FIFTH THIRD BANCORP - FORM 8-K - EX-99.1 - FIFTH THIRD BANCORP PRESENTATION

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8-K - CURRENT REPORT - FIFTH THIRD BANCORP	d8k.htm

Exhibit 99.1

Investor Update

August

2010

Please refer to earnings release dated July 22, 2010 and 10-Q dated

August 9, 2010 for further information, including full results reported on a U.S.

GAAP basis

2Q10 in review

•

Net income of $192 million

versus 1Q10 net loss of $10

million

•

Pre-provision net revenue of

$567 million consistent with

1Q10

•

Average core deposits up

$582 million, or 1%

sequentially

–

Average transaction

deposits up $1.3 billion, or

2% sequentially

•

Strong capital ratios:

–

Tier 1 common 7.2%

–

Leverage ratio 12.2%

–

Tier 1 ratio 13.7%

–

Total capital ratio 18.0%

•

Extended $20 billion of new

and renewed credit

Strong operating trends

•

Net charge-offs declined 25%

sequentially (lowest level since

2Q08)

–

At $434M, down 46% from

$756M peak

•

Nonperforming assets declined

5% and nonperforming loans

declined 8% sequentially

(lowest levels since the first

half of 2009)

–

Total delinquencies

declined 17% sequentially

(lowest level since 2Q07)

•

Loan loss allowance of 4.85%,

146% of nonperforming loans

and leases and more than two

times annualized 2Q10 net

charge-offs

•

Realized credit losses have

been significantly below SCAP

scenarios

Significant improvements in credit

•

Focusing on credit

quality, portfolio

management and loss

mitigation strategies

•

Executing on customer

satisfaction initiatives and

improving customer

loyalty

•

Enhancing breadth and

profitability of offerings

and relationships

•

Becoming an employer of

choice in the industry by

continuing to enhance the

employee engagement

Actions driving progress

Peer performance summary –

YoY

Comparison

Continued relative outperformance on key value drivers

FITB

2Q10

Regional

bank peer

average

(1)

2Q10

Midwest

peers

average

(2)

2Q10

Performance

vs. peers

Core pre-tax pre-provision earnings* / loans

2.9%

2.7%

Better

Average core deposits growth

+12%

+7%

+9%

Better

Net charge-off ratio /

(bps)

2.26% (-82)

2.50% (-3)

2.83% (-26)

Better

NPA ratio* /

(bps)

3.87% (+39)

4.01% (+50)

3.49% (-24)

In line

Operating efficiency ratio*

63%

64%

63%

In line

Average loan growth*

-6%

-7%

-10%

In line

Net interest margin /

(bps)

3.57% (+31)

3.62% (+33)

3.40% (+41)

In line

Operating fee growth*

-7%

-4%

+1%

Worse (Mortgage)

Source: SNL and company reports.

(1) Regional bank peer average consists of BBT, CMA, HBAN, KEY, MTB, MI, PNC, RF, STI, USB, WFC, and ZION.

(2) Midwest peer average consists of CMA, HBAN, KEY, MI, and USB.

Operating fee growth, core pre-tax pre-provision earnings, and operating efficiency ratio exclude the following items: securities gains/losses, gains/losse

from debt extinguishments, leveraged lease gains/losses, gains from asset sales, goodwill impairment charges, FDIC special assessment, the pro forma

effect of the 2Q09 processing business sale, and other non-recurring items. Average loans include only loans held-for-investment. NPAs exclude loans

held-for-sale and covered assets.

Pre-tax pre-provision earnings

•

Reported PPNR of $567M consistent with strong 1Q10 levels, reflecting fee income results

and lower expenses, partially offset by lower net interest income

•

Core PPNR of $552M, due to negative adjustments totaling $15M, resulting in sequential and

year-over-year declines of 3% and 2%, respectively

•

Excluding the impact of credit-related adjustments ($69M in 2Q10), PPNR down 6% versus

1Q10; down 2% versus 2Q09

Core PPNR

Core PPNR reconciliation

* Pre-provision net revenue (PPNR): net interest income plus noninterest income minus noninterest expense

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

Reported PPNR

$511

$2,393

$844

$562

$568

$567

Adjustments:

Gain on sale of Visa shares

(244)

BOLI charge

Gain from sale of processing interest

(1,764)

Divested merchant and EFT revenue

(155)

(169)

Class B Visa swap fair value adjustment

Securities gains/losses

(5)

(8)

(2)

(14)

(8)

Visa litigation reserve expense

(73)

Other litigation reserve expense

FTPS warrants and puts

(20)

(10)

Seasonal pension expense

FDIC special assessment

Divested merchant & EFT expense

(est.)

Core PPNR

$483

$564

$535

$562

$569

$552

Credit Related Items:

OREO write-downs, FV adjs, & G/L on

loan sales

Problem asset work-out expenses

111

Credit adjusted PPNR

$580

$630

$690

$665

$661

$621

Strong profitability results

2Q10 core PPNR / average loans (annualized)

ROAA

Core PPNR / NCOs

•

Return on assets higher than peer

average

•

PPNR more than covers net charge-offs

(profitability not dependent on reserve

releases)

•

Strong PPNR profitability creates higher

than average loss absorption capacity

Credit adjusted PPNR

/ Average Loans

Source: SNL Financial and company reports. Data as of 2Q10.

* Core pre-tax pre-provision earnings excludes the following items: securities gains/losses, gains/losses from debt extinguishments, leveraged lease

gains/losses, gains from asset sales, goodwill impairment charges, FDIC special assessment, the pro forma effect of the 2Q09 processing business sale,

and other non-recurring items. Average loans include only loans held-for-investment.

Stable income and expense in difficult environment

Core fee income ($M)

Core expenses ($M)

•

Core noninterest income of $601M declined $23M, or

4%, compared with prior quarter, impacted by lower

mortgage banking net revenue

•

Sequential strength in card and processing revenue

(+15%), corporate banking revenue (+14%), and deposit

service charges (+5%)

•

Credit-related costs affected fee income by $14M in

2Q10 compared with $1M in 1Q10 and $8M in 2Q09

•

Core expense growth driven by elevated credit costs

and higher salaries, wages, and incentives due to

increased production levels and investment in sales

force expansion

•

Core efficiency ratio of 62.6% in 2Q10, compared with

62.4% in 1Q10 and 61.6% in 2Q09

•

Credit-related costs affected noninterest

expenses by

$55M in 1Q10 compared with $91M the previous

quarter and $57M in 2Q09

•

Total expense related to mortgage repurchases ~$18M

in 2Q10 compared with $39M in 1Q10 and $10M in 2Q09

* Refer to slide 4 for itemized effects of non-core fees and expenses

Net interest income

NII and NIM (FTE)

•

Sequential trends in net interest income and

net interest margin reflect weak loan demand

and impact of excess liquidity held in cash

equivalents

–

NII down $14M and NIM down 6 bps in

2Q10 over prior quarter

•

Expect improved NII and NIM in 2H10 from

CD maturities, better loan spreads, and

public funds deposit runoff

(bps)

Reported NIM and YOY growth versus peers

Peers include: BBT, CMA, HBAN, KEY, MI, MTB, PNC, RF, STI, USB, WFC, ZION

Source: SNL and company reports

Reflects purchase accounting adjustments from the First Charter acquisition of $37M, $29M, $25M, $21M, and $17M in 2Q09, 3Q09, 4Q09, 1Q10, and 2Q10, respectively.

** Excludes purchase accounting adjustments

Yields and rates**

($Ms)

Balance sheet:

Continued growth in core funding

•

Extended $20B of new and renewed credit in 2Q10

•

CRE loans down 4% sequentially and 14% from the previous year

•

C&I loans were flat sequentially and down 7% from the previous year largely

due to lower line utilization and soft demand

•

Consumer loans down 2% sequentially and 1% from the previous year

•

Warehoused residential mortgage loans held-for-sale were $2.0 billion at

quarter end

•

Core deposit to loan ratio of 100%, up from 84% in 2Q09

•

Everyday Great Rates strategy continues to drive core deposit growth

–

DDAs

up 3% sequentially and 16% year-over-year

–

Retail

transaction

deposits

sequentially

and

12%

from

the

year,

driven

growth

savings,

interest

checking,

and

demand

deposit

balances

–

Commercial transaction deposits down 2% sequentially and up 41% from

the previous year

Average loan growth ($B)^

Average core deposit growth ($B)

Average wholesale funding ($B)

•

Reduced

wholesale

funding

$1.2

billion

sequentially

and

$12.4

billion

from

the previous year

–

Non-core deposits down 10% sequentially and 45% from the previous year

–

Short term borrowings up 4% sequentially and down 80% from the

previous year

–

Long-term debt down 5% sequentially and 2% from the previous year

^ Excludes loans held-for-sale

Note: Numbers may not sum due to rounding

Credit trends better than peers

Source: SNL and company reports. NPA and NCO ratios exclude loans held-for-sale and covered assets for peers where appropriate.

* 4Q08 net charge-offs included $800M in NCOs related to commercial losses moved to held-for-sale

FITB

credit

metrics

were

higher

than

peers

but

are

now

generally

better

than

peers

NPA ratio vs. peers

Net charge-off ratio vs. peers*

Loans 90+ days delinquent % vs. peers

Loans 30-89 days delinquent % vs. peers

(7.5%)

(HFS transfer)

Strong credit metrics compared with peers

Source: SNL Financial and company reports. Data as of 2Q10.

HFI NPA Ratio

Peer average: 2.5%

Peer average: 4.0%

Net Charge-off Ratio (Annualized)

“Texas Ratio”

NPAs

+ 90+ –

Reserves / TCE

Peer average: 11%

Non-performing loans

Non-performing loans ($M)

$2.6B

$2.9B

$2.7B

Non-performing loans improving with lower

severity mix

$2.5B

Fifth Third’s non-performing loan inflows (relative to loans) were higher

than peers throughout 2008. Over the past four quarters, FITB inflows have

been lower than peers and generally in the top quartile.

FITB NPL inflows (relative to loans) vs. Peers

FITB

Peers include: MI, RF, KEY, STI, JPM, C, BBT, WFC, USB, BAC, HBAN, CMA, PNC, and MTB

New non-performing loan flows ($M)

NPL flows have declined significantly

Troubled debt restructurings (TDR) overview

Successive

improvement

vintage

performance

during

2008

and

2009,

even

volume

modification

increased

Fifth

Third’s

mortgage

portfolio

TDRs

have

redefaulted

lower

rate

than

other

bank

held

portfolio

modifications

—

Fifth

Third’s

TDRs

are

about

third

less

likely

redefault

than

modifications

GSE

mortgages

$1.8B

consumer

TDRs,

over

$1.6B

were

accrual

status

and

$246M

were

nonaccruals

—

$1.0

billion

TDRs

are

current

and

have

been

the

books

months;

within

that,

$600

million

TDRs

are

current

and

have

been

the

books

for

more than

a year

current

TDRs

season,

their

default

propensity

declines

significantly

—

not

typically

see

significant

defaults

current

loans

once

vintage

approaches

months

since

modification

TDR performance has improved in newer vintages

Outperforming redefault

benchmarks

Source: Fifth Third and OCC/OTS data; data through 4Q09; industry data cumulative through 4Q09

Mortgage TDR 60+ redefault

trend by vintage

1Q08 $69M

2Q08 $135M

3Q08 $146M

4Q08 $176M

1Q09 $221M

2Q09 $257M

Months since modification

Mortgage TDR 60+ redefault

rate: Fifth Third comparison

(through December 2009)

Fannie Mae

Industry

portfolio loans

Fifth Third

Volume by

vintage

Freddie Mac

3Q09 $386M

4Q09 $153M

$1.0

billion

2008

2009

Time since restructuring

Current consumer TDRs

($Ms)

Manageable commercial real estate exposure

CRE / Assets

Source: SNL and company reports.

CRE / (TCE + Reserves)

Peer average: 256%

Peer average: 22%

CRE

exposure

lower

than

peer

average;

problems

relatively

manageable

given

capital

and

reserves

Updated stress testing -

process overview

Similar process to that used in our previous stress test applications; updated for actual

performance and current economic expectations

Moody’s “Base”

and “Weaker Recovery/Mild Second Recession”

scenarios key economic

assumptions

Commercial

—

33 geographic/industry sectors analyzed and regressed against economic and

performance drivers

—

Migration trends from criticized to nonaccrual and charge-off evaluated by region

and industry

Consumer

—

Portfolios subdivided into appropriate categories (i.e. liquidating vs. non-liquidating

home equity)

—

Results derived using combination of regression models, loss curves and roll rates,

and applied economic factors

–

Mortgage and home equity key correlation: HPI

–

Credit card key correlation: unemployment

–

Other consumer key correlations: unemployment and GDP

Base

Weaker Recovery /

Mild Second Recession

Economic Assumptions*

2010

Peak Unemployment

10.0%

10.5%

GDP

2.5%

0.4%

Avg. change in quarterly HPI

(0.8%)

(1.7%)

* Moody’s Economy.com; as of May 2010

Updated credit loss expectations vs.

SCAP “stress test”

scenarios

$4.1B

$5.0B

$2.8B

Moody’s Recession

Case** Assumptions

(May 2010)

Moody’s Base

Case** Assumptions

(May 2010)

Realized credit losses have been significantly below SCAP submissions; expected to continue

SCAP Baseline Scenario

(Submitted; Mar 2009)

SCAP Adverse Scenario*

(Supervisory; Mar 2009)

Actual

$2.6B

Actual

$2.7B

Fifth Third

capitalized for this

level of credit losses

under SCAP (plus

surplus raised vs.

buffer)

Fifth Third’s realized credit losses

have been significantly below its

SCAP submitted baseline and

more adverse scenarios

–

In SCAP submissions, we

incorporated significant

conservatism, given then

prevailing negative economic

and industry trends and

extreme uncertainty in

potential loss outcomes

–

Economic and credit market

conditions are much

improved versus those

expected in spring 2009

Base and stress scenarios reflect

Moody’s Base Case and Moody’s

Weaker Recovery/ Mild Second

Recession Case (as of May

2010)**

Our current expectation is for

2010 losses to be lower than 2009

$2.9B

$1,500

$1,750

$2,000

$2,250

$2,500

$2,750

$3,000

$3,250

$3,500

$3,750

$4,000

$4,250

$4,500

$4,750

$5,000

$5,250

$5,500

2008

2009

2010

Net credit losses ($Ms)

Red SCAP line represents more adverse scenario as adjusted by supervisors for additional assumed two-year losses. Supervisory estimates of total two-

year losses under more adverse scenario were not allocated by period. Estimate allocates total two-year supervisory losses using the allocation under

Fifth Third’s submission.

** Source for macroeconomic assumptions: Moody’s Economy.com as of May 2010. FITB results updated to reflect 2Q10 actual results.

Strong reserve position

Source: SNL and company reports. NPAs/NPLs

exclude held-for-sale portion for all banks and covered assets for BBT, USB, and ZION.

Coverage ratios are strong relative to peers

Industry leading reserve level

FITB

4.85%

KEY

4.16%

ZION

4.11%

HBAN

3.79%

3.71%

3.69%

PNC

3.46%

WFC

3.21%

USB

2.83%

10.

STI

2.79%

11.

BBT

2.66%

12.

CMA

2.38%

13.

MTB

1.77%

Peer Average

3.21%

Reserves / Loans

Robust capital position

Source: SNL and company reports.

Strong capital ratios relative to peers, particularly considering reserve levels

Peer average w/

TARP: 11.5%

Peer average

w/o TARP: 9.7%

Tier 1 capital ratio (with and without TARP)

9.2%

11.0%

13.5%

12.6%

12.5%

13.6%

13.7%

12.0%

Tangible common equity ratio

Peer average: 7.1%

Tier 1 common ratio

Peer average: 7.8%

(Tier 1 common + reserves) / RWA

Peer average: 10.4%

Strong liquidity profile

Retail Brokered CD maturities: $328M in 2010; $31M in 2011

FHLB borrowings $2.6B

6/30 unused avail. capacity $22B ($18.1B in Fed and $3.6B in FHLB)

Holding Company cash at 6/30/10: $1.4B

—

Total Fed deposits ~$4.0B

Expected cash obligations over the next 12 months (assuming no

TARP repayment)

—

$0 debt maturities

—

~$39M common dividends

—

~$205M preferred dividends (~$35M Series G, ~$170M TARP)

—

~$221M interest and other expenses

Cash

currently

sufficient

satisfy

all

fixed

obligations*

over

the

months

without

accessing

capital

markets/subsidiary

dividends

Bank

unsecured

debt

maturities

($M

–

excl.

Brokered

CDs)

Heavily core funded

Holding company unsecured debt maturities ($M)

* Debt maturities, common and preferred dividends, interest and other expenses

S-T

wholesale

Potential impact of key elements of Dodd-Frank Act

and other recent financial legislation*

Scope of activity

Potential impact**

Volcker Rule /

Derivatives

•

Vast majority of derivatives activities are exempted (FITB

generally not a market maker)

•

Any proprietary trading de minimis

•

“P/E”

fund investments <$100M (<1% of Tier 1 capital)

•

Expect minimal financial impact from loss of existing revenue

•

Potentially higher compliance costs despite small levels of non-

exempt activities

Debit

Interchange

(Durbin

Amendment)

•

LTM^ debit interchange revenue $190M

–

Signature $171M, PIN $19M

•

LTM debit interchange $ volume: $15B

–

Signature $11.6B, PIN $3.4B

•

LTM debit interchange transaction volume: 412M

–

Signature 328M, PIN 84M

•

Will

not

know

what

“reasonable”

and

“proportional”

mean

until

after Fed study

•

Each 10 bps reduction in overall interchange rates would

represent ~$15M revenue impact annually, before effect of

mitigation

•

Additional follow-on effects on industry debit card payments

business could result from changes

Deposit

Insurance

•

Current assessed base (Deposits): $80B

•

Proposed assessed base (Assets-TE): $97B

•

FITB percentage share of new industry assessment base

lower than its percentage share of old base (due to lower

reliance on wholesale funding)

•

Don’t know assessment rates on new base

•

DIF reserve target increase to 1.35% from 1.15%

–

May be achieved from banks >$50B through higher

annual assessments or longer period of elevated

assessments

Reg. E

•

Requires customers to “opt-in”

to allow non-recurring

electronic overdrafts (e.g. debit, ATM) from accounts

•

Estimated ~$20M per quarter ($80M annualized) reduction to

deposit service charges, before effect of mitigation

Potential impact of these and other elements of financial regulatory reform, such as CFPA activities and many other

aspects, are unknown at this time

TRUPs

exclusion

(Collins

Amendment)

•

280 bps of non-common Tier 1 capital in capital structure

•

>300 bps of non-common Tier 1 currently

–

Potentially more than may be needed post-Basel III

•

3-year transition period begins 2013

•

Will manage capital structure to desired composition

Based on current understanding of legislation. ** Potential impact, as noted above, is not intended to be inclusive of all potential impacts that may result

from implementation of legislation. Please refer also to cautionary statement.

LTM = last twelve months

Fifth Third –

Traditional Banking Model

Fifth Third’s business model is not oriented toward capital markets activities, trading,

or other systemic or interconnected risks

—

$100B in assets, primarily core funded rather than wholesale; <1% U.S. banking

assets

Volcker Rule and derivatives legislation should have minimal effect on revenues and

activities

—

Didn’t/don’t originate/sell CDOs

—

Didn’t/don’t originate/sell subprime mortgages or Option ARMs

—

De minimis

market making in derivatives

—

De minimis

proprietary trading

—

Small private equity portfolio <$100M (holding company subsidiary)

—

Fifth Third loss in Lehman bankruptcy should be less than $2 million

(interconnectedness)

—

Daily VaR

less than $500 thousand

Business model largely that of pre-Gramm-Leach-Bliley Act banking company

Continuing to invest for the future

Cautionary statement

This

report

may

contain

statements

that

believe

are

“forward-looking

statements”

within

the

meaning

Section

27A

the

Securities

Act

1933,

amended,

and

Rule

175

promulgated

thereunder,

and

Section

21E

the

Securities

Exchange

Act

1934,

amended,

and

Rule

3b-6

promulgated

thereunder.

These

statements

relate

our

financial

condition,

results

operations,

plans,

objectives,

future

performance

business.

They

usually

can

identified

the

use

forward-looking

language

such

“will

likely

result,”

“may,”

“are

expected

to,”

“is

anticipated,”

“estimate,”

“forecast,”

“projected,”

“intends

to,”

may

include

other

similar

words

phrases

such

“believes,”

“plans,”

“trend,”

“objective,”

“continue,”

“remain,”

similar

expressions,

future

conditional

verbs

such

“will,”

“would,”

“should,”

“could,”

“might,”

“can,”

similar

verbs.

You

should

not

place

undue

reliance

these

statements,

they

are

subject

risks

and

uncertainties,

including

but

not

limited

the

risk

factors

set

forth

our

most

recent

Annual

Report

Form

10-K

and

our

most

recent

quarterly

report

Form

10-Q.

When

considering

these

forward-looking

statements,

you

should

keep

mind

these

risks

and

uncertainties,

well

any

cautionary

statements

may

make.

Moreover,

you

should

treat

these

statements

speaking

only

the

date

they

are

made

and

based

only

information

then

actually

known

us.

There

are

number

important

factors

that

could

cause

future

results

differ

materially

from

historical

performance

and

these

forward-looking

statements.

Factors

that

might

cause

such

difference

include,

but

are

not

limited

to:

(1)

general

economic

conditions

and

weakening

the

economy,

specifically

the

real

estate

market,

either

nationally

the

states

which

Fifth

Third,

one

acquired

entities

and/or

the

combined

company

business,

are

less

favorable

than

expected;

(2)

deteriorating

credit

quality;

(3)

political

developments,

wars

other

hostilities

may

disrupt

increase

volatility

securities

markets

other

economic

conditions;

(4)

changes

the

interest

rate

environment

reduce

interest

margins;

(5)

prepayment

speeds,

loan

origination

and

sale

volumes,

charge-offs

and

loan

loss

provisions;

(6)

Fifth

Third’s

ability

maintain

required

capital

levels

and

adequate

sources

funding

and

liquidity;

(7)

maintaining

capital

requirements

may

limit

Fifth

Third’s

operations

and

potential

growth;

(8)

changes

and

trends

capital

markets;

(9)

problems

encountered

larger

similar

financial

institutions

may

adversely

affect

the

banking

industry

and/or

Fifth

Third

(10)

competitive

pressures

among

depository

institutions

increase

significantly;

(11)

effects

critical

accounting

policies

and

judgments;

(12)

changes

accounting

policies

procedures

may

required

the

Financial

Accounting

Standards

Board

(FASB)

other

regulatory

agencies;

(13)

legislative

regulatory

changes

actions,

significant

litigation,

adversely

affect

Fifth

Third,

one

acquired

entities

and/or

the

combined

company

the

businesses

which

Fifth

Third,

one

acquired

entities

and/or

the

combined

company

are

engaged;

(14)

ability

maintain

favorable

ratings

from

rating

agencies;

(15)

fluctuation

Fifth

Third’s

stock

price;

(16)

ability

attract

and

retain

key

personnel;

(17)

ability

receive

dividends

from

its

subsidiaries;

(18)

potentially

dilutive

effect

future

acquisitions

current

shareholders’

ownership

Fifth

Third;

(19)

effects

accounting

financial

results

one

acquired

entities;

(20)

difficulties

separating

Fifth

Third

Processing

Solutions

from

Fifth

Third;

(21)

loss

income

from

any

sale

potential

sale

businesses

that

could

have

adverse

effect

Fifth

Third’s

earnings

and

future

growth;

(22)

ability

secure

confidential

information

through

the

use

computer

systems

and

telecommunications

networks;

and

(23)

the

impact

reputational

risk

created

these

developments

such

matters

business

generation

and

retention,

funding

and

liquidity.

You

should

refer

our

periodic

and

current

reports

filed

with

the

Securities

and

Exchange

Commission,

“SEC,”

for

further

information

other

factors,

which

could

cause

actual

results

significantly

different

from

those

expressed

implied

these

forward-looking

statements.

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