Attached files
| file | filename |
|---|---|
| EX-99.3 - EX-99.3 - FIFTH THIRD BANCORP | d758814dex993.htm |
| EX-99.1 - EX-99.1 - FIFTH THIRD BANCORP | d758814dex991.htm |
| 8-K - FORM 8-K - FIFTH THIRD BANCORP | d758814d8k.htm |
 2Q14
Earnings Conference Call July 17, 2014
Refer to earnings release dated July 17, 2014 for further information.
Exhibit 99.2 |
 2
Cautionary statement
This
report
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,”
“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.
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.
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)
general
economic
conditions
and
weakening
in
the
economy,
specifically
the
real
estate
market,
either
nationally
or
in
the
states
in
which
Fifth
Third,
one
or
more
acquired
entities
and/or
the
combined
company
do
business,
are
less
favorable
than
expected;
(2)
deteriorating
credit
quality;
(3)
political
developments,
wars
or
other
hostilities
may
disrupt
or
increase
volatility
in
securities
markets
or
other
economic
conditions;
(4)
changes
in
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
to
maintain
required
capital
levels
and
adequate
sources
of
funding
and
liquidity;
(7)
maintaining
capital
requirements
may
limit
Fifth
Third’s
operations
and
potential
growth;
(8)
changes
and
trends
in
capital
markets;
(9)
problems
encountered
by
larger
or
similar
financial
institutions
may
adversely
affect
the
banking
industry
and/or
Fifth
Third;
(10)
competitive
pressures
among
depository
institutions
increase
significantly;
(11)
effects
of
critical
accounting
policies
and
judgments;
(12)
changes
in
accounting
policies
or
procedures
as
may
be
required
by
the
Financial
Accounting
Standards
Board
(FASB)
or
other
regulatory
agencies;
(13)
legislative
or
regulatory
changes
or
actions,
or
significant
litigation,
adversely
affect
Fifth
Third,
one
or
more
acquired
entities
and/or
the
combined
company
or
the
businesses
in
which
Fifth
Third,
one
or
more
acquired
entities
and/or
the
combined
company
are
engaged,
including
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act;
(14)
ability
to
maintain
favorable
ratings
from
rating
agencies;
(15)
fluctuation
of
Fifth
Third’s
stock
price;
(16)
ability
to
attract
and
retain
key
personnel;
(17)
ability
to
receive
dividends
from
its
subsidiaries;
(18)
potentially
dilutive
effect
of
future
acquisitions
on
current
shareholders’
ownership
of
Fifth
Third;
(19)
effects
of
accounting
or
financial
results
of
one
or
more
acquired
entities;
(20)
difficulties
from
Fifth
Third’s
investment
in,
relationship
with,
and
nature
of
the
operations
of
Vantiv,
LLC;
(21)
loss
of
income
from
any
sale
or
potential
sale
of
businesses
that
could
have
an
adverse
effect
on
Fifth
Third’s
earnings
and
future
growth;
(22)
ability
to
secure
confidential
information
and
deliver
products
and
services
through
the
use
of
computer
systems
and
telecommunications
networks;
and
(23)
the
impact
of
reputational
risk
created
by
these
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. |
 3
Net income available to common shareholders of $416MM ($0.49 per
diluted share), vs. $309MM ($0.36 per share) in
1Q14 and $582MM ($0.65 per share) in 2Q13
Operating results in line with our expectations, including C&I and CRE loan
growth, deposit growth, and continued expense management
Solid credit trends
—
2Q14 net charge-offs of $101MM (0.45% of loans and leases) vs. $168MM (0.76% of
loans and leases) in 1Q14 —
Total nonperforming assets (NPAs) of $837MM, down $112MM, or 12%, from 1Q14; NPA
ratio of 0.92%, down 13 bps from 1Q14, nonperforming loans ratio of 0.70%,
down 12 bps from 1Q14 Strong capital ratios²
—
Repurchased 6MM common shares in 2Q14; average diluted share count reduced by 9MM
shares in 2Q14 —
Tier
1
common
ratio³
9.61%
vs.
9.51%
in
1Q14;
Basel
III
pro
forma
estimate³
of
~9.3%
—
Tier 1 risk-based capital ratio 10.80%, Total risk-based capital ratio
14.30%, Leverage ratio 9.86% —
Tangible common equity ratio³
of 9.00%; excluding securities portfolio unrealized gains/losses 8.74%
—
Book value per share of $16.74; tangible book value per
share³ of $13.86, up 9% from 2Q13
2Q14 in review
1
Assumes
35%
marginal
tax
rate
2
Capital
ratios
estimated;
presented
under
current
U.S.
capital
regulations.
The
pro
forma
Basel
III
Tier
I
common
equity
ratio
is
management’s
estimate
based
upon
its
current
interpretation
of
recent
prospective
regulatory
capital
requirements
approved
in
July
2013.
3
Non-GAAP
measure;
see
Reg.
G
reconciliation
in
appendix.
Significant items in 2Q14 results
$ in MM, except per share data
Net income impact
After tax EPS
impact
Pre-tax
After tax
1
Gain on sale of Vantiv shares
Valuation adjustment on Vantiv warrant
Litigation reserve charges
Land valuation adjustment
$125
$63
($61)
($17)
$82
$41
($39)
($11)
Valuation adjustment on Visa total return swap
Negative impact to Vantiv equity method income
($16)
($12)
($11)
($8)
Total
$54
~$0.06 |
 4
Financial summary
Stable operating results with balance sheet growth and controlled expenses
Actual
Seq.
YOY
($ in millions)
2Q13
1Q14
2Q14
$
%
$
%
Average Balances
Total
loans
&
leases
1
$86,707
$89,530
$90,549
$1,019
1%
$3,842
4%
Core deposits
$85,537
$91,512
$92,841
$1,329
1%
$7,304
9%
Income Statement Data
Net interest income (taxable equivalent) (NII)
$885
$898
$905
$7
1%
$20
2%
Provision for loan and lease losses
64
69
76
7
10%
12
20%
Noninterest income
1,060
564
736
172
31%
(324)
(31%)
Noninterest expense
1,035
950
954
4
-
(81)
(8%)
Net income attributable to Bancorp
$591
$318
$439
$121
38%
($152)
(26%)
Net income available to common shareholders
$582
$309
$416
$107
35%
($166)
(29%)
Financial Ratios
Earnings per share, diluted
0.65
0.36
0.49
$0.13
36%
($0.16)
(27%)
Net interest margin
3.33%
3.22%
3.15%
(7bps)
(2%)
(18bps)
(5%)
Efficiency ratio
53.2%
64.9%
58.2%
(670bps)
(10%)
500bps
9%
Return on average assets
1.94%
1.00%
1.34%
34bps
34%
(60bps)
(31%)
Return on average common equity
17.3%
9.0%
11.9%
290bps
31%
(540bps)
(31%)
Return
on
average
tangible
common
equity
2
21.1%
11.0%
14.4%
340bps
31%
(670bps)
(32%)
Note:
The
percentages
in
all
of
the
tables
in
this
presentation
are
calculated
on
actual
dollar
amounts
and
not
the
rounded
dollar
amounts.
1
Excludes
loans
held-for-sale
2
Non-GAAP
measure;
see
Reg.
G
reconciliation
in
appendix. |
 5
Balance sheet
•
Average C&I loans up 2% sequentially and 10% from 2Q13
•
Average CRE loans up 2% sequentially; sixth quarter of
sequential CRE growth
•
End of period commercial line utilization 32%; up from
30% in 1Q14
•
Average consumer loans flat sequentially and year-over-
year
•
Average loans held for sale down 2% sequentially and
75% from 2Q13
•
Core deposit to loan ratio of 103%
–
DDAs up 2% sequentially and up 5% from 2Q13
–
Consumer average transaction deposits up 2%
sequentially and 4% year-over-year
–
Commercial average transaction deposits flat
sequentially and up 16% year-over-year
•
Short-term wholesale borrowings represent only 3% of
total funding
Average core deposit growth ($B)
Note: Numbers may not sum due to rounding.
1
Excludes loans held-for-sale
Average loan growth ($B)
1 |
 6
Net interest income
NII and NIM (FTE)
•
Net interest income up $7MM from 1Q14
–
Increase driven by interest-earning asset growth and an additional day in the
second quarter, partially offset by the effects of loan repricing and debt
issuances •
NIM decreased 7 bps sequentially primarily due to the effects of
loan repricing, debt issuances, and day count,
offset partially by higher yields on the investment portfolio
•
Year-over-year NII increased $20MM and NIM decreased 18 bps
–
NII increase driven by higher balances and yields in investment securities, as well
as higher loan balances, partially offset by the effect of loan
repricing –
NIM decrease due to the impact of loan repricing
Yield Analysis
2Q13
1Q14
2Q14
Seq.
(bps)
YoY
(bps)
Commercial and industrial loans
3.58%
3.35%
3.27%
(8)
(31)
Commercial mortgage loans
3.65%
3.43%
3.39%
(4)
(26)
Commercial construction loans
3.41%
3.48%
3.54%
6
13
Commercial leases
3.36%
3.09%
3.04%
(5)
(32)
Residential mortgage loans
3.91%
3.94%
3.93%
(1)
2
Home equity
3.76%
3.74%
3.71%
(3)
(5)
Automobile loans
3.16%
2.86%
2.77%
(9)
(39)
Credit card
9.97%
9.90%
10.06%
16
9
Other consumer loans and leases
39.49%
39.93%
35.63%
(430)
(386)
Total loans and leases
3.89%
3.72%
3.65%
(7)
(24)
Taxable securities
3.09%
3.33%
3.34%
1
25
Tax exempt securities
5.01%
5.51%
4.69%
(82)
(32)
Other short-term investments
0.24%
0.26%
0.28%
2
4
Total interest-earning assets
3.73%
3.58%
3.53%
(5)
(20)
Total interest-bearing liabilities
0.57%
0.51%
0.54%
3
(3)
Net interest rate spread
3.16%
3.07%
2.99%
(8)
(17) |
 7
Noninterest income
Noninterest income
1
Net credit-related costs recognized in other noninterest income were $4MM in
2Q14. This compares with net credit-related costs of $10MM in 1Q14 and $6MM in 2Q13.
Actual
Seq.
YOY
2Q13
1Q14
2Q14
$
%
$
%
($ in millions)
Service charges on deposits
$136
$133
$139
$6
5%
$3
2%
Corporate banking revenue
106
104
107
3
3%
1
1%
Mortgage banking net revenue
233
109
78
(31)
(29%)
(155)
(67%)
Investment advisory revenue
98
102
102
-
-
4
4%
Card and processing revenue
67
68
76
8
11%
9
12%
Other noninterest income
1
414
41
226
185
NM
(188)
(45%)
Securities gains, net
-
7
8
1
16%
8
NM
Securities gains (losses), net -
6
-
-
-
-
(6)
(100%)
non-qualifying hedges on MSRs
Total noninterest income
$1,060
$564
$736
$172
31%
($324)
(31%)
•
2Q14 fee income reflected sequential growth in card and processing revenue, service
charges on deposits, and corporate banking revenue, offset by lower mortgage
banking net revenue •
2Q14 other noninterest income included a $125MM gain on the sale
of Vantiv shares, $63MM positive valuation
adjustment on the Vantiv warrant, $17MM negative valuation adjustment for land upon
which the Bancorp no longer expects to build branches, negative $16MM
adjustment on the Visa total return swap (TRS), and $12MM negative impact to
equity method income in Vantiv related to certain charges recognized by Vantiv as a result of
their acquisition of Mercury Payment Systems
–
1Q14 other noninterest income included $36MM negative valuation adjustment for the
Vantiv warrant and a $1MM positive valuation on Visa TRS
–
2Q13 other noninterest income included a $242MM gain on the sale
of Vantiv shares, $76MM positive valuation
adjustment for the Vantiv warrant, a $10MM benefit resulting from the settlement
related to a previously surrendered BOLI policy, and a $5MM negative valuation
adjustment on the Visa TRS |
 8
Noninterest expense
Noninterest expense
•
2Q14 results reflected continued disciplined expense management,
flat sequentially and down 8% from 2Q13
2Q14 other noninterest expense included $61MM in litigation reserve charges compared
with $51MM each in 1Q14 and 2Q13
Increase in card and processing expense commensurate with higher
revenue in that business
•
Year-over-year improvement in employee-related costs largely driven by
changes in mortgage and retail staffing Actual
Seq.
YOY
2Q13
1Q14
2Q14
$
%
$
%
($ in millions)
Salaries, wages and incentives
$404
$359
$368
$9
2%
($36)
(9%)
Employee benefits
83
101
79
(22)
(22%)
(4)
(5%)
Net occupancy expense
76
80
79
(1)
(1%)
3
3%
Technology and communications
50
53
52
(1)
(3%)
2
4%
Equipment expense
28
30
30
-
1%
2
9%
Card and processing expense
33
31
37
6
17%
4
10%
Other noninterest expense
361
296
309
13
5%
(52)
(14%)
Total noninterest expense
$1,035
$950
$954
$4
-
($81)
(8%) |
  9
Pre-tax pre-provision earnings
1
PPNR trend
1
Non-GAAP
measure;
see
Reg.
G
reconciliation
in
appendix.
2
Prior
quarters
include
similar
adjustments.
3
There
are
limitations
on
the
usefulness
of
credit-adjusted
PPNR,
including
the
significant
degree
to
which
changes
in
credit
and
fair
value
are
integral,
recurring
components
of
the
Bancorp’s
core
operations
as
a
financial
institution.
This
measure
has
been
included
herein
to
facilitate
a
greater
understanding
of
the
Bancorp’s
financial
condition.
Note:
1Q14
and
2Q13
included
the
impact
of
$3MM
and
$20MM,
respectively
in
mortgage
repurchase
provision.
4Q13
and
3Q13
included
benefits
to
the
mortgage
repurchase
provision
of
$28MM
and
$4MM,
respectively.
These
impacts
are
reflected
in
“Credit-related
items”
and
“Adjusted
Efficiency
Ratio”
listed
above.
PPNR reconciliation
Efficiency ratio
($ in millions)
2Q13
3Q13
4Q13
1Q14
2Q14
Income before income taxes (U.S. GAAP) (a)
$841
$604
$561
$438
$606
Add: Provision expense (U.S. GAAP) (b)
64
51
53
69
76
PPNR (a) + (b)
$905
$655
$614
$507
$682
Adjustments to remove (benefit) / detriment²:
In noninterest income:
Gain from sales of Vantiv shares
(242)
(85)
-
-
(125)
Vantiv warrant valuation
(76)
(6)
(91)
36
(63)
Reduction in equity method income from interest in Vantiv
-
-
-
-
12
Land valuation adjusments
-
-
-
-
17
Other Vantiv-related income
-
-
(9)
-
-
Valuation of 2009 Visa total return swap
5
2
18
(1)
16
BOLI settlement
(10)
-
-
-
-
Securities (gains) / losses
-
(2)
(2)
(7)
(8)
In noninterest expense:
Debt extinguishment (gains) / losses
-
-
8
-
-
Severance expense
1
5
8
4
1
Large bank assessment fees
-
5
-
-
-
Gain on sale of affordable housing investments
(2)
(1)
-
-
-
Donation to Fifth Third Foundation
-
-
8
-
-
Litigation reserve charges
51
30
69
51
61
Adjusted PPNR
$632
$603
$623
$590
$593
Credit-related items:
In noninterest income
6
5
5
10
4
In noninterest expense
35
16
(12)
9
6
Credit-adjusted PPNR³
$673
$624
$616
$609
$603
PPNR increased 34% sequentially, reflecting
impact of $89MM in net benefit and $83MM in net
detriment to 2Q14 and 1Q14, respectively.
Excluding those items, adjusted PPNR increased
$3MM sequentially, primarily driven by improved
expenses. |
 10
Credit quality overview
$109
Net charge-offs ($MM)
$148
$101
$112
NCO ratio
0.51%
0.49%
0.67%
0.76%
0.45%
$168
HFI Nonperforming assets ($MM)
$1,150
$1,014
$980
$832
$946
NPAs down 28% from 2Q13;
lowest level since 2007
Reserve Coverage
Accruing Past Due ($MM)
$410
$414
$379
$337
$337
Includes 2Q14 provision expense of $76MM;
reserve coverage levels remain solid
Total delinquencies declined 18% from 2Q13;
remain at very low levels
NPA ratio
1.32% 1.16% 1.10%
1.05% 0.92%
4Q13 and 1Q14 net charge-offs elevated;
2Q14 returned to longer-term trend |
 11
Strong capital position
1
Non-GAAP
measure;
See
Reg.
G
reconciliation
in
appendix.
2
Capital
ratios
estimated;
presented
under
current
U.S.
capital
regulations.
The
pro
forma
Basel
III
Tier
I
common
equity
ratio
is
management’s
estimate
based
upon
its
current
interpretation
of
recent
prospective
regulatory
capital
requirements
approved
in
July
2013.
Tier 1 common equity
Avg.
Diluted
Shares
Outstanding
(MM)
and
Tangible
Book
Value
per
share
•
2014 CCAR plan not objected to by Federal Reserve Board
•
2Q14 capital actions included:
–
$150MM of common stock repurchases
–
$300MM perpetual preferred stock issuance
–
Increase common dividend by 8% to $0.13
•
2014 CCAR plan designed to maintain regulatory common
equity capital ratios generally at current levels
•
2014 CCAR plan included the potential repurchase of common
shares in an amount up to $669MM
–
Also included the ability to repurchase shares in the
amount of any after-tax gains from the sale of Vantiv Inc.
stock
EOP share impact
(MM)
Average share impact
(MM)
1Q14
2Q14
1Q14
2Q14
3Q14
$200MM ASR
1.1
-
4.8
0.8
-
$456MM ASR
2.3
-
15.3
2.1
-
$99MM ASR
4.6
-
2.8
1.8
-
$150MM ASR
-
6.2
-
4.2
~2.0
8.0
6.2
22.9
8.9
~2.0
Capital Actions
Impact of Share Repurchases
1 |
 12
Balance Sheet:
Average loans & leases (excl. HFS)
Average transaction deposits
Income Statement:
Net interest income
2
Net interest margin
2
Noninterest income
1
Noninterest expense
Pre-provision net revenue
1,2
ROA
1
Effective tax rate
1,2
Asset Quality:
Net charge-offs
Loan loss allowance
4
Nonperforming assets
4
Tier 1 common equity
3,6
Category
Fifth Third: Outlook
2014 Outlook
1
$87.0B
$82.9B
1
2013
results
exclude
a
net
$534MM
benefit
from
gains
on
Vantiv
share
sales
and
valuation
adjustments
on
the
Vantiv
warrant.
2014
outlook
excludes
a
net
$152MM
benefit
from
gains
on
Vantiv
share
sales
and
valuation
adjustments
on
the
Vantiv
warrant.
2014
outlook
also
does
not
include
potential,
but
currently
unforecasted,
items,
such
as
any
potential
additional
Vantiv
gains
or
losses,
future
capital
actions,
or
changes
in
regulatory
or
accounting
guidance.
2
Presented
on
a
fully-taxable
equivalent
basis.
3
Non-GAAP
measure;
see
Reg.
G
reconciliation
in
appendix.
4
Ratio
as
a
percent
of
loans
excluding
held-for-sale;
allowance
expectation
assumes
current
expectation
for
credit
and
economic
trends
and
is
subject
to
review
in
each
period.
5
As
a
percentage
of
loans
and
leases
6
Current
period
capital
ratios
estimated.
Tier
1
common
equity
ratio
outlook
assumes
generally
stable
common
equity
levels
managed
through
asset
growth
and
share
repurchases.
Repurchases
subject
to
ongoing
evaluation
under
the
Federal
Reserve’s
CCAR
process.
7
Also excludes items reflected on page 9 as adjustments to remove (benefit) /
detriment in noninterest income and noninterest expense for 1Q14 and 2Q14.
2013-Adjusted
1
Outlook as of July 17, 2014;
please see cautionary statement on slide 2 for risk factors related to
forward-looking statements Mid single digit growth
Mid single digit growth
Down ~$40MM (~0.50%
5
)
Lower vs. 4Q13
Down ~15% vs. 4Q13
$3.58B
3.32% (3.21% 4Q13)
$2.70B
$3.95B
$2.31B
~1.2%
~28.4%
9.45%
$501MM (0.58%
5
)
$1.6B (1.79%)
$980MM (1.10%)
~Consistent with 4Q13 |
 13
Appendix |
 14
Mortgage banking results
•
2Q14 mortgage components:
–
$2B in originations; $62MM in gross servicing fees revenue
–
MSR valuation adjustments of positive $6MM; servicing rights amortization of negative
$32MM
–
Gain on sale margin down 4 bps sequentially
•
Expect continued stronger mortgage servicing results due to higher rates
•
Emphasis on purchase business continues to impact volumes
–
70% purchase volume in 2Q14 vs. 55% 1Q14
Mortgage
originations
($B)
and
gain-on-sale
margin¹
Mortgage Banking Net Revenue ($MM)
Note: Numbers may not sum due to rounding.
1
Gain-on-sale margin represents gains on all loans originated for
sale. $121
$78
$233
$126
$109 |
 15
Available and contingent borrowing capacity
(2Q14):
–
FHLB ~$11.9B available, ~$15.4B total
–
Federal Reserve ~$27.8B
Holding Company cash at 6/30/14: $2.6B
Cash currently sufficient to satisfy all fixed
obligations in a stressed environment for over
18 months (debt maturities, common and
preferred dividends, interest and other
expenses) without accessing capital markets;
relying on dividends from subsidiaries or any
other discretionary actions
Holding company unsecured debt maturities ($MM)
Bank
unsecured
debt
maturities
($MM
–
excl.
Brokered
CDs)
Heavily core funded
Strong liquidity profile
S-T
wholesale
5% |
 16
NPL rollforward
NPL HFI Rollforward
Commercial
2Q13
3Q13
4Q13
1Q14
2Q14
639
623
521
458
464
Transfers to nonperforming
151
71
107
164
143
Transfers to performing
(6)
(1)
(1)
(2)
(20)
Transfers to performing (restructured)
(7)
(2)
(2)
(1)
(47)
Transfers from held for sale
-
-
-
-
-
Transfers to held for sale
(2)
-
-
-
(1)
Loans sold from portfolio
(2)
(14)
(19)
(2)
(24)
Loan paydowns/payoffs
(80)
(101)
(61)
(43)
(54)
Transfers to other real estate owned
(28)
(14)
(12)
(7)
(18)
Charge-offs
(45)
(44)
(78)
(105)
(48)
Draws/other extensions of credit
3
3
3
2
1
623
521
458
464
396
Consumer
2Q13
3Q13
4Q13
1Q14
2Q14
314
286
248
293
269
Transfers to nonperforming
116
95
165
93
85
Transfers to performing
(31)
(30)
(25)
(28)
(24)
Transfers to performing (restructured)
(28)
(24)
(22)
(22)
(20)
Transfers to held for sale
-
-
-
-
-
Loans sold from portfolio
-
-
-
-
-
Loan paydowns/payoffs
(33)
(39)
(24)
(29)
(25)
Transfers to OREO/other repossessed property
(21)
(28)
(20)
(24)
(24)
Charge-offs
(30)
(13)
(30)
(15)
(16)
Draws/other extensions of credit
(1)
1
1
1
(1)
286
248
293
269
244
Total NPL
909
769
751
733
640
Total new nonaccrual loans - HFI
267
166
272
257
228
Beginning NPL amount
Ending Commercial NPL
Beginning NPL amount
Ending Consumer NPL |
 17
Troubled debt restructurings overview
Of $1.7B in consumer TDRs, $1.6B were on accrual
status and $115MM were nonaccruals
—
$1.2B of TDRs are current and have been on the
books 6 or more months; within that, $1.1B of
TDRs are current and have been on the books for
more than a year
As current TDRs season, their default propensity
declines significantly
—
We see much lower defaults on current loans after
a vintage approaches 12 months since
modification
TDR
performance
has
improved
in
newer
vintages
Source:
Fifth
Third
and
OCC/OTS
data
through
1Q14
Mortgage
TDRs
that
are
past
due
60
days
or
more
trend
by
vintage
1
$1.3B
current
consumer
TDRs
(%)
1
Fifth
Third
data
includes
changes
made
to
align
with
OCC/OTS
methodology
(i.e.
excludes
government
loans,
closed
loans
and
OREO
from
calculations) |
 18
Commercial & industrial
Loans by geography
Credit trends
Loans by industry
Comments
•
Commercial & industrial loans represented 46% of total loans
and 31% of net charge-offs
•
C&I loans increased 2% sequentially and 9% since 2Q13
•
Leveraged loans of $4.9B in 2Q14, consistent with 1Q14 and
4Q13 (regulatory definitions regarding purpose, senior debt/
EBITDA >3x, total debt/EBITDA >4x)
* Excludes loans held-for-sale.
($ in millions)
2Q13
3Q13
4Q13
1Q14
2Q14
EOP Balance*
$37,856
$38,253
$39,316
$40,591
$41,299
Avg Loans*
$37,630
$38,133
$38,835
$40,377
$41,374
90+ days delinquent
-
$3
-
$1
-
as % of loans
NM
0.01%
NM
NM
NM
NPAs*
$361
$321
$290
$304
$265
as % of loans
0.95%
0.84%
0.74%
0.75%
0.64%
Net charge-offs
$33
$44
$66
$97
$31
as % of loans
0.35%
0.46%
0.67%
0.97%
0.30%
C&I |
 19
Commercial mortgage
Loans by geography
Credit trends
Loans by industry
Comments
•
Commercial mortgage loans represented 9% of total loans and
9% of net charge-offs
•
Owner occupied 2Q14 NCO ratio of 0.2%, non-owner occupied
2Q14 NCO ratio of 0.7%
•
Loans from FL/MI represented 35% of portfolio loans and 68%
of portfolio losses in 2Q14
* Excludes loans held-for-sale.
($ in millions)
2Q13
3Q13
4Q13
1Q14
2Q14
EOP Balance*
$8,443
$8,052
$8,066
$7,958
$7,805
Avg Loans*
$8,618
$8,273
$8,047
$7,981
$7,885
90+ days delinquent
-
-
-
-
-
as % of loans
NM
NM
NM
NM
NM
NPAs*
$355
$296
$252
$240
$212
as % of loans
4.15%
3.62%
3.09%
2.98%
2.69%
Net charge-offs
$10
$2
$8
$3
$9
as % of loans
0.50%
0.14%
0.40%
0.16%
0.44%
Commercial mortgage |
  20
Commercial construction
Loans by geography
Credit trends
Loans by industry
Comments
•
Commercial construction loans represented 2% of total loans
and 8% of net charge-offs
•
Loans from FL/MI represented 18% of portfolio loans
* Excludes loans held-for-sale.
($ in millions)
2Q13
3Q13
4Q13
1Q14
2Q14
EOP Balance*
$754
$875
$1,039
$1,218
$1,424
Avg Loans*
$713
$793
$952
$1,116
$1,362
90+ days delinquent
-
-
-
-
-
as % of loans
NM
NM
NM
NM
NM
NPAs*
$69
$62
$59
$46
$31
as % of loans
8.88%
6.86%
5.53%
3.68%
2.17%
Net charge-offs
-
($2)
$4
$5
$8
as % of loans
(0.04%)
(1.16%)
1.65%
1.66%
2.26%
Commercial construction |
  21
Residential mortgage
1
st
liens: 100%; weighted average LTV: 73.2%
Weighted average origination FICO: 753
Origination FICO distribution: <660 6%; 660-689 5%; 690-719 9%;
720-749 14%; 750+ 58%; Other^ 8%
(note: loans <660 includes CRA loans and FHA/VA loans)
Origination LTV distribution: <=70 38%; 70.1-80 36%; 80.1-90 7%;
90.1-95 5%; >95 14%
Vintage distribution: 2014: 6%, 2013: 22%; 2012 22%; 2011 14%;
2010 7%; 2009 4%; 2008 3%; 2007 4%; 2006 4%; 2005 6%; 2004
and prior 7%
14%
originated
through
3
rd
party; performance similar to direct
Loans by geography
Credit trends
Portfolio details
Comments
^ Includes acquired loans where FICO at origination is not available
* Excludes loans held-for-sale
•
Residential
mortgage
loans
represented
14%
of
total
loans
and
8%
of
net
charge-offs
•
Net
charge-offs
decreased
to
$8MM
in
2Q14
•
OH,
MI,
and
IL
account
for
25%,
18%,
and
28%
of
residential
mortgage
net
charge-offs,
respectively
•
Improvement
driven
by
sequential
$2.4MM
decrease
in
OH,
$2.7MM
decrease
in
FL,
and
$1.6MM
decrease in
Other/National
•
$0.7MM
in
combined
recoveries
recognized
in
FL
and
KY
($ in millions)
2Q13
3Q13
4Q13
1Q14
2Q14
EOP Balance*
$12,400
$12,534
$12,680
$12,626
$12,652
Avg Loans*
$12,260
$12,486
$12,609
$12,659
$12,611
90+ days delinquent
$71
$73
$66
$56
$60
as % of loans
0.57%
0.58%
0.52%
0.44%
0.47%
NPAs*
$255
$229
$223
$201
$172
as % of loans
2.06%
1.82%
1.76%
1.59%
1.36%
Net charge-offs
$15
$12
$13
$15
$8
as % of loans
0.48%
0.39%
0.39%
0.49%
0.24%
Residential mortgage |
 22
Home equity loans represented 10% of total loans and 18% of net
charge-offs
Approximately 12% of portfolio in broker product generated 37% total
loss
37%
of
Fifth
Third
2
nd
liens
are
behind
Fifth
Third
1
st
liens
2005/2006 vintages represent approximately 24% of portfolio; account
for 44% of losses
Home equity
1
liens: 34%; 2
liens: 66%
Weighted average origination FICO: 752
Origination FICO distribution^: <660 3%; 660-689 7%; 690-719 12%;
720-749 16%; 750+ 53%; Other 9%
Average CLTV: 73%; Origination CLTV distribution: <=70 41%; 70.1-
80 23%; 80.1-90 18%; 90.1-95 6%; >95 12%
Vintage distribution: 2014: 4%, 2013: 7%; 2012 4%; 2011 3%; 2010
2%; 2009 3%; 2008 9%; 2007 9%; 2006 13%; 2005 12%; 2004 and
prior 34%
% through broker channels: 12% WA FICO: 734 brokered, 755 direct;
WA CLTV: 88% brokered; 70% direct
Portfolio details
Comments
Brokered loans by geography
Direct loans by geography
Credit trends
Note:
Brokered
and
direct
home
equity
net
charge-off
ratios
are
calculated
based
on
end
of
period
loan
balances
^
Includes
acquired
loans
where
FICO
at
origination
is
not
available
*
Excludes
loans
held-for-sale
st
nd |
 23
Regulation G Non-GAAP reconciliation
Fifth Third Bancorp and Subsidiaries
Regulation G Non-GAAP Reconcilation
$ and shares in millions
(unaudited)
June
March
December
September
June
2014
2014
2013
2013
2013
Income before income taxes (U.S. GAAP)
$606
$438
$561
$604
$841
Add:
Provision expense (U.S. GAAP)
76
69
53
51
64
Pre-provision net revenue (a)
682
507
614
655
905
Net income available to common shareholders (U.S. GAAP)
416
309
383
421
582
Add:
Intangible amortization, net of tax
1
1
1
1
1
Tangible net
income available to common shareholders 417
310
384
422
583
Tangible net income available to common
shareholders (annualized) (b) 1,673
1,257
1,523
1,674
2,338
Average Bancorp shareholders' equity (U.S. GAAP)
15,157
14,862
14,757
14,440
14,221
Less:
Average preferred stock
(1,119)
(1,034)
(703)
(593)
(717)
Average goodwill
(2,416)
(2,416)
(2,416)
(2,416)
(2,416)
Average intangible assets
(17)
(19)
(20)
(22)
(24)
Average tangible common equity
(c) 11,605
11,393
11,618
11,409
11,064
Total Bancorp shareholders' equity (U.S. GAAP)
15,469
14,826
14,589
14,641
14,239
Less:
Preferred stock
(1,331)
(1,034)
(1,034)
(593)
(991)
Goodwill
(2,416)
(2,416)
(2,416)
(2,416)
(2,416)
Intangible assets
(17)
(18)
(19)
(21)
(23)
Tangible common equity, including
unrealized gains / losses (d) 11,705
11,358
11,120
11,611
10,809
Less: Accumulated other comprehensive income
(382)
(196)
(82)
(218)
(149)
Tangible common equity, excluding unrealized gains /
losses (e) 11,323
11,162
11,038
11,393
10,660
Total assets (U.S. GAAP)
132,562
129,654
130,443
125,673
123,360
Less:
Goodwill
(2,416)
(2,416)
(2,416)
(2,416)
(2,416)
Intangible assets
(17)
(18)
(19)
(21)
(23)
Tangible assets, including
unrealized gains / losses (f) 130,129
127,220
128,008
123,236
120,921
Less: Accumulated other comprehensive income / loss, before tax
(588)
(302)
(126)
(335)
(229)
Tangible assets, excluding unrealized gains / losses
(g) 129,541
126,918
127,882
122,901
120,692
Common shares outstanding (h)
844
848
855
887
851
Ratios:
Return on average tangible common equity (b) / (c)
14.4%
11.0%
13.1%
14.7%
21.1%
Tangible common equity (excluding unrealized gains/losses) (e) / (g)
8.74%
8.79%
8.63%
9.27%
8.83%
Tangible common equity (including unrealized gains/losses) (d) / (f)
9.00%
8.93%
8.69%
9.42%
8.94%
Tangible book value per share (d) / (h)
$13.86
$13.40
$13.00
$13.09
$12.69
For the Three Months Ended |
 24
Regulation G Non-GAAP reconciliation
Fifth Third Bancorp and Subsidiaries
Regulation G Non-GAAP Reconcilation
$ and shares in millions
(unaudited)
June
March
December
September
June
2014
2014
2013
2013
2013
Total Bancorp shareholders' equity (U.S. GAAP)
$15,469
$14,826
$14,589
$14,641
$14,239
Goodwill and certain other intangibles
(2,484)
(2,490)
(2,492)
(2,492)
(2,496)
Unrealized gains
(382)
(196)
(82)
(218)
(149)
Qualifying trust preferred securities
60
60
60
810
810
Other
(19)
(18)
19
21
22
Tier I capital
12,644
12,182
12,094
12,762
12,426
Less:
Preferred stock
(1,331)
(1,034)
(1,034)
(593)
(991)
Qualifying trust preferred securities
(60)
(60)
(60)
(810)
(810)
Qualifying noncontrolling interest in consolidated subsidiaries
(1)
(1)
(37)
(39)
(38)
Tier I common equity (a)
11,252
11,087
10,963
11,320
10,587
Risk-weighted assets, determined in accordance with
prescribed regulatory requirements (b)
117,127
116,622
115,969
113,801
111,559
Ratio:
Tier I common equity (a) / (b)
9.61%
9.51%
9.45%
9.95%
9.49%
Basel III -
Estimated Tier 1 common equity ratio
June
March
December
September
2014
2014
2013
2013
Tier 1 common equity (Basel I)
11,252
11,087
10,963
11,320
Add:
Adjustment related to capital components
96
99
82
88
Estimated Tier 1 common equity under final Basel III rules without AOCI (opt
out)(c) 11,348
11,186
11,045
11,408
Add:
Adjustment related to AOCI
382
196
82
218
Estimated Tier 1 common equity under final Basel III rules with AOCI (non opt
out)(d) 11,730
11,382
11,127
11,626
Estimated risk-weighted assets under final Basel III rules (e)
122,460
122,659
122,851
120,447
Estimated
Tier
1
common
equity
ratio
under
final
Basel
III
rules
(opt
out)
(c)
/
(e)
9.27%
9.12%
8.99%
9.47%
Estimated
Tier
1
common
equity
ratio
under
final
Basel
III
rules
(non
opt
out)
(d)
/
(e)
9.58%
9.28%
9.06%
9.65%
(c), (d)
(e)
Under the final Basel III rules, non-advanced approach banks are permitted to
make a one-time election to opt out of the requirement to include AOCI in Tier 1 common equity. Other adjustments
include mortgage servicing rights and deferred tax assets subject to threshold
limitations and deferred tax liabilities related to intangible assets. Key
differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk weighting for commitments under 1 year; (2) Higher risk weighting for exposures to
securitizations, past due loans, foreign banks and certain commercial real estate;
(3) Higher risk weighting for mortgage servicing rights and deferred tax assets that are under certain thresholds as
a percent of Tier 1 capital; and (4) Derivatives are differentiated between exchange
clearing and over-the-counter and the 50% risk-weight cap is removed.
For the Three Months Ended |