Fifth Third Bank

Investor Relations

Fifth Third Announces Third Quarter 2019 Results

Reported diluted earnings per share of $0.71

Reported results included a negative $0.04 impact from certain items on page 2 of the 3Q19 earnings release including merger-related expenses

Category:

Tuesday, October 22, 2019 6:30 am EDT

Dateline:

CINCINNATI

Public Company Information:

NASDAQ:
FITB
US3167731005

CINCINNATI--(BUSINESS WIRE)--Fifth Third Bancorp (FITB):

Key Highlights

  • Achieved previously stated 4Q19 financial targets sooner than expected

 

Reported

Adjusted(1)

ROTCE(a)

14.2%

16.5%

ROA

1.28%

1.35%

Efficiency(a)

58.4%

56.7%

  • Revenue and expense performance exceeded July expectations
  • Record capital markets revenue
  • Strong commercial loan production, up 15% vs. 3Q18 and up 26% vs. 2Q19
  • Effectively managed interest bearing core deposit costs (down 2 bps vs. 2Q19) while continuing to grow average core deposits (up 2% vs. 2Q19)
  • Remain on-track to achieve MB expense savings by 1Q20 ($255 million pre-tax); expect to achieve ~80% of run-rate savings by year-end
  • Continue to realize desired MB employee and client outcomes

 

 

 

 

 

 

 

 

 

Key Financial Data

 

 

 

 

 

 

 

 

 

$ millions for all balance sheet and income statement items

 

 

3Q19

2Q19

3Q18

 

 

 

 

 

 

 

 

 

Income Statement Data

 

 

 

 

 

 

 

Net income available to common shareholders

$530

 

$427

 

$421

 

 

Net interest income (U.S. GAAP)

1,242

 

1,245

 

1,043

 

 

Net interest income (FTE) (a)

1,246

 

1,250

 

1,047

 

 

Noninterest income

740

 

660

 

563

 

 

Noninterest expense

1,159

 

1,243

 

972

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

Earnings per share, basic

$0.72

 

$0.57

 

$0.62

 

 

Earnings per share, diluted

0.71

 

0.57

 

0.61

 

 

Book value per share

27.32

 

26.17

 

21.70

 

 

Tangible book value per share (a)

21.06

 

20.03

 

17.94

 

 

 

 

 

 

 

 

 

 

Balance Sheet & Credit Quality

 

 

 

 

 

 

 

Average portfolio loans and leases

$109,541

 

$110,095

 

$93,192

 

 

Average deposits

125,206

 

124,345

 

104,666

 

 

Net charge-off ratio (b)

0.36

%

0.29

%

0.30

%

 

Nonperforming asset ratio (c)

0.47

 

0.51

 

0.48

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

Return on average assets

1.28

%

1.08

%

1.22

%

 

Return on average common equity

10.7

 

9.1

 

11.4

 

 

Return on average tangible common equity (a)

14.2

 

12.3

 

13.8

 

 

CET1 capital (d)(e)

9.56

 

9.57

 

10.67

 

 

Net interest margin (a)

3.32

 

3.37

 

3.23

 

 

Efficiency (a)

58.4

 

65.1

 

60.4

 

Other than the Quarterly Financial Review tables beginning on page 13 of the 3Q19 earnings release, commentary is on a fully taxable-equivalent (FTE) basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a taxable-equivalent basis, net interest income, net interest margin, net interest rate spread, total revenue and the efficiency ratio are provided on an FTE basis. (1)Adjusted return metrics are non-GAAP measures; see discussion on non-GAAP and Reg. G reconciliation beginning on page 26; ROTCE excludes accumulated other comprehensive income (“AOCI”).

CEO Commentary

“Our strong third quarter results reflect the ongoing discipline throughout the bank and the strength of our diversified revenue streams. We generated very strong fee revenue, including a record in capital markets, while tightly managing our expenses. In addition, we generated strong core deposit growth while lowering deposit costs. As a result, our key financial metrics met or exceeded our year-end targets.

During the quarter, we were again able to deliver the financial outcomes as we had expected associated with the MB Financial acquisition, and remain on-track to achieve the previously-stated expense and revenue synergy targets. We remain pleased with the low client attrition rates, and employee attrition continues to track our original deal expectations.

Our clearly defined strategic growth priorities, proactive balance sheet management, and continued discipline throughout the bank position us well into next year and beyond. We remain cognizant of the dynamic macroeconomic and interest rate environment, and continue to focus on through-the-cycle outperformance to create long-term shareholder value.”

-Greg D. Carmichael, Chairman, President and CEO

 

Income Statement Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions, except per share data)

For the Three Months Ended

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

Condensed Statements of Income

 

 

 

 

 

 

 

 

 

 

Net interest income (NII) (a)

$

1,246

 

$

1,250

 

$

1,047

 

-

 

 

19

%

 

Provision for credit losses

 

134

 

 

85

 

 

84

 

58

%

 

60

%

 

Noninterest income

 

740

 

 

660

 

 

563

 

12

%

 

31

%

 

Noninterest expense

 

1,159

 

 

1,243

 

 

972

 

(7

%)

 

19

%

 

Income before income taxes (a)

$

693

 

$

582

 

$

554

 

19

%

 

25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable equivalent adjustment

 

4

 

 

5

 

 

4

 

(20

%)

 

-

 

 

Applicable income tax expense

 

140

 

 

124

 

 

114

 

13

%

 

23

%

 

Net income

$

549

 

$

453

 

$

436

 

21

%

 

26

%

 

Less: Net income attributable to noncontrolling interests

 

-

 

 

-

 

 

-

 

NM

 

NM

 

Net income attributable to Bancorp

$

549

 

$

453

 

$

436

 

21

%

 

26

%

 

Dividends on preferred stock

 

19

 

 

26

 

 

15

 

(27

%)

 

27

%

 

Net income available to common shareholders

$

530

 

$

427

 

$

421

 

24

%

 

26

%

 

Earnings per share, diluted

$

0.71

 

$

0.57

 

$

0.61

 

25

%

 

16

%

Fifth Third Bancorp (Nasdaq: FITB) today reported third quarter 2019 net income of $549 million compared to net income of $436 million in the year-ago quarter. Net income available to common shareholders was $530 million, or $0.71 per diluted share, compared to $421 million, or $0.61 per diluted share in the year-ago quarter. Prior quarter net income was $453 million and net income available to common shareholders was $427 million, or $0.57 per diluted share.

 

 

Diluted earnings per share impact of certain items

 

 

 

 

(after-tax impacts (f) ; $ in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

Merger-related expenses

($22)

 

 

 

 

Valuation of Visa total return swap

($8)

 

 

 

 

After-tax impact (f) of certain items

($30)

 

 

 

 

 

 

 

 

 

 

Average diluted common shares outstanding (thousands)

736,086

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share impact

($0.04)

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(FTE; $ in millions) (a)

For the Three Months Ended

 

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

1,629

 

 

 

$

1,641

 

 

 

$

1,319

 

 

 

(1

%)

 

24

%

 

Interest expense

 

383

 

 

 

 

391

 

 

 

 

272

 

 

 

(2

%)

 

41

%

 

Net interest income (NII)

$

1,246

 

 

 

$

1,250

 

 

 

$

1,047

 

 

 

-

 

 

19

%

 

Adjusted NII (a)

$

1,218

 

 

 

$

1,232

 

 

 

$

1,047

 

 

 

(1

%)

 

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Yield/Rate Analysis

 

 

 

 

 

 

 

 

 

bps Change

 

Yield on interest-earning assets

 

4.34

%

 

 

 

4.42

%

 

 

 

4.07

%

 

 

(8

)

 

27

 

 

Rate paid on interest-bearing liabilities

 

1.41

%

 

 

 

1.47

%

 

 

 

1.20

%

 

 

(6

)

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest rate spread

 

2.93

%

 

 

 

2.95

%

 

 

 

2.87

%

 

 

(2

)

 

6

 

 

Net interest margin (NIM)

 

3.32

%

 

 

 

3.37

%

 

 

 

3.23

%

 

 

(5

)

 

9

 

 

Adjusted NIM (a)

 

3.25

%

 

 

 

3.32

%

 

 

 

3.23

%

 

 

(7

)

 

2

 

Compared to the year-ago quarter, reported NII increased $199 million, or 19%. Excluding purchase accounting accretion of $28 million in the third quarter of 2019, adjusted NII increased $171 million, or 16%, reflecting an increase in interest earning assets, including the impact from the MB Financial acquisition. Compared to the year-ago quarter, reported NIM increased 9 bps, or 2 bps excluding purchase accounting accretion.

Compared to the prior quarter, reported NII decreased $4 million. Excluding purchase accounting accretion, adjusted NII decreased $14 million, or 1%, primarily reflecting lower short-term market rates and a decline in commercial & industrial (C&I) loans, partially offset by growth in the indirect secured consumer portfolio (predominantly indirect automobile) and lower deposit costs. Compared to the prior quarter, reported NIM decreased 5 bps. Excluding purchase accounting accretion, adjusted NIM decreased 7 bps, primarily reflecting lower short-term market rates, increased deposit balances resulting in elevated cash levels and higher day count, partially offset by continued improvement in indirect secured consumer yields (predominantly indirect automobile).

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

$

143

 

$

143

 

$

139

 

 

-

 

 

3

%

 

Corporate banking revenue

 

168

 

 

137

 

 

100

 

 

23

%

 

68

%

 

Mortgage banking net revenue

 

95

 

 

63

 

 

49

 

 

51

%

 

94

%

 

Wealth and asset management revenue

 

124

 

 

122

 

 

114

 

 

2

%

 

9

%

 

Card and processing revenue

 

94

 

 

92

 

 

82

 

 

2

%

 

15

%

 

Other noninterest income

 

111

 

 

93

 

 

86

 

 

19

%

 

29

%

 

Securities gains (losses), net

 

5

 

 

8

 

 

(6

)

 

(38

%)

 

NM

 

Securities gains (losses), net - non-qualifying

hedges on mortgage servicing rights

 

-

 

 

2

 

 

(1

)

 

(100

%)

 

NM

 

Total noninterest income

$

740

 

$

660

 

$

563

 

 

12

%

 

31

%

Reported noninterest income increased $177 million, or 31%, from the year-ago quarter, and increased $80 million, or 12%, from the prior quarter. The reported results reflect the impact of certain items in the table below, in both the prior quarter and the year-ago quarter.

 

Noninterest Income excluding certain items

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

September

 

June

 

September

 

 

2019

 

2019

 

2018

 

Noninterest Income excluding certain items

 

 

 

 

 

 

 

Noninterest income (U.S. GAAP)

$

740

 

 

 

$

660

 

 

$

563

 

 

Valuation of Visa total return swap

 

11

 

 

 

 

22

 

 

 

17

 

 

GreenSky equity securities losses

 

-

 

 

 

 

-

 

 

 

8

 

 

Securities (gains), net (excluding GreenSky)

 

(5

)

 

 

 

(8

)

 

 

(2

)

 

Noninterest income excluding certain items (a)

$

746

 

 

 

$

674

 

 

$

586

 

 

 

Compared to the year-ago quarter, noninterest income excluding the items in the preceding table increased $160 million, or 27%. Compared to the prior quarter, noninterest income excluding the items in the preceding table increased $72 million, or 11%.

Compared to the year-ago quarter, service charges on deposits increased $4 million, or 3%, primarily driven by higher commercial deposit fees, partially offset by lower consumer deposit fees. Corporate banking revenue increased $68 million, or 68%, primarily driven by lease-related services revenue resulting from the MB Financial acquisition, as well as increases in lease remarketing revenue, corporate bond fees, and M&A advisory revenue. Mortgage banking net revenue increased $46 million, or 94%, primarily driven by higher mortgage originations of $3.4 billion, an increase of 81%. Wealth and asset management revenue increased $10 million, or 9%, primarily driven by higher personal asset management revenue.

Compared to the prior quarter, service charges on deposits were flat, as higher consumer deposit fees were offset by lower commercial deposit fees. Corporate banking revenue increased $31 million, or 23%, primarily driven by an increase in lease remarketing revenue, M&A advisory revenue, and corporate bond fees. Mortgage banking net revenue increased $32 million, or 51%, primarily driven by an improved gain on sale margin and a 17% increase in origination volumes. Wealth and asset management revenue increased $2 million, or 2%, primarily driven by higher personal asset management revenue and brokerage fees.

Other noninterest income results on a reported basis in the current and previous quarters were impacted by the Visa total return swap valuation adjustments. Excluding this item, other noninterest income of $122 million increased $19 million, or 18%, compared to the year-ago quarter, primarily driven by other noninterest income from MB Financial. Compared to the prior quarter, other noninterest income excluding this item increased $7 million, or 6%, reflecting higher private equity investment income.

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

 

2019

 

2019

 

2018

 

 

Seq

 

Yr/Yr

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

584

 

 

$

641

 

 

$

503

 

 

(9

%)

 

16

%

 

Net occupancy expense

 

84

 

 

 

88

 

 

 

70

 

 

(5

%)

 

20

%

 

Technology and communications

 

100

 

 

 

136

 

 

 

71

 

 

(26

%)

 

41

%

 

Equipment expense

 

33

 

 

 

33

 

 

 

31

 

 

-

 

 

6

%

 

Card and processing expense

 

33

 

 

 

34

 

 

 

31

 

 

(3

%)

 

6

%

 

Intangible amortization expense

 

14

 

 

 

14

 

 

 

2

 

 

-

 

 

NM

 

Other noninterest expense

 

311

 

 

 

297

 

 

 

264

 

 

5

%

 

18

%

 

Total noninterest expense

$

1,159

 

 

$

1,243

 

 

$

972

 

 

(7

%)

 

19

%

 

Impacts of Merger-Related Expenses

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

September

 

June

 

September

 

 

2019

 

2019

 

2018

 

Merger-Related Expenses

 

 

 

 

 

 

Compensation and benefits

$

14

 

$

41

 

$

-

 

Net occupancy expense

 

3

 

 

6

 

 

-

 

Technology and communications

 

8

 

 

49

 

 

-

 

Equipment expense

 

-

 

 

1

 

 

-

 

Card and processing expense

 

-

 

 

1

 

 

-

 

Intangible amortization expense

 

-

 

 

-

 

 

-

 

Other noninterest expense

 

3

 

 

11

 

 

1

 

Total merger-related expenses

$

28

 

$

109

 

$

1

 

Noninterest Expense excluding Merger-Related Expenses(a)

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

 

2019

 

 

2018

 

Seq

 

Yr/Yr

 

Noninterest Expense excluding Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

570

 

$

600

 

$

503

 

(5

%)

 

13

%

 

Net occupancy expense

 

81

 

 

82

 

 

70

 

(1

%)

 

16

%

 

Technology and communications

 

92

 

 

87

 

 

71

 

6

%

 

30

%

 

Equipment expense

 

33

 

 

32

 

 

31

 

3

%

 

6

%

 

Card and processing expense

 

33

 

 

33

 

 

31

 

-

 

 

6

%

 

Intangible amortization expense

 

14

 

 

14

 

 

2

 

-

 

 

NM

 

Other noninterest expense

 

308

 

 

286

 

 

263

 

8

%

 

17

%

 

Total noninterest expense excluding merger-related expenses

$

1,131

 

$

1,134

 

$

971

 

-

 

 

16

%

Compared to the year-ago quarter, reported noninterest expense increased $187 million, or 19%, impacted by the expenses associated with the MB Financial acquisition. Excluding the merger-related expenses and the intangible amortization expense noted in the table above, noninterest expense increased $148 million, or 15%, reflecting the ongoing expenses from the MB Financial acquisition, including elevated other noninterest expense associated with operating lease expense, as well as continued technology investments. The growth was partially offset by the elimination of the FDIC surcharge.

Compared to the prior quarter, reported noninterest expense decreased $84 million, or 7%, and was impacted by lower merger-related expenses, partially offset by elevated other noninterest expense. Excluding the merger-related expenses and the aforementioned intangible amortization expense, noninterest expense decreased $3 million, driven by lower compensation and benefits partially offset by higher other noninterest expense.

 

Average Interest-Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

Average Portfolio Loans and Leases

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases:

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

$

51,241

 

$

52,078

 

$

42,494

 

(2

%)

 

21

%

 

Commercial mortgage loans

 

10,692

 

 

10,632

 

 

6,635

 

1

%

 

61

%

 

Commercial construction loans

 

5,267

 

 

5,248

 

 

4,870

 

-

 

 

8

%

 

Commercial leases

 

3,562

 

 

3,809

 

 

3,738

 

(6

%)

 

(5

%)

 

Total commercial loans and leases

$

70,762

 

$

71,767

 

$

57,737

 

(1

%)

 

23

%

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

Residential mortgage loans

$

16,736

 

$

16,804

 

$

15,598

 

-

 

 

7

%

 

Home equity

 

6,267

 

 

6,376

 

 

6,529

 

(2

%)

 

(4

%)

 

Indirect secured consumer loans

 

10,707

 

 

10,190

 

 

8,969

 

5

%

 

19

%

 

Credit card

 

2,448

 

 

2,408

 

 

2,299

 

2

%

 

6

%

 

Other consumer loans

 

2,621

 

 

2,550

 

 

2,060

 

3

%

 

27

%

 

Total consumer loans

$

38,779

 

$

38,328

 

$

35,455

 

1

%

 

9

%

 

Total average portfolio loans and leases

$

109,541

 

$

110,095

 

$

93,192

 

(1

%)

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

Average Loans and Leases Held for Sale

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases held for sale

$

127

 

$

113

 

$

157

 

12

%

 

(19

%)

 

Consumer loans held for sale

 

998

 

 

785

 

 

628

 

27

%

 

59

%

 

Total average loans and leases held for sale

$

1,125

 

$

898

 

$

785

 

25

%

 

43

%

 

 

 

 

 

 

 

 

 

 

 

 

Securities and other short-term investments

$

38,188

 

$

37,797

 

$

34,822

 

1

%

 

10

%

 

Total average interest-earning assets

$

148,854

 

$

148,790

 

$

128,799

 

-

 

 

16

%

Compared to the year-ago quarter, average total portfolio loans and leases increased 18%, reflecting the impact of the MB Financial acquisition. Average commercial portfolio loans and leases increased 23%, reflecting the impact of MB Financial as well as higher commercial and industrial (C&I) and commercial mortgage loans, partially offset by a decline in commercial leases. Average consumer portfolio loans increased 9%, reflecting the impact of MB Financial as well as growth in indirect secured consumer loans and other consumer loans.

Compared to the prior quarter, average total portfolio loans and leases decreased 1%, primarily driven by a decline in C&I loans and commercial leases, partially offset by an increase in indirect secured consumer loans. Average commercial portfolio loans and leases decreased 1%, primarily driven by a decline in C&I loans and commercial leases. Average consumer portfolio loans increased 1%, reflecting growth in indirect secured consumer loans and other consumer loans, partially offset by a decline in home equity loans.

Period end commercial line utilization was 36%, compared to 35% in the year-ago quarter and 37% in the prior quarter.

Average securities and other short-term investments were $38.2 billion compared to $34.8 billion in the year-ago quarter and $37.8 billion in the prior quarter. Average available-for-sale debt and other securities of $34.8 billion increased 7% compared to the year-ago quarter and remained flat compared to the prior quarter.

Average Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

September

 

June

 

September

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

Average Deposits

 

 

 

 

 

 

 

 

 

 

Demand

$

35,223

 

$

35,818

 

$

32,333

 

(2

%)

 

9

%

 

Interest checking

 

37,729

 

 

36,514

 

 

29,681

 

3

%

 

27

%

 

Savings

 

14,405

 

 

14,418

 

 

13,231

 

-

 

 

9

%

 

Money market

 

26,962

 

 

25,934

 

 

21,753

 

4

%

 

24

%

 

Foreign office (g)

 

222

 

 

163

 

 

317

 

36

%

 

(30

%)

 

Total transaction deposits

$

114,541

 

$

112,847

 

$

97,315

 

2

%

 

18

%

 

Other time

 

5,823

 

 

5,678

 

 

4,177

 

3

%

 

39

%

 

Total core deposits

$

120,364

 

$

118,525

 

$

101,492

 

2

%

 

19

%

 

Certificates - $100,000 and over

 

4,795

 

 

5,780

 

 

2,596

 

(17

%)

 

85

%

 

Other deposits

 

47

 

 

40

 

 

578

 

18

%

 

(92

%)

 

Total average deposits

$

125,206

 

$

124,345

 

$

104,666

 

1

%

 

20

%

Compared to the year-ago quarter, average core deposits increased 19%, reflecting the impact of the MB Financial acquisition. Average core deposit growth was driven by an increase in interest checking, money market, and demand deposits. The increases were partially offset by lower foreign office deposits. Average commercial transaction deposits increased 26% and average consumer transaction deposits increased 11%.

Compared to the prior quarter, average core deposits increased 2%, primarily driven by higher interest checking and money market deposits, partially offset by a decline in demand deposits. Average demand deposits represented 29% of total core deposits in the third quarter of 2019, down from 30% in the prior quarter. Average commercial transaction deposits increased 4%, and average consumer transaction deposits decreased 1%.

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

 

September

 

June

 

September

 

 

 

 

 

 

 

2019

 

2019

 

2018

 

Seq

 

Yr/Yr

 

 

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates - $100,000 and over

$

4,795

 

 

$

5,780

 

 

$

2,596

 

 

(17

%)

 

85

%

 

 

Other deposits

 

47

 

 

 

40

 

 

 

578

 

 

18

%

 

(92

%)

 

 

Federal funds purchased

 

739

 

 

 

1,151

 

 

 

1,987

 

 

(36

%)

 

(63

%)

 

 

Other short-term borrowings

 

1,278

 

 

 

1,119

 

 

 

1,018

 

 

14

%

 

26

%

 

 

Long-term debt

 

15,633

 

 

 

15,543

 

 

 

14,434

 

 

1

%

 

8

%

 

 

Total average wholesale funding

$

22,492

 

 

$

23,633

 

 

$

20,613

 

 

(5

%)

 

9

%

 

Compared to the year-ago quarter, average wholesale funding increased 9% driven by growth in jumbo CD balances and long-term debt balances associated with the acquisition of MB Financial, partially offset by a decrease in federal funds borrowings. Compared to the prior quarter, average wholesale funding decreased 5% reflecting a decrease in jumbo CD balances and federal funds borrowings, partially offset by an increase in other short-term debt.

 

Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

September

 

June

 

March

 

December

 

September

 

 

2019

 

2019

 

2019

 

2018

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Total nonaccrual portfolio loans and leases (NPLs)

$

482

 

 

$

521

 

 

$

450

 

 

$

348

 

 

$

403

 

 

Repossessed property

 

9

 

 

 

8

 

 

 

11

 

 

 

10

 

 

 

8

 

 

OREO

 

28

 

 

 

31

 

 

 

37

 

 

 

37

 

 

 

37

 

 

Total nonperforming portfolio assets (NPAs)

$

519

 

 

$

560

 

 

$

498

 

 

$

395

 

 

$

448

 

 

 

 

 

 

 

 

 

 

 

 

 

NPL ratio (h)

 

0.44

%

 

 

0.48

%

 

 

0.41

%

 

 

0.37

%

 

 

0.43

%

 

NPA ratio (c)

 

0.47

%

 

 

0.51

%

 

 

0.45

%

 

 

0.41

%

 

 

0.48

%

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases 30-89 days past due (accrual)

 

402

 

 

 

383

 

 

 

322

 

 

 

297

 

 

 

270

 

 

Total loans and leases 90 days past due (accrual)

 

132

 

 

 

128

 

 

 

132

 

 

 

93

 

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses, beginning

$

1,115

 

 

$

1,115

 

 

$

1,103

 

 

$

1,091

 

 

$

1,077

 

 

Total net losses charged-off

 

(99

)

 

 

(78

)

 

 

(77

)

 

 

(83

)

 

 

(72

)

 

Provision for loan and lease losses

 

127

 

 

 

78

 

 

 

89

 

 

 

95

 

 

 

86

 

 

Allowance for loan and lease losses, ending

$

1,143

 

 

$

1,115

 

 

$

1,115

 

 

$

1,103

 

 

$

1,091

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments, beginning

$

147

 

 

$

133

 

 

$

131

 

 

$

129

 

 

$

131

 

 

Reserve for acquired commitments

 

-

 

 

 

7

 

 

 

1

 

 

 

-

 

 

 

-

 

 

Provision for (benefit from) the reserve for unfunded commitments

 

7

 

 

 

7

 

 

 

1

 

 

 

2

 

 

 

(2

)

 

Reserve for unfunded commitments, ending

$

154

 

 

$

147

 

 

$

133

 

 

$

131

 

 

$

129

 

 

 

 

 

 

 

 

 

 

 

 

 

Total allowance for credit losses

$

1,297

 

 

$

1,262

 

 

$

1,248

 

 

$

1,234

 

 

$

1,220

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses ratios

 

 

 

 

 

 

 

 

 

 

As a percent of portfolio loans and leases

 

1.04

%

 

 

1.02

%

 

 

1.02

%

 

 

1.16

%

 

 

1.17

%

 

As a percent of nonperforming portfolio loans and leases

 

237

%

 

 

214

%

 

 

248

%

 

 

317

%

 

 

270

%

 

As a percent of nonperforming portfolio assets

 

221

%

 

 

199

%

 

 

224

%

 

 

279

%

 

 

243

%

 

 

 

 

 

 

 

 

 

 

 

 

Total losses charged-off

$

(130

)

 

$

(119

)

 

$

(108

)

 

$

(116

)

 

$

(112

)

 

Total recoveries of losses previously charged-off

 

31

 

 

 

41

 

 

 

31

 

 

 

33

 

 

 

40

 

 

Total net losses charged-off

$

(99

)

 

$

(78

)

 

$

(77

)

 

$

(83

)

 

$

(72

)

 

 

 

 

 

 

 

 

 

 

 

 

Net charge-off ratio (NCO ratio) (b)

 

0.36

%

 

 

0.29

%

 

 

0.32

%

 

 

0.35

%

 

 

0.30

%

 

Commercial NCO ratio

 

0.18

%

 

 

0.13

%

 

 

0.11

%

 

 

0.19

%

 

 

0.19

%

 

Consumer NCO ratio

 

0.68

%

 

 

0.59

%

 

 

0.68

%

 

 

0.61

%

 

 

0.50

%

Compared to the year-ago quarter, NPLs increased $79 million, or 20%, with the resulting NPL ratio of 0.44% increasing 1 bp. NPAs increased $71 million, or 16%, with the resulting NPA ratio of 0.47% decreasing 1 bp. Compared to the prior quarter, NPLs decreased $39 million, or 7%, with the resulting NPL ratio decreasing 4 bps. NPAs decreased $41 million, or 7%, with the resulting NPA ratio decreasing 4 bps.

The provision for loan and lease losses totaled $127 million in the current quarter compared to $86 million in the year-ago quarter and $78 million in the prior quarter. The resulting allowance for loan and lease losses ratio represented 1.04% of total portfolio loans and leases outstanding in the current quarter, compared with 1.17% in the year-ago quarter and 1.02% in the prior quarter. The allowance for loan and lease losses represented 237% of nonperforming portfolio loans and leases and 221% of nonperforming portfolio assets in the current quarter.

Net charge-offs totaled $99 million in the current quarter compared to $72 million in the year-ago quarter and $78 million in the prior quarter. The resulting NCO ratio of 0.36% in the current quarter increased 6 bps compared to the year-ago quarter and increased 7 bps compared to the prior quarter.

 

Capital and Liquidity Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

 

September

 

June

 

March

 

December

 

September

 

 

 

 

2019

 

2019

 

2019

 

2018

 

2018

 

Capital Position

 

 

 

 

 

 

 

 

 

 

 

Average total Bancorp shareholders' equity as a percent of average assets

 

12.43

%

 

12.02

%

 

11.43

%

 

10.95

%

 

11.29

%

 

Tangible equity (a)

 

9.29

%

 

9.09

%

 

9.03

%

 

9.63

%

 

9.97

%

 

Tangible common equity (excluding AOCI) (a)

 

8.21

%

 

8.27

%

 

8.21

%

 

8.71

%

 

9.02

%

 

Tangible common equity (including AOCI) (a)

 

9.09

%

 

8.91

%

 

8.44

%

 

8.64

%

 

8.53

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory Capital and Liquidity Ratios (e)

 

 

 

CET1 capital (d)

 

9.56

%

 

9.57

%

 

9.60

%

 

10.24

%

 

10.67

%

 

Tier I risk-based capital (d)

 

10.81

%

 

10.62

%

 

10.67

%

 

11.32

%

 

11.78

%

 

Total risk-based capital (d)

 

13.69

%

 

13.53

%

 

13.57

%

 

14.48

%

 

14.94

%

 

Tier I leverage

 

9.36

%

 

9.24

%

 

10.32

%

 

9.72

%

 

10.10

%

 

Modified liquidity coverage ratio (LCR)

 

116

%

 

119

%

 

113

%

 

128

%

 

119

%

Capital ratios remained strong during the quarter. The CET1 capital ratio was 9.56%, the tangible common equity to tangible assets ratio was 8.21% excluding AOCI, and 9.09% including AOCI. The Tier I risk-based capital ratio was 10.81%, the Total risk-based capital ratio was 13.69%, and the Tier I leverage ratio was 9.36%.

Fifth Third completed multiple share repurchases during the quarter totaling $350 million, including approximately $50 million of its outstanding common stock (approximately 1.7 million shares) through the open market, which settled between July 31, 2019 and August 1, 2019. Below is a summary of the remaining share repurchases.

  • On August 7, 2019, Fifth Third initially settled a share repurchase agreement whereby Fifth Third would purchase $100 million of its outstanding stock. The initial settlement reduced third quarter common shares outstanding by 3.1 million shares. On August 16, 2019, Fifth Third settled the forward contract, which resulted in an additional 0.7 million shares repurchased in connection with the completion of this agreement.
  • On August 9, 2019, Fifth Third initially settled a share repurchase agreement whereby Fifth Third would purchase $200 million of its outstanding stock in two $100 million tranches. The initial settlement reduced third quarter common shares outstanding by 6.4 million shares. On August 28, 2019, Fifth Third settled both tranches from the forward contract. An additional 1.5 million shares were repurchased in connection with the completion of this agreement.

Based on the transactions noted above, common shares outstanding decreased by approximately 13.4 million shares, or 1.8%, in the third quarter of 2019 from the second quarter of 2019.

Fifth Third issued $250 million of 4.95% fixed rate non-cumulative perpetual preferred stock (Series K preferred stock) for net proceeds of $242 million on September 17, 2019.

Tax Rate

The effective tax rate was 20.2% compared with 20.7% in the year-ago quarter and 21.5% in the prior quarter. The current quarter tax rate was impacted by a $7 million tax benefit associated with certain commercial lease terminations.

Other

On September 10, 2019, Fifth Third Bank received approval from the Office of the Comptroller of the Currency (“OCC”) to convert from an Ohio state-chartered bank to a national bank.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”).

Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address. Additionally, a telephone replay of the conference call will be available after the conference call until approximately November 5, 2019 by dialing 800-585-8367 for domestic access or 404-537-3406 for international access (passcode 7285218#).

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. As of September 30, 2019, the Company had $171 billion in assets and operates 1,143 full-service Banking Centers, and 2,487 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina. In total, Fifth Third provides its customers with access to approximately 53,000 fee-free ATMs across the United States. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2019, had $397 billion in assets under care, of which it managed $46 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ® Global Select Market under the symbol “FITB.”

Earnings Release End Notes

(a)

Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 26 of the 3Q19 earnings release.

(b)

Net losses charged-off as a percent of average portfolio loans and leases.

(c)

Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO.

(d)

Under the U.S. banking agencies' Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated according to the standardized approach for risk-weighted assets. The resulting values are added together resulting in the Bancorp’s total risk-weighted assets.

(e)

Current period regulatory capital and liquidity ratios are estimated.

(f)

Assumes a 23% tax rate, except for merger-related expenses which were impacted by certain non-deductible items.

(g)

Includes commercial customer Eurodollar sweep balances for which the Bank pays rates comparable to other commercial deposit accounts.

(h)

Nonperforming portfolio loans and leases as a percent of portfolio loans and leases and OREO.

FORWARD-LOOKING STATEMENTS

This release contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “potential,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K as updated by our Quarterly Reports on Form 10-Q. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. We undertake no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this document.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) deteriorating credit quality; (2) loan concentration by location or industry of borrowers or collateral; (3) problems encountered by other financial institutions; (4) inadequate sources of funding or liquidity; (5) unfavorable actions of rating agencies; (6) inability to maintain or grow deposits; (7) limitations on the ability to receive dividends from subsidiaries; (8) cyber-security risks; (9) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (10) failures by third-party service providers; (11) inability to manage strategic initiatives and/or organizational changes; (12) inability to implement technology system enhancements; (13) failure of internal controls and other risk management systems; (14) losses related to fraud, theft or violence; (15) inability to attract and retain skilled personnel; (16) adverse impacts of government regulation; (17) governmental or regulatory changes or other actions; (18) failures to meet applicable capital requirements; (19) regulatory objections to Fifth Third’s capital plan; (20) regulation of Fifth Third’s derivatives activities; (21) deposit insurance premiums; (22) assessments for the orderly liquidation fund; (23) replacement of LIBOR; (24) weakness in the national or local economies; (25) global political and economic uncertainty or negative actions; (26) changes in interest rates; (27) changes and trends in capital markets; (28) fluctuation of Fifth Third’s stock price; (29) volatility in mortgage banking revenue; (30) litigation, investigations, and enforcement proceedings by governmental authorities; (31) breaches of contractual covenants, representations and warranties; (32) competition and changes in the financial services industry; (33) changing retail distribution strategies, customer preferences and behavior; (34) risks relating to Fifth Third’s ability to realize anticipated benefits of the merger with MB Financial, Inc.; (35) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (36) potential dilution from future acquisitions; (37) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (38) results of investments or acquired entities; (39) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (40) inaccuracies or other failures from the use of models; (41) effects of critical accounting policies and judgments or the use of inaccurate estimates; (42) weather-related events or other natural disasters; and (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity.

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC,” for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements.

Multimedia Files:

Preview image

Contact:

Investor contact: Chris Doll (513) 534–2345
Media contact: Gary Rhodes (513) 534–4225