Fifth Third Bancorp
) arrived at a settlement with The Securities and Exchange
Commission (SEC) regarding its faulty accounting of commercial
real estate loans. The Ohio-based bank will pay $6.5 million to
settle the charges leveled against it. Notably, the amount is
inclusive of penalties against the bank's former chief financial
However, Fifth Third did not admit or deny the allegations. Under
terms of the settlement, the bank removed Daniel Poston as CFO
and consequently assigned him the role of chief strategy and
The SEC has suspended Poston from practicing as an accountant for
a year and demanded a penalty of $100,000 from him. However,
according to terms of the settlement, Poston can apply for the
resumption of his former post after one year.
With the burst of the housing bubble in 2007 and 2008, the real
estate market crashed and the number of defaulting borrowers
significantly increased. Therefore, Fifth Third had decided to
sell some of its problem loans but continued to categorize these
as "held for investment."
The SEC instructed that the above-mentioned loans should have
been labeled "held for sale." The SEC also declared that proper
accounting would have increased Fifth Third's pretax loss for the
third quarter of 2008 by 132%.
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In the recent past, Fifth Third has been striving to resolve its
legal woes. In November, the company announced a settlement worth
about $25 million with
). The settlement included resolution of certain repurchase
claims related to misrepresentation of loans originated and sold
directly to Freddie Mac by Fifth Third before Jan 1, 2009.
The latest move by Fifth Third demonstrates its efforts to
resolve litigation issues and thereby reduce costs. Moreover,
such settlements will help boost investors' confidence in the
Fifth Third currently carries a Zacks Rank #3 (Hold). Some
better-ranked banks include
). Both these stocks have a Zacks Rank #1 (Strong Buy).