bank to stop making acquisitions until the matter is resolved, forcing it to extend the deadline on its pending deal to buy Tennessee-based Franklin Financial Corp. until June 2004.
A regional favorite
Fifth Third has been a regional bank favorite on Wall Street, posting 29 consecutive years of record earnings growth and a stock price that grew an average 22.7 percent annually since 1990. It is considered one of the most efficient banks in the country, spending a below-average 44.5 cents to generate a dollar of revenue.