CINCINNATI -- Regional bank Fifth Third Bancorp said Wednesday it received $3.4 billion as part of the government's $700 billion bank investment program.
The government investment, administered by the U.S. Treasury Department, is part of a broader program to invest in banks amid the ongoing credit crisis in an effort to stabilize the financial services sector and spur lending between banks and to consumers and other businesses.
The program calls for the U.S. Treasury Department to receive preferred stock and warrants to purchase common shares in return for the investment. The preferred stock carries an interest rate of 5 percent per year for the first five years. It then increases to 9 percent after five years if the preferred shares are not redeemed.
Fifth Third issued warrants to the government to purchase up to about 43.6 million shares of common stock at a price of $11.72 per share. Fifth Third had about 577.5 million shares of common stock outstanding as of Sept. 30.
Many banks have been hit hard over the past year-and-a-half by a sharp rise in mortgage defaults and a freezing of credit markets. As some financial firms collapsed in recent months, banks shied away from lending to each other and to customers for fear that losses would mount.
Shares of Fifth Third added a penny to $7.98 in afternoon trading.
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