FITB
$18.39
Fifth Third Bncp
$1.00
5.75%
Earnings Details
1st Quarter March 2020
Tuesday, April 21, 2020 6:30:00 AM
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Summary

Fifth Third Bncp Misses

Fifth Third Bncp (FITB) reported 1st Quarter March 2020 earnings of $0.13 per share on revenue of $2.2 billion. The consensus earnings estimate was $0.23 per share on revenue of $1.9 billion. The Earnings Whisper number was $0.15 per share. Revenue fell 13.3% compared to the same quarter a year ago.

Fifth Third Bancorp along with its subsidiaries provides financial products and services such as checking, savings and money market accounts, and credit products such as credit cards, installment loans, mortgage loans and leases.

Results
Reported Earnings
$0.13
Earnings Whisper
$0.15
Consensus Estimate
$0.23
Reported Revenue
$2.20 Bil
Revenue Estimate
$1.90 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Fifth Third Announces First Quarter 2020 Results

Reported diluted earnings per share of $0.04

Reported results included a negative $0.64 impact from certain items on page 2, including $0.09 from notable items, and $0.55 from provision in excess of net charge-offs

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

Key Highlights

Taking significant action for our customers, employees and communities in response to virus impacts

  • Proactive, ongoing outreach to provide customer hardship assistance including participation in government programs
  • Prudently extending credit to customers in order to support economic activity
  • Keeping virtually all branches open, with amended hours and safety measures
  • Taking several measures for employees, including front-line employee bonuses, enhanced cleaning, and large scale migration to remote workforce

First quarter 2020

  • Net interest income, NIM, noninterest income, and expense performance in-line with or better than prior guidance
  • NCO ratio consistent with previous expectations
  • Growth in the allowance for credit losses reflects adoption of CECL1 and the impact of COVID-19
  • Maintained robust capital and liquidity levels

 

 

 

 

 

 

 

 

Key Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ millions for all balance sheet and income statement items

 

 

 

 

 

 

1Q20

4Q19

1Q19

 

Income Statement Data

 

 

 

 

 

 

 

Net income available to common shareholders

$29

 

$701

 

$760

 

 

Net interest income (U.S. GAAP)

1,229

 

1,228

 

1,082

 

 

Net interest income (FTE)(a)

1,233

 

1,232

 

1,086

 

 

Noninterest income

671

 

1,035

 

1,101

 

 

Noninterest expense

1,200

 

1,160

 

1,097

 

 

Per Share Data

 

 

 

 

 

 

 

Earnings per share, basic

$0.04

 

$0.97

 

$1.14

 

 

Earnings per share, diluted

0.04

 

0.96

 

1.12

 

 

Book value per share

28.26

 

27.41

 

24.77

 

 

Tangible book value per share(a)

22.02

 

21.13

 

18.64

 

 

Balance Sheet & Credit Quality

 

 

 

 

 

 

 

Average portfolio loans and leases

$110,779

 

$109,787

 

$97,773

 

 

Average deposits

126,789

 

126,116

 

109,591

 

 

Net charge-off ratio(b)

0.44

%

0.41

%

0.32

%

 

Nonperforming asset ratio(c)

0.60

 

0.62

 

0.45

 

 

Financial Ratios

 

 

 

 

 

 

 

Return on average assets

0.11

%

1.72

%

2.11

%

 

Return on average common equity

0.6

 

14.2

 

19.6

 

 

Return on average tangible common equity(a)

1.0

 

18.7

 

23.9

 

 

CET1 capital(d)(e)

9.36

 

9.75

 

9.60

 

 

Net interest margin(a)

3.28

 

3.27

 

3.28

 

 

Efficiency(a)

63.0

 

51.2

 

50.2

 

 

 

 

 

 

Other than the Quarterly Financial Review tables beginning on page 14 of the 1Q20 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. 1Refers to the current expected credit losses (CECL) methodology implemented upon the Bancorp's adoption of ASU 2016-13.

CEO Commentary

“The unprecedented nature of the environment that we are operating in today undoubtedly reprioritizes our focus to the significant and ongoing actions we are taking for our customers, our employees, and our communities. We are leveraging our balance sheet strength to help solve the spiraling economic effects of this health crisis, and we will continue to respond rapidly and do what is necessary to help mitigate the effects of the downturn. I am very proud of the way our employees have responded in extraordinary ways to support our customers and each other.

Our operating results during the first quarter were very strong given the speed and extent of the deterioration in the economic environment that we experienced in the latter part of the quarter. The results show the impact of the strength of our franchise and the strategic decisions we have made in managing our balance sheet, our interest rate risk and our liquidity risk exposures. Net interest income, net interest margin, noninterest income, and expenses all performed in-line with or better than our January guidance, with the net charge off ratio also consistent with our previous expectations.

Our allowance for credit losses now reflects both the adoption of the new CECL methodology and the impact of COVID-19. After assessing the impact of the deteriorating economic conditions and the counter impact of the unprecedented fiscal and monetary stimulus programs on our loan portfolios, we increased our reserves compared to last quarter, which includes the impact of the loan growth that we experienced during the quarter.

While we do not know the duration or severity of the crisis, we have spent the past decade strengthening our balance sheet, diversifying our revenue streams, and stress testing our firm-wide resilience under a range of conditions worse than the last crisis and more severe than the regulatory-run stress tests. During that time, we have consistently communicated our ‘through-the-cycle’ principles of disciplined client selection, conservative underwriting, and an overall balance sheet management approach focused on a long-term performance horizon. Our unwavering adherence to these principles and our balance sheet strength give us confidence as we navigate this uncertain environment.”

-Greg D. Carmichael, Chairman, President and CEO

 

 

Income Statement Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions, except per share data)

For the Three Months Ended

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Condensed Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (NII)(a)

$

1,233

 

$

1,232

 

$

1,086

 

-

 

 

14

%

 

 

Provision for credit losses

 

640

 

 

162

 

 

90

 

295

%

 

611

%

 

 

Noninterest income

 

671

 

 

1,035

 

 

1,101

 

(35

%)

 

(39

%)

 

 

Noninterest expense

 

1,200

 

 

1,160

 

 

1,097

 

3

%

 

9

%

 

 

Income before income taxes(a)

$

64

 

$

945

 

$

1,000

 

(93

%)

 

(94

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable equivalent adjustment

 

4

 

 

4

 

 

4

 

-

 

 

-

 

 

 

Applicable income tax expense

 

14

 

 

207

 

 

221

 

(93

%)

 

(94

%)

 

 

Net income

$

46

 

$

734

 

$

775

 

(94

%)

 

(94

%)

 

 

Dividends on preferred stock

 

17

 

 

33

 

 

15

 

(48

%)

 

13

%

 

 

Net income available to common shareholders

$

29

 

$

701

 

$

760

 

(96

%)

 

(96

%)

 

 

Earnings per share, diluted

$

0.04

 

$

0.96

 

$

1.12

 

(96

%)

 

(97

%)

 

 

Fifth Third Bancorp (Nasdaq: FITB) today reported first quarter 2020 net income of $46 million compared to net income of $775 million in the year-ago quarter. Net income available to common shareholders was $29 million, or $0.04 per diluted share, compared to $760 million, or $1.12 per diluted share in the year-ago quarter. Prior quarter net income was $734 million and net income available to common shareholders was $701 million, or $0.96 per diluted share.

 

 

 

 

 

 

 

 

Diluted earnings per share impact of certain items - 1Q20

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Provision in excess of net charge-offs

($399)

 

 

 

 

Diluted earnings per share impact from provision in excess of net charge-offs

($0.55)

 

 

 

 

 

 

 

 

 

 

Unfavorable credit valuation adjustment (CVA) within other noninterest expense

($28)

 

 

 

 

Valuation of Visa total return swap within other noninterest income

($17)

 

 

 

 

Net impairment on private equity investments

($12)

 

 

 

 

Merger-related expenses

($5)

 

 

 

 

After-tax impact(f) of other notable items

($62)

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share impact of other notable items

($0.09)

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share impact reflect 720.363 million average diluted shares outstanding

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(FTE; $ in millions)(a)

For the Three Months Ended

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

1,529

 

 

 

$

1,563

 

 

 

$

1,437

 

 

 

(2

%)

 

6

%

 

 

Interest expense

 

296

 

 

 

 

331

 

 

 

 

351

 

 

 

(11

%)

 

(16

%)

 

 

Net interest income (NII)

$

1,233

 

 

 

$

1,232

 

 

 

$

1,086

 

 

 

-

 

 

14

%

 

 

Adjusted NII(a)

$

1,217

 

 

 

$

1,214

 

 

 

$

1,085

 

 

 

-

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Yield/Rate Analysis

 

 

 

 

 

 

 

 

 

bps Change

 

 

Yield on interest-earning assets

 

4.07

%

 

 

 

4.15

%

 

 

 

4.33

%

 

 

(8

)

 

(26

)

 

 

Rate paid on interest-bearing liabilities

 

1.09

%

 

 

 

1.22

%

 

 

 

1.46

%

 

 

(13

)

 

(37

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest rate spread

 

2.98

%

 

 

 

2.93

%

 

 

 

2.87

%

 

 

5

 

 

11

 

 

 

Net interest margin (NIM)

 

3.28

%

 

 

 

3.27

%

 

 

 

3.28

%

 

 

1

 

 

-

 

 

 

Adjusted NIM(a)

 

3.24

%

 

 

 

3.22

%

 

 

 

3.28

%

 

 

2

 

 

(4

)

 

 

Compared to the year-ago quarter, reported NII increased $147 million, or 14%. Excluding purchase accounting accretion of $16 million in the current quarter and $1 million in the year-ago quarter, adjusted NII increased $132 million, or 12%, reflecting an increase in interest-earning assets, including the impact from the MB Financial acquisition, partially offset by the declining-rate environment. Compared to the year-ago quarter, reported NIM remained flat, and decreased 4 bps excluding purchase accounting accretion.

Compared to the prior quarter, reported NII increased $1 million. Excluding purchase accounting accretion, adjusted NII increased $3 million, reflecting loan growth, the favorable impact of previously executed cash flow hedges, and the benefit of elevated short-term LIBOR rates on loan yields relative to funding costs, partially offset by seasonally strong securities portfolio income in the prior quarter as well as the impact of a lower day count. Compared to the prior quarter, reported NIM increased 1 bp. Excluding purchase accounting accretion, adjusted NIM increased 2 bps, reflecting the favorable impact of previously executed hedges, proactive management of deposit rates, and a lower day count, partially offset by the aforementioned securities portfolio income from the prior quarter and a 3 bps unfavorable impact from elevated cash balances.

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

$

148

 

 

$

149

 

 

$

131

 

(1

%)

 

13

%

 

 

Commercial banking revenue

 

124

 

 

 

127

 

 

 

103

 

(2

%)

 

20

%

 

 

Mortgage banking net revenue

 

120

 

 

 

73

 

 

 

56

 

64

%

 

114

%

 

 

Wealth and asset management revenue

 

134

 

 

 

129

 

 

 

112

 

4

%

 

20

%

 

 

Card and processing revenue

 

86

 

 

 

95

 

 

 

79

 

(9

%)

 

9

%

 

 

Leasing business revenue

 

73

 

 

 

71

 

 

 

32

 

3

%

 

128

%

 

 

Other noninterest income

 

7

 

 

 

382

 

 

 

569

 

(98

%)

 

(99

%)

 

 

Securities (losses) gains, net

 

(24

)

 

 

10

 

 

 

16

 

NM

 

 

NM

 

 

 

Securities gains (losses), net - non-qualifying

 

 

 

 

 

 

 

 

 

 

 

hedges on mortgage servicing rights

 

3

 

 

 

(1

)

 

 

3

 

NM

 

 

-

 

 

 

Total noninterest income

$

671

 

 

$

1,035

 

 

$

1,101

 

(35

%)

 

(39

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In the first quarter 2020, as a result of updating internal management reporting processes and to provide more detailed information, certain noninterest income disclosures were adjusted. Leasing business revenue is a new line item with revenue previously included in the Corporate banking revenue - with the remaining revenue shown as Commercial banking revenue - and Other noninterest income line items. These adjustments were retrospectively applied to prior periods presented.)

Reported noninterest income decreased $430 million, or 39%, from the year-ago quarter, and decreased $364 million, or 35%, from the prior quarter. The reported results reflect the impact of certain items in the table below, primarily from Worldpay transactions, in both the prior quarter and the year-ago quarter.

 

 

Noninterest Income excluding certain items

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

March

 

December

 

 

March

 

 

 

2020

 

2019

 

 

2019

 

 

Noninterest Income excluding certain items

 

 

 

 

 

 

 

 

 

Noninterest income (U.S. GAAP)

$671

 

 

$1,035

 

 

$1,101

 

 

Valuation of Visa total return swap

22

 

 

44

 

 

31

 

 

Net impairment on private equity investments

15

 

 

-

 

 

-

 

 

Merger-related branch network impairment charge

-

 

 

-

 

 

13

 

 

Gain on sale of Worldpay shares

-

 

 

-

 

 

(562)

 

 

Gain recognized from Worldpay TRA transaction

-

 

 

(345)

 

 

-

 

 

GreenSky equity securities (gain)

-

 

 

-

 

 

(9)

 

 

Securities (gains) losses, net (excluding GreenSky)

24

 

 

(10)

 

 

(7)

 

 

Noninterest income excluding certain items(a)

$732

 

 

$724

 

 

$567

 

 

 

Compared to the year-ago quarter, noninterest income excluding the items in the preceding table increased $165 million, or 29%. Compared to the prior quarter, noninterest income excluding the items in the preceding table increased $8 million, or 1%.

Compared to the year-ago quarter, service charges on deposits increased $17 million, or 13%, driven by higher commercial deposit fees. Commercial banking revenue increased $21 million, or 20%, primarily driven by increases in financial risk management revenue and corporate bond fees, partially offset by a decrease in loan syndications revenue. Mortgage banking net revenue increased $64 million, or 114% primarily driven by an improved gain on sale margin on higher mortgage originations of $4 billion in the current quarter compared to $1.6 billion in the year-ago quarter. Wealth and asset management revenue increased $22 million, or 20%, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased by $7 million, or 9%, reflecting increases in credit and debit transaction volumes, partially offset by higher rewards. Leasing business revenue increased $41 million, or 128%, primarily reflecting the impacts from the MB Financial acquisition.

Compared to the prior quarter, service charges on deposits decreased $1 million, or 1%, due to lower consumer deposit fees, partially offset by higher commercial deposit fees. Commercial banking revenue decreased $3 million, or 2%, primarily driven by decreases in loan syndications and M&A advisory revenue, partially offset by increases in financial risk management revenue and corporate bond fees. Mortgage banking net revenue increased $47 million, or 64%, primarily driven by an improved gain on sale margin, a 6% increase in origination volumes, and the impact of the MSR valuation, net of hedges. Wealth and asset management revenue increased $5 million, or 4%, primarily driven by higher brokerage fees, partially offset by lower personal asset management revenue. Card processing revenue decreased $9 million, or 9%, reflecting decreases in credit and debit volumes in the final month of the quarter, partially offset by lower rewards. Leasing business revenue increased $2 million, or 3%, primarily driven by an increase in lease syndication fees, partially offset by a decrease in business solutions revenue.

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

March

 

December

 

 

March

 

 

 

 

 

 

 

 

2020

 

2019

 

 

2019

 

 

Seq

 

Yr/Yr

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

647

 

 

$

576

 

 

$

610

 

 

12

%

 

6

%

 

 

Net occupancy expense

 

82

 

 

 

84

 

 

 

75

 

 

(2

%)

 

9

%

 

 

Technology and communications

 

93

 

 

 

103

 

 

 

83

 

 

(10

%)

 

12

%

 

 

Equipment expense

 

32

 

 

 

33

 

 

 

30

 

 

(3

%)

 

7

%

 

 

Card and processing expense

 

31

 

 

 

33

 

 

 

31

 

 

(6

%)

 

-

 

 

 

Leasing business expense

 

35

 

 

 

36

 

 

 

19

 

 

(3

%)

 

84

%

 

 

Marketing expense

 

31

 

 

 

44

 

 

 

36

 

 

(30

%)

 

(14

%)

 

 

Intangible amortization expense

 

13

 

 

 

14

 

 

 

3

 

 

(7

%)

 

NM

 

 

 

Other noninterest expense

 

236

 

 

 

237

 

 

 

210

 

 

-

 

 

12

%

 

 

Total noninterest expense

$

1,200

 

 

$

1,160

 

 

$

1,097

 

 

3

%

 

9

%

 

 

 

 

(In the first quarter 2020, as a result of updating internal management reporting processes and to provide more detailed information, certain noninterest expense disclosures were adjusted. Leasing business expense and Marketing expense are new line items shown reflecting expenses previously included in the Other noninterest expense line item. These adjustments were retrospectively applied to prior periods presented.)

 

Impacts of Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

 

 

March

 

December

 

 

March

 

 

 

 

2020

 

2019

 

 

2019

 

 

 

Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$2

 

 

$1

 

 

$35

 

 

 

Net occupancy expense

1

 

 

3

 

 

-

 

 

 

Technology and communications

3

 

 

4

 

 

11

 

 

 

Equipment expense

-

 

 

-

 

 

-

 

 

 

Card and processing expense

-

 

 

-

 

 

-

 

 

 

Leasing business expense

-

 

 

-

 

 

-

 

 

 

Marketing expense

-

 

 

-

 

 

4

 

 

 

Intangible amortization expense

-

 

 

-

 

 

-

 

 

 

Other noninterest expense

1

 

 

1

 

 

26

 

 

 

Total merger-related expenses

$7

 

 

$9

 

 

$76

 

 

 

 

Noninterest Expense excluding Merger-Related Expenses(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Noninterest Expense excluding Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

645

 

 

$

575

 

 

$

575

 

 

12

%

 

12

%

 

 

Net occupancy expense

 

81

 

 

 

81

 

 

 

75

 

 

-

 

 

8

%

 

 

Technology and communications

 

90

 

 

 

99

 

 

 

72

 

 

(9

%)

 

25

%

 

 

Equipment expense

 

32

 

 

 

33

 

 

 

30

 

 

(3

%)

 

7

%

 

 

Card and processing expense

 

31

 

 

 

33

 

 

 

31

 

 

(6

%)

 

-

 

 

 

Leasing business expense

 

35

 

 

 

36

 

 

 

19

 

 

(3

%)

 

84

%

 

 

Marketing expense

 

31

 

 

 

44

 

 

 

32

 

 

(30

%)

 

(3

%)

 

 

Intangible amortization expense

 

13

 

 

 

14

 

 

 

3

 

 

(7

%)

 

NM

 

 

 

Other noninterest expense

 

235

 

 

 

236

 

 

 

184

 

 

-

 

 

28

%

 

 

Total noninterest expense excluding merger-related expenses

$

1,193

 

 

$

1,151

 

 

$

1,021

 

 

4

%

 

17

%

 

 

Compared to the year-ago quarter, reported noninterest expense increased $103 million, or 9%. Excluding the merger-related expenses, intangible amortization expense, and an unfavorable CVA within other noninterest expense of $36 million in the current quarter, noninterest expense increased $126 million, or 12%, reflecting the operating expenses resulting from the MB Financial acquisition as well as continued technology investments.

Compared to the prior quarter, reported noninterest expense increased $40 million, or 3%. Excluding the aforementioned merger-related expenses, intangible amortization expense, unfavorable CVA, and a $20 million contribution to the Fifth Third Foundation (included in other noninterest expense) in the prior quarter, noninterest expense increased $27 million, or 2%, as seasonally higher compensation and benefits as well as $3 million in special payments to employees providing essential banking services through the COVID-19 pandemic were partially offset by lower marketing and technology expenses.

 

 

Average Interest-Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Average Portfolio Loans and Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

$

51,586

 

 

$

50,938

 

 

$

46,011

 

 

1

%

 

12

%

 

 

Commercial mortgage loans

 

11,019

 

 

 

10,831

 

 

 

7,414

 

 

2

%

 

49

%

 

 

Commercial construction loans

 

5,132

 

 

 

5,334

 

 

 

4,838

 

 

(4

%)

 

6

%

 

 

Commercial leases

 

3,201

 

 

 

3,384

 

 

 

3,555

 

 

(5

%)

 

(10

%)

 

 

Total commercial loans and leases

$

70,938

 

 

$

70,487

 

 

$

61,818

 

 

1

%

 

15

%

 

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage loans

$

16,732

 

 

$

16,697

 

 

$

15,624

 

 

-

 

 

7

%

 

 

Home equity

 

6,006

 

 

 

6,147

 

 

 

6,355

 

 

(2

%)

 

(5

%)

 

 

Indirect secured consumer loans

 

11,809

 

 

 

11,281

 

 

 

9,176

 

 

5

%

 

29

%

 

 

Credit card

 

2,498

 

 

 

2,496

 

 

 

2,396

 

 

-

 

 

4

%

 

 

Other consumer loans

 

2,796

 

 

 

2,679

 

 

 

2,404

 

 

4

%

 

16

%

 

 

Total consumer loans

$

39,841

 

 

$

39,300

 

 

$

35,955

 

 

1

%

 

11

%

 

 

Total average portfolio loans and leases

$

110,779

 

 

$

109,787

 

 

$

97,773

 

 

1

%

 

13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Loans and Leases Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases held for sale

$

108

 

 

$

43

 

 

$

62

 

 

151

%

 

74

%

 

 

Consumer loans held for sale

 

1,293

 

 

 

1,156

 

 

 

527

 

 

12

%

 

145

%

 

 

Total average loans and leases held for sale

$

1,401

 

 

$

1,199

 

 

$

589

 

 

17

%

 

138

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities and other short-term investments

$

39,033

 

 

$

38,326

 

 

$

36,101

 

 

2

%

 

8

%

 

 

Total average interest-earning assets

$

151,213

 

 

$

149,312

 

 

$

134,463

 

 

1

%

 

12

%

 

 

Compared to the year-ago quarter, total average portfolio loans and leases increased 13%, reflecting the impact of the MB Financial acquisition. Average commercial portfolio loans and leases increased 15%, 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 11%, reflecting growth in indirect secured consumer loans (predominantly indirect automobile) as well as the impact of MB Financial.

Compared to the prior quarter, total average portfolio loans and leases increased 1%, as higher C&I loans and indirect secured consumer loans were partially offset by lower commercial construction loans and commercial leases. Average commercial portfolio loans and leases increased 1%, reflecting elevated C&I line draws near the end of the quarter and growth in commercial mortgage loans, partially offset by lower commercial construction loans and commercial leases. Average consumer portfolio loans increased 1%, reflecting growth in indirect secured consumer loans (predominantly indirect automobile) and other consumer loans, partially offset by a decline in home equity loans.

Total period end commercial loans and leases of $78 billion increased $6 billion, or 9%, from the year-ago quarter and increased $8 billion, or 11%, from the prior quarter, primarily due to the aforementioned C&I line draw activity. Period end commercial revolving line utilization was 47%, compared to 38% in the year-ago quarter and 36% in the prior quarter, reflecting line draw activity at the end of the quarter predominantly from corporate banking clients.

Average available-for-sale debt and other securities of $35.1 billion increased 5% compared to the year-ago quarter and decreased 1% compared to the prior quarter. Average other short-term investments (which includes interest-bearing cash) of $2.9 billion increased 65% compared to the year-ago quarter and increased 44% compared to the prior quarter.

 

Average Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Average Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

$35,765

 

 

$35,710

 

 

$30,557

 

 

-

 

 

17

%

 

 

Interest checking

40,298

 

 

38,628

 

 

33,697

 

 

4

%

 

20

%

 

 

Savings

14,715

 

 

14,274

 

 

13,052

 

 

3

%

 

13

%

 

 

Money market

27,109

 

 

27,429

 

 

23,133

 

 

(1

%)

 

17

%

 

 

Foreign office(g)

209

 

 

244

 

 

208

 

 

(14

%)

 

-

 

 

 

Total transaction deposits

$118,096

 

 

$116,285

 

 

$100,647

 

 

2

%

 

17

%

 

 

Other time

5,081

 

 

5,507

 

 

4,860

 

 

(8

%)

 

5

%

 

 

Total core deposits

$123,177

 

 

$121,792

 

 

$105,507

 

 

1

%

 

17

%

 

 

Certificates - $100,000 and over

3,355

 

 

4,072

 

 

3,358

 

 

(18

%)

 

-

 

 

 

Other deposits

257

 

 

252

 

 

726

 

 

2

%

 

(65

%)

 

 

Total average deposits

$126,789

 

 

$126,116

 

 

$109,591

 

 

1

%

 

16

%

 

 

Compared to the year-ago quarter, average core deposits increased 17%, reflecting the impact of the MB Financial acquisition. Average core deposit growth was primarily driven by an increase in interest checking, demand, and money market deposits. Average commercial transaction deposits increased 25% and average consumer transaction deposits increased 11%.

Compared to the prior quarter, average core deposits increased 1%, primarily driven by an increase in interest checking and savings deposits. Average demand deposits represented 29% of total core deposits in both the current and prior quarter. Average commercial transaction deposits increased 1%, and average consumer transaction deposits increased 2%.

Period end total transaction deposits of $128 billion increased $9 billion, or 8%, compared to the prior quarter. Performance was primarily driven by commercial transaction growth of $8 billion, or 14%, partially reflecting deposits from the aforementioned C&I line draw activity near the end of the quarter.

 

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

March

 

December

 

March

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

Seq

 

Yr/Yr

 

 

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates - $100,000 and over

$3,355

 

 

$4,072

 

 

$3,358

 

 

(18

%)

 

-

 

 

 

Other deposits

257

 

 

252

 

 

726

 

 

2

%

 

(65

%)

 

 

Federal funds purchased

654

 

 

1,174

 

 

2,019

 

 

(44

%)

 

(68

%)

 

 

Other short-term borrowings

1,750

 

 

1,133

 

 

646

 

 

54

%

 

171

%

 

 

Long-term debt

15,816

 

 

14,860

 

 

15,438

 

 

6

%

 

2

%

 

 

Total average wholesale funding

$21,832

 

 

$21,491

 

 

$22,187

 

 

2

%

 

(2

%)

 

 

Compared to the year-ago quarter, average wholesale funding decreased 2% primarily driven by a decrease in federal funds borrowings, partially offset by an increase in other short-term borrowings. Compared to the prior quarter, average wholesale funding increased 2% primarily driven by debt issuances of $1.25 billion during the quarter and an increase in other short-term borrowings, partially offset by decreases in jumbo CD balances and federal funds borrowings.

 

 

Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

March

 

December

 

September

 

June

 

March

 

 

2020

 

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonaccrual portfolio loans and leases (NPLs)

$647

 

 

 

$618

 

 

 

$482

 

 

 

$521

 

 

 

$450

 

 

 

Repossessed property

10

 

 

 

10

 

 

 

9

 

 

 

8

 

 

 

11

 

 

 

OREO

52

 

 

 

52

 

 

 

28

 

 

 

31

 

 

 

37

 

 

 

Total nonperforming portfolio loans and leases and OREO (NPAs)

$709

 

 

 

$680

 

 

 

$519

 

 

 

$560

 

 

 

$498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPL ratio(h)

0.55

%

 

 

0.56

%

 

 

0.44

%

 

 

0.48

%

 

 

0.41

%

 

 

NPA ratio(c)

0.60

%

 

 

0.62

%

 

 

0.47

%

 

 

0.51

%

 

 

0.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

409

 

 

 

364

 

 

 

402

 

 

 

383

 

 

 

322

 

 

 

Total loans and leases 90 days past due (accrual)

151

 

 

 

130

 

 

 

132

 

 

 

128

 

 

 

132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses, beginning

$1,202

 

 

 

$1,143

 

 

 

$1,115

 

 

 

$1,115

 

 

 

$1,103

 

 

 

Impact of CECL adoption

643

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

Total net losses charged-off

(122

)

 

 

(113

)

 

 

(99

)

 

 

(78

)

 

 

(77

)

 

 

Provision for loan and lease losses

625

 

 

 

172

 

 

 

127

 

 

 

78

 

 

 

89

 

 

 

Allowance for loan and lease losses, ending

$2,348

 

 

 

$1,202

 

 

 

$1,143

 

 

 

$1,115

 

 

 

$1,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments, beginning

$144

 

 

 

$154

 

 

 

$147

 

 

 

$133

 

 

 

$131

 

 

 

Impact of CECL adoption

10

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

Reserve for acquired commitments

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

1

 

 

 

Provision for (benefit from) the reserve for unfunded commitments

15

 

 

 

(10

)

 

 

7

 

 

 

7

 

 

 

1

 

 

 

Reserve for unfunded commitments, ending

$169

 

 

 

$144

 

 

 

$154

 

 

 

$147

 

 

 

$133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total allowance for credit losses

$2,517

 

 

 

$1,346

 

 

 

$1,297

 

 

 

$1,262

 

 

 

$1,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As a percent of portfolio loans and leases

1.99

%

 

 

1.10

%

 

 

1.04

%

 

 

1.02

%

 

 

1.02

%

 

 

As a percent of nonperforming portfolio loans and leases

363

%

 

 

194

%

 

 

237

%

 

 

214

%

 

 

248

%

 

 

As a percent of nonperforming portfolio assets

331

%

 

 

177

%

 

 

221

%

 

 

199

%

 

 

224

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses as a percent of portfolio loans and leases

2.13

%

 

 

1.23

%

 

 

1.19

%

 

 

1.15

%

 

 

1.14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total losses charged-off

$(159

)

 

 

$(152

)

 

 

$(130

)

 

 

$(119

)

 

 

$(108

)

 

 

Total recoveries of losses previously charged-off

37

 

 

 

39

 

 

 

31

 

 

 

41

 

 

 

31

 

 

 

Total net losses charged-off

$(122

)

 

 

$(113

)

 

 

$(99

)

 

 

$(78

)

 

 

$(77

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

0.44

%

 

 

0.41

%

 

 

0.36

%

 

 

0.29

%

 

 

0.32

%

 

 

Commercial NCO ratio

0.32

%

 

 

0.20

%

 

 

0.18

%

 

 

0.13

%

 

 

0.11

%

 

 

Consumer NCO ratio

0.66

%

 

 

0.78

%

 

 

0.68

%

 

 

0.59

%

 

 

0.68

%

 

 

Nonperforming portfolio loans and leases were $647 million in the current quarter, with the resulting NPL ratio of 0.55%. Compared to the year-ago quarter, NPLs increased $197 million with the NPL ratio increasing 14 bps. Compared to the prior quarter, NPLs increased $29 million with the NPL ratio decreasing 1 bp.

Nonperforming portfolio assets were $709 million in the current quarter, with the resulting NPA ratio of 0.60%. Compared to the year-ago quarter, NPAs increased $211 million with the NPA ratio increasing 15 bps. Compared to the prior quarter, NPAs increased $29 million with the NPA ratio decreasing 2 bps.

The provision for loan and lease losses totaled $625 million in the current quarter. The allowance for loan and lease losses ratio represented 1.99% of total portfolio loans and leases in the current quarter, compared with 1.02% in the year-ago quarter and 1.10% in the prior quarter. In the current quarter, the allowance for loan and lease losses represented 363% of nonperforming portfolio loans and leases and 331% of nonperforming portfolio assets. The allowance for credit losses ratio represented 2.13% of total portfolio loans and leases in the current quarter, reflecting the impacts of the CECL adoption and COVID-19.

Net charge-offs were $122 million in the current quarter, with the resulting NCO ratio of 0.44%. Compared to the year-ago quarter, net charge-offs increased $45 million and the NCO ratio increased 12 bps. Compared to the prior quarter, net charge-offs increased $9 million and the NCO ratio increased 3 bps.

In response to the COVID-19 pandemic, beginning in March 2020 Fifth Third began providing financial hardship relief in the form of payment deferrals and forbearances to consumer and business customers across a wide array of lending products, as well as the suspension of vehicle repossessions and home foreclosures. The payment deferrals and forbearances are currently expected to cover periods of three to six months. In most cases, these offers are not classified as troubled debt restructurings (TDRs) and do not result in loans being placed on nonaccrual status. However, for the residential mortgage loan portfolio, the forbearance program is expected to result in increases in loans reported as past due.

 

 

Capital Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

 

March

 

December

 

September

 

June

 

March

 

 

 

 

2020

 

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

Capital Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

12.63

%

 

 

12.58

%

 

 

12.43

%

 

 

12.02

%

 

11.43

%

 

 

Tangible equity(a)

 

8.41

%

 

 

9.52

%

 

 

9.29

%

 

 

9.09

%

 

9.03

%

 

 

Tangible common equity (excluding AOCI)(a)

 

7.41

%

 

 

8.44

%

 

 

8.21

%

 

 

8.27

%

 

8.21

%

 

 

Tangible common equity (including AOCI)(a)

 

8.65

%

 

 

9.08

%

 

 

9.09

%

 

 

8.91

%

 

8.44

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory Capital Ratios(e)

 

 

 

 

CET1 capital(d)

 

9.36

%

 

 

9.75

%

 

 

9.56

%

 

 

9.57

%

 

9.60

%

 

 

Tier I risk-based capital(d)

 

10.56

%

 

 

10.99

%

 

 

10.81

%

 

 

10.62

%

 

10.67

%

 

 

Total risk-based capital(d)

 

13.59

%

 

 

13.84

%

 

 

13.68

%

 

 

13.53

%

 

13.57

%

 

 

Tier I leverage

 

9.37

%

 

 

9.54

%

 

 

9.36

%

 

 

9.24

%

 

10.32

%

 

Capital ratios remained strong during the quarter. The CET1 capital ratio was 9.36%, the tangible common equity to tangible assets ratio was 7.41% excluding AOCI, and 8.65% including AOCI. The Tier I risk-based capital ratio was 10.56%, the Total risk-based capital ratio was 13.59%, and the Tier I leverage ratio was 9.37%.

Fifth Third’s regulatory capital ratio estimates for the first quarter of 2020 reflect the ‘five-year transition’ from the banking agencies’ interim final rule announced on March 27, 2020. This five-year transition election allows banking organizations to defer certain effects of the CECL accounting standard on their regulatory capital. Specifically, this interim final rule allows for 25% of the cumulative increase in allowance since the adoption of CECL and 100% of the day-one impact of CECL adoption to be deferred for a two-year period. This two-year period will be followed by a three-year transition period to phase-in the impact of the deferred amounts on regulatory capital. As a result of the transition election, the increase in credit reserves negatively impacted the current quarter CET1 capital ratio approximately 18 bps.

Tax Rate
The effective tax rate was 22.6% compared with 22.2% in the year-ago quarter and 22.0% in the prior quarter.

Other
The Bancorp adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments (commonly referred to as Current Expected Credit Losses, or CECL), on January 1, 2020. Upon adoption, the Bancorp recorded an increase to reserves of $653 million. The impact of the cumulative effect of the change was a $472 million decrease to equity.

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 May 4, 2020, by dialing 800-585-8367 for domestic access or 404-537-3406 for international access (passcode 4109509#).

Corporate Profile
Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. As of March 31, 2020, the Company had $185 billion in assets and operates 1,123 full-service Banking Centers, and 2,464 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 March 31, 2020, had $374 billion in assets under care, of which it managed $42 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 27 of the 1Q20 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 ratios are estimated.

(f) Assumes a 23% tax rate.

(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 filings with the U.S. Securities and Exchange Commission (“SEC”). 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) effects of the global COVID-19 pandemic; (2) deteriorating credit quality; (3) loan concentration by location or industry of borrowers or collateral; (4) problems encountered by other financial institutions; (5) inadequate sources of funding or liquidity; (6) unfavorable actions of rating agencies; (7) inability to maintain or grow deposits; (8) limitations on the ability to receive dividends from subsidiaries; (9) cyber-security risks; (10) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (11) failures by third-party service providers; (12) inability to manage strategic initiatives and/or organizational changes; (13) inability to implement technology system enhancements; (14) failure of internal controls and other risk management systems; (15) losses related to fraud, theft or violence; (16) inability to attract and retain skilled personnel; (17) adverse impacts of government regulation; (18) governmental or regulatory changes or other actions; (19) failures to meet applicable capital requirements; (20) regulatory objections to Fifth Third’s capital plan; (21) regulation of Fifth Third’s derivatives activities; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) replacement of LIBOR; (25) weakness in the national or local economies; (26) global political and economic uncertainty or negative actions; (27) changes in interest rates; (28) changes and trends in capital markets; (29) fluctuation of Fifth Third’s stock price; (30) volatility in mortgage banking revenue; (31) litigation, investigations, and enforcement proceedings by governmental authorities; (32) breaches of contractual covenants, representations and warranties; (33) competition and changes in the financial services industry; (34) changing retail distribution strategies, customer preferences and behavior; (35) risks relating to Fifth Third’s ability to realize the anticipated benefits of the merger with MB Financial, Inc.; (36) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (37) potential dilution from future acquisitions; (38) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (39) results of investments or acquired entities; (40) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (41) inaccuracies or other failures from the use of models; (42) effects of critical accounting policies and judgments or the use of inaccurate estimates; (43) weather-related events, other natural disasters, or health emergencies; and (44) 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.

Investor contact: Chris Doll (513) 534-2345 | Media contact: Ed Loyd (513) 534-6397

Source: Fifth Third Bancorp