2016 Earnings Per Diluted Share of
$1.93
- 4Q16 net income available to common
shareholders of $372 million, or $0.49 per diluted common share
- Reported results included the following
items which had a positive $0.01 impact on reported 4Q16 EPS:
- A $16 million pre-tax (~$10 million
after-tax*) reduction to net interest income for refunds offered to
certain bankcard customers
- A $9 million pre-tax (~$6 million
after-tax*) gain from the net exercise of the Vantiv warrant
- A $6 million pre-tax (~$4 million
after-tax*) benefit related to the valuation of the Visa total
return swap
- A $6 million tax benefit from the early
adoption of an accounting standard
- Pre-tax income of $509 million and
pre-provision net revenue (PPNR)** of $563 million in 4Q16
- Reported net interest income of $903
million and $909 million on an FTE basis, both flat sequentially;
net interest income (FTE)** up 1% versus 4Q15; up 1% sequentially
and 2% year-over-year excluding the refunds**
- Net interest margin of 2.84% and net
interest margin (FTE)** of 2.86% (including a negative 5 basis
point impact of the $16 million card refunds), down 2 bps
sequentially and up 1 bp from 4Q15
- Average portfolio loans and leases of
$93.0 billion, down 1% sequentially and down 1% from 4Q15
- Noninterest income of $620 million
compared with $840 million in 3Q16, primarily driven by a gain of
only $9 million in 4Q16 compared to a $280 million gain in 3Q16
from Vantiv-related transactions; see table on page 9
- Noninterest expense of $960 million,
down 1% from 3Q16 and flat from 4Q15
- Credit trends
- 4Q16 net charge-offs (NCOs) of $73
million (0.31% of loans and leases) decreased from 3Q16 NCOs of
$107 million (0.45% of loans and leases)
- Portfolio nonperforming asset (NPA)
ratio of 0.80%, up 5 bps from 3Q16; total portfolio NPAs of $738
million
- 4Q16 provision expense of $54 million
compared to $80 million in 3Q16 and $91 million in 4Q15
- Strong capital ratios***
- Common equity Tier 1 (CET1) ratio
10.40%; fully phased-in CET1 ratio** of 10.30%
- Tier 1 risk-based capital ratio 11.51%,
Total risk-based capital ratio 15.00%, Leverage ratio 9.90%
- Tangible common equity ratio** of
8.91%; 8.87% excluding unrealized gains/losses
- Book value per share of $19.82; down 3%
from 3Q16 and up 7% from 4Q15; tangible book value per share** of
$16.60 down 4% from 3Q16 and up 8% from 4Q15
* Assumes a 35% tax rate.** Non-GAAP measure; see discussion of
non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit
99.1 of 8-K filing dated 1/24/17*** Capital ratios estimated;
presented under current U.S. capital regulations.
Fifth Third Bancorp (Nasdaq:FITB) today reported full year 2016
net income of $1.6 billion, down 9 percent from net income of $1.7
billion in 2015. After preferred dividends, 2016 net income
available to common shareholders was $1.5 billion, or $1.93 per
diluted share, down 9 percent compared with 2015 net income
available to common shareholders of $1.6 billion, or $2.01 per
diluted share. Results were significantly impacted by
Vantiv-related transactions throughout 2015 and 2016.
Fourth quarter 2016 net income was $395 million, a decrease of
23 percent from net income of $516 million in the third quarter of
2016 and a decrease of 40 percent from net income of $657 million
in the fourth quarter of 2015. Results were significantly impacted
by Vantiv-related transactions explained in further detail below,
including $280 million in pre-tax income in third quarter of 2016
and $469 million in pre-tax income in fourth quarter of 2015. After
preferred dividends, net income available to common shareholders
was $372 million, or $0.49 per diluted share, in the fourth quarter
2016, compared with $501 million, or $0.65 per diluted share, in
the third quarter 2016, and $634 million, or $0.79 per diluted
share, in the fourth quarter of 2015.
Fourth quarter 2016 included:
Income
- $9 million gain on the Vantiv warrant
net exercise and share sale
- $6 million benefit related to the
valuation of the Visa total return swap
- ($16 million) reduction to net interest
income for refunds offered to certain bankcard customers
Expenses
- ($5 million) contribution to Fifth
Third Foundation
Results also included a $6 million tax benefit from the early
adoption of an accounting standard, and a $33 million annual
payment recognized from Vantiv pursuant to the tax receivable
agreement, which was recorded in other noninterest income.
Third quarter 2016 included:
Income
- $280 million gain from the termination
and settlement of gross cash flows from existing Vantiv tax
receivable agreements (TRA) and the expected obligation to
terminate and settle the remaining TRA cash flows upon the exercise
of put or call options
- $11 million gain on the sale of a
non-branch facility
- ($28 million) non-cash impairment
charge related to previously announced plans to sell or consolidate
certain bank branches and land acquired for future branch
expansion
- ($12 million) charge related to the
valuation of the Visa total return swap
- ($9 million) charge from the transfer
of certain nonconforming investments affected by the Volcker Rule
to held-for-sale
- ($2 million) negative valuation
adjustment on the Vantiv warrant
Results also included an $8 million beneficial tax impact in
connection with certain commercial lease terminations.
Fourth quarter 2015 included:
Income
- $331 million gain on the sale of Vantiv
shares
- $89 million gain on Vantiv warrant
actions taken during the quarter
- $49 million payment received from
Vantiv to terminate a portion of its tax receivable agreement
- $21 million positive valuation
adjustment on the remaining Vantiv warrant
- ($10 million) related to the valuation
of the Visa total return swap
Expenses
- ($10 million) contribution to Fifth
Third Foundation
Results also included a $31 million annual payment recognized
from Vantiv pursuant to the tax receivable agreement, which was
recorded in other noninterest income.
Earnings
Highlights
For the Three Months Ended
% Change December September June March December 2016
2016(d) 2016(d) 2016(d) 2015 Seq
Yr/Yr
Earnings ($ in millions) Net income attributable to
Bancorp $395 $516 $328 $326 $657 (23%) (40%) Net income available
to common shareholders $372 $501 $305 $311 $634 (26%) (41%)
Common Share Data Earnings per share, basic $0.49 $0.66
$0.40 $0.40 $0.80 (26%) (39%) Earnings per share, diluted 0.49 0.65
0.39 0.40 0.79 (25%) (38%) Cash dividends per common share 0.14
0.13 0.13 0.13 0.13 8% 8% Common shares outstanding (in
thousands) 750,479 755,582 766,346 770,471 785,080 (1%) (4%)
Average common shares outstanding (in thousands): Basic 746,107
750,886 759,105 773,564 784,855 (1%) (5%) Diluted 757,444 757,856
764,811 777,758 794,481 - (5%)
Financial Ratios bps
Change Return on average assets 1.11 % 1.44 % 0.92 % 0.93 % 1.83 %
(33) (72) Return on average common equity 9.7 12.8 8.0 8.3 17.2
(310) (750) Return on average tangible common equity(b) 11.6 15.2
9.6 9.9 20.6 (360) (900) CET1 capital(c) 10.40 10.17 9.94 9.81 9.82
23 58 Tier I risk-based capital(c) 11.51 11.27 11.03 10.91 10.93 24
58 CET1 capital (fully-phased in)(b)(c) 10.30 10.09 9.86 9.72 9.72
21 58 Net interest margin(a)(b) 2.86 2.88 2.88 2.91 2.85 (2) 1
Efficiency(a)(b) 62.8 55.5 65.3 63.8 48.0 730 1480 (a)
Presented on a fully taxable equivalent basis. (b) Non-GAAP
measure; see discussion of non-GAAP and Reg. G reconciliation
beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17.
(c) Under the 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 used in the calculation of the
tier I risk-based capital and common equity tier 1 ratios. Current
period regulatory capital ratios are estimated. (d) The Condensed
Consolidated Financial Statements include a $1 million, $5 million
and $0 net reclassification of excess tax benefits from capital
surplus to applicable income tax expense at March 31, 2016, June
30, 2016 and September 30, 2016, respectively, related to the early
adoption of ASU 2016-09 during the fourth quarter of 2016, with an
effective date of January 1, 2016. NA: Not applicable.
“Our fourth quarter results were strong and reflected our
continued commitment to improving shareholder returns. With a
balance sheet positioned to benefit from a rising rate environment,
effective expense controls, and good credit quality, we achieved
solid results during the quarter,” said Greg D. Carmichael,
President and CEO of Fifth Third Bancorp.
“We believe the hard work and focus of our employees throughout
2016 have positioned us well for 2017 and beyond. With our
long-term goals firmly in place, we are executing on the
initiatives that we have outlined under Project North Star.
Although we did not assume improving economic conditions to help us
achieve our targets, we should continue to benefit from a more
positive operating environment.
“Also, our confidence in our underlying businesses and our
outlook has allowed us to increase our quarterly common stock
dividend 8 percent to $0.14. Our capital and liquidity ratios
remain strong and growing.
“Lastly, during the quarter we announced plans to invest $30
billion in community development, and also announced a
newly-created corporate responsibility and reputation office. Fifth
Third is committed to delivering positive outcomes for our
customers, our shareholders, and the communities we serve.”
Income Statement Highlights
For
the Three Months Ended % Change December September
June March December 2016 2016(b) 2016(b)
2016(b) 2015 Seq Yr/Yr
Condensed Statements
of Income ($ in millions) Net interest income (taxable
equivalent)(a) $909 $913 $908 $909 $904 - 1% Provision for loan and
lease losses 54 80 91 119 91 (33%) (41%) Total noninterest income
620 840 599 637 1,104 (26%) (44%) Total noninterest expense
960 973 983 986 963 (1%)
- Income before income taxes (taxable equivalent)(a) $515
$700 $433 $441 $954 (26%)
(46%) Taxable equivalent adjustment 6 6 6 6 5 - 20%
Applicable income tax expense 114 178 103
109 292 (36%) (61%) Net income $395
$516 $324 $326 $657 (23%) (40%) Less: Net income attributable to
noncontrolling interests - - (4) -
- - - Net income attributable to Bancorp $395
$516 $328 $326 $657 (23%) (40%) Dividends on preferred stock
23 15 23 15 23 53% - Net
income available to common shareholders $372 $501
$305 $311 $634 (26%) (41%)
Earnings per share, diluted $0.49 $0.65 $0.39
$0.40 $0.79 (25%) (38%) (a) Non-GAAP
measure; see discussion of non-GAAP and Reg. G reconciliation
beginning on page 32 in Exhibit 99.1 of 8-K filing dated 1/24/17.
(b) The Condensed Consolidated Financial Statements include a $1
million, $5 million and $0 net reclassification of excess tax
benefits from capital surplus to applicable income tax expense at
March 31, 2016, June 30, 2016 and September 30, 2016, respectively,
related to the early adoption of ASU 2016-09 during the fourth
quarter of 2016, with an effective date of January 1, 2016.
Net Interest
Income
For the Three Months Ended %
Change December September June March December 2016 2016
2016 2016 2015 Seq Yr/Yr
Interest Income ($ in millions) Total interest income
(taxable equivalent)(a) $1,058 $1,063 $1,052 $1,044 $1,035 - 2%
Total interest expense 149 150
144 135 131 (1%)
14% Net interest income (taxable equivalent)(a) $909
$913 $908 $909
$904 - 1%
Average Yield bps
Change Yield on interest-earning assets (taxable equivalent) 3.33%
3.36% 3.34% 3.34% 3.26% (3) 7 Rate paid on interest-bearing
liabilities 0.70% 0.70% 0.67%
0.64% 0.61% - 9
Net interest rate spread (taxable equivalent) 2.63%
2.66% 2.67% 2.70%
2.65% (3) (2) Net interest margin (taxable
equivalent)(a) 2.86% 2.88% 2.88% 2.91% 2.85% (2) 1
Average Balances ($ in millions) % Change Loans and leases,
including held for sale $93,981 $94,417 $94,807 $94,078 $94,587 -
(1%) Total securities and other short-term investments 32,567
31,675 32,040 31,573 31,256 3% 4% Total interest-earning assets
126,548 126,092 126,847 125,651 125,843 - 1% Total interest-bearing
liabilities 84,552 85,193 86,145 85,450 85,381 (1%) (1%) Bancorp
shareholders' equity 16,545 16,883
16,584 16,376 15,982
(2%) 4% (a) Non-GAAP measure; see discussion of
non-GAAP and Reg. G reconciliation beginning on page 32 in Exhibit
99.1 of 8-K filing dated 1/24/17.
Excluding the $16 million reduction for the card refunds, net
interest income (FTE)* of $925 million was up 1 percent from the
third quarter of 2016. Reported net interest income of $903 million
and net interest income (FTE)* of $909 million both decreased $4
million from the third quarter of 2016, primarily driven by the
aforementioned card refunds, partially offset by improved
short-term market rates in the fourth quarter and higher investment
securities balances.
The adjusted net interest margin* was 2.91 percent, up 3 bps
from the prior quarter, excluding the aforementioned card refunds.
The reported net interest margin was 2.84 percent and the net
interest margin (FTE)* was 2.86 percent, both decreasing 2 bps from
the previous quarter, primarily due to a 5 basis point impact from
the aforementioned card refunds. This impact was partially offset
by improved short-term market rates in the fourth quarter.
Compared to the fourth quarter of 2015, adjusted net interest
income (FTE)* was up 2 percent, excluding the card refunds.
Adjusted net interest margin (FTE)* was up 6 bps from the fourth
quarter of 2015, excluding the card refunds. Reported net interest
income and net interest income (FTE)*, increased by $4 million and
$5 million, or 2 percent, respectively from the fourth quarter of
2015. The reported net interest margin and net interest margin
(FTE)* increased by 1 bp year-over-year. The increase in net
interest income was driven by the impact of higher investment
securities balances and improved short-term market rates, partially
offset by the previously-mentioned card refunds. The increase in
the net interest margin was driven by improved short-term market
rates, partially offset by the previously-mentioned card
refunds.
* Non-GAAP measure; see discussion of non-GAAP and Reg. G
reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing
dated 1/24/17.
Securities
Average securities and other short-term investments were $32.6
billion in the fourth quarter of 2016 compared to $31.7 billion in
the previous quarter and $31.3 billion in the fourth quarter of
2015. Average balances of other short-term investments decreased by
$18 million sequentially to $1.8 billion.
Loans
For the Three Months Ended % Change
December September June March December 2016 2016 2016
2016 2015 Seq Yr/Yr
Average
Portfolio Loans and Leases ($ in millions) Commercial:
Commercial and industrial loans $42,548 $43,116 $43,876 $43,089
$43,154 (1%) (1%) Commercial mortgage loans 6,957 6,888 6,831 6,886
7,032 1% (1%) Commercial construction loans 3,890 3,848 3,551 3,297
3,141 1% 24% Commercial leases 3,921 3,962
3,898 3,874 3,839
(1%) 2% Total commercial loans and leases
$57,316 $57,814 $58,156
$57,146 $57,166 (1%) - Consumer:
Residential mortgage loans $14,854 $14,455 $14,046 $13,788 $13,504
3% 10% Home equity 7,779 7,918 8,054 8,217 8,360 (2%) (7%)
Automobile loans 10,162 10,508 10,887 11,283 11,670 (3%) (13%)
Credit card 2,180 2,165 2,134 2,179 2,218 1% (2%) Other consumer
loans and leases 673 651 654
662 676 3% - Total
consumer loans and leases $35,648 $35,697
$35,775 $36,129 $36,428
- (2%) Total average portfolio loans
and leases $92,964 $93,511 $93,931 $93,275 $93,594 (1%) (1%)
Average loans held for sale $1,017 $906
$876 $803 $993 12%
2%
Average portfolio loan and lease balances decreased $547
million, or 1 percent, sequentially and decreased $630 million, or
1 percent, from the fourth quarter of 2015. The sequential and
year-over-year decrease was driven by both declines in automobile
loans related to the strategic decision to reduce auto loan
originations to improve return on shareholders’ equity and
deliberate exits from certain commercial and industrial (C&I)
loans that did not meet risk-adjusted profitability targets. The
sequential and year-over-year decreases were partially offset by
increases in residential mortgage and commercial real estate loans.
Period end portfolio loans and leases of $92.1 billion decreased
$1.1 billion, or 1 percent, sequentially and $484 million, or 1
percent, from a year ago. The sequential decrease was primarily due
to decreases in C&I and automobile loans, partially offset by
an increase in residential mortgage loans. The year-over-year
decline was primarily driven by decreases in automobile and home
equity loans, partially offset by increases in residential mortgage
and commercial construction loans.
Average commercial portfolio loan and lease balances decreased
$498 million, or 1 percent, sequentially and were flat from the
fourth quarter of 2015. Average C&I loans decreased $568
million, or 1 percent, from the prior quarter and decreased $606
million, or 1 percent, from the fourth quarter of 2015. Average
commercial real estate loans increased $111 million, or 1 percent,
from the prior quarter and increased $674 million, or 7 percent,
from the fourth quarter of 2015. Within commercial real estate,
growth was relatively balanced as average commercial mortgage
balances increased $69 million and average commercial construction
balances increased $42 million sequentially. Period end commercial
line utilization of 34% decreased 95 bps from the third quarter of
2016 and decreased 88 bps from the fourth quarter of 2015.
Average consumer portfolio loan and lease balances were flat
sequentially and decreased $780 million, or 2 percent, from the
fourth quarter of 2015. This was primarily driven by average
automobile loans which decreased 3 percent sequentially and 13
percent from a year ago. Average residential mortgage loans
increased 3 percent sequentially and 10 percent from the previous
year. Average home equity loans decreased 2 percent sequentially
and 7 percent from the fourth quarter of 2015. Average credit card
loans increased 1 percent sequentially and decreased 2 percent from
the fourth quarter of 2015.
Deposits
For the Three Months Ended
% Change December September June March December 2016
2016 2016 2016 2015 Seq Yr/Yr
Average Deposits ($ in millions) Demand $36,412 $35,918
$35,912 $35,201 $36,254 1% - Interest checking 25,644 24,475 24,714
25,740 25,296 5% 1% Savings 13,979 14,232 14,576 14,601 14,615 (2%)
(4%) Money market 20,476 19,706 19,243 18,655 18,775 4% 9% Foreign
office(a) 497 524 484
483 736 (5%) (32%) Total
transaction deposits $97,008 $94,855 $94,929 $94,680 $95,676 2% 1%
Other time 3,941 4,020 4,044
4,035 4,052 (2%)
(3%) Total core deposits $100,949 $98,875 $98,973 $98,715 $99,728
2% 1% Certificates - $100,000 and over 2,539 2,768 2,819 2,815
3,305 (8%) (23%) Other 115 749
467 - 7 (85%) NM
Total average deposits $103,603 $102,392
$102,259 $101,530
$103,040 1% 1% (a)Includes commercial customer
Eurodollar sweep balances for which the Bancorp pays rates
comparable to other commercial deposit accounts.
Average core deposits increased $2.1 billion, or 2 percent,
sequentially and increased $1.2 billion, or 1 percent, from the
fourth quarter of 2015. Average transaction deposits increased $2.2
billion, or 2 percent from the third quarter of 2016 and increased
$1.3 billion, or 1 percent from the fourth quarter of 2015.
Sequential performance was primarily driven by increased commercial
interest checking account balances, as well as consumer money
market account balances that benefited from the recent enactment of
new money market reforms, partially offset by lower savings account
balances. The year-over-year increase was primarily driven by
higher consumer money market and consumer interest checking account
balances, partially offset by lower savings and foreign office
account balances. Other time deposits decreased by 2 percent
sequentially and 3 percent year-over-year.
Average total commercial transaction deposits of $45 billion
increased 3 percent sequentially and decreased 2 percent from the
fourth quarter of 2015. Average total consumer transaction deposits
of $52 billion increased 2 percent sequentially and increased 5
percent from the fourth quarter of 2015.
Wholesale
Funding
For the Three Months Ended
% Change December September June March December 2016
2016 2016 2016 2015 Seq
Yr/Yr
Average Wholesale Funding ($ in millions) Certificates
- $100,000 and over $2,539 $2,768 $2,819 $2,815 $3,305 (8%) (23%)
Other deposits 115 749 467 - 7 (85%) NM Federal funds purchased 280
446 693 608 1,182 (37%) (76%) Other short-term borrowings 1,908
2,171 3,754 3,564 1,675 (12%) 14% Long-term debt 15,173
16,102 15,351 14,949
15,738 (6%) (4%) Total average
wholesale funding $20,015 $22,236
$23,084 $21,936 $21,907
(10%) (9%)
Average wholesale funding of $20.0 billion decreased $2.2
billion, or 10 percent, sequentially and decreased $1.9 billion, or
9 percent, compared with the fourth quarter of 2015. The sequential
decrease in average wholesale funding was primarily driven by a
decline in long-term debt largely due to maturities early in the
fourth quarter. The year-over-year decline reflected a decrease in
federal funds purchased resulting from an increase in deposit
balances.
Noninterest
Income
For the Three
Months Ended % Change December September June March December
2016 2016 2016 2016 2015 Seq
Yr/Yr
Noninterest Income ($ in millions) Service
charges on deposits $141 $143 $138 $137 $144 (1%) (2%) Corporate
banking revenue 101 111 117 102 104 (9%) (3%) Mortgage banking net
revenue 65 66 75 78 74 (2%) (12%) Wealth and asset management
revenue 100 101 101 102 102 (1%) (2%) Card and processing revenue
79 79 82 79 77 - 3% Other noninterest income 137 336 80 136 602
(59%) (77%) Securities gains (losses), net (3) 4
6 3 1 NM NM Total noninterest
income $620 $840 $599 $637
$1,104 (26%) (44%)
Noninterest income of $620 million decreased $220 million
sequentially and decreased $484 million compared with prior year
results. The sequential and year-over-year comparisons reflect the
impacts described below.
Noninterest Income excluding certain items
For the Three Months Ended
% Change December September
December 2016 2016 2015
Seq Yr/Yr
Noninterest Income excluding
certain items ($ in millions) Noninterest income (U.S. GAAP)
$620 $840 $1,104 Gain on Vantiv warrant actions (9) - (89)
Valuation of Visa total return swap (6) 12 10
Gain from termination and settlement of
Vantiv TRA and the expected obligation
to terminate and settle the remaining TRA cash
flows upon exercise of put or call
options
- (280) (49) Gain on sale of a non-branch facility - (11) - Gain on
sale of Vantiv shares - - (331) Vantiv warrant valuation - 2 (21)
Transfer of certain nonconforming investments under Volcker to HFS
- 9 - Branch / land impairment charge - 28 - Securities (gains) /
losses 3 (4) (1)
Noninterest income excluding certain items(a)
$608 $596 $623 2%
(2%) (a) Non-GAAP measure; see discussion of non-GAAP and
Reg. G reconciliation beginning on page 32 in Exhibit 99.1 of 8-K
filing dated 1/24/17.
Excluding the items in the table above, noninterest income of
$608 million increased $12 million, or 2 percent, from the previous
quarter and decreased $15 million, or 2 percent, from the fourth
quarter of 2015. The sequential increase was primarily due to the
$33 million annual payment received from Vantiv pursuant to the tax
receivable agreement in the fourth quarter of 2016, partially
offset by a decrease in corporate banking revenue. The
year-over-year decrease was driven by a decline in mortgage banking
net revenue.
Service charges on deposits of $141 million decreased 1 percent
from the third quarter of 2016, and decreased 2 percent compared
with the fourth quarter of 2015. The sequential decrease primarily
reflected a 2 percent decrease in commercial service charges, as
well as a 1 percent decrease in retail service charges. The
decrease from the fourth quarter of 2015 was primarily due to a 5
percent decrease in retail service charges.
Corporate banking revenue of $101 million decreased 9 percent
compared to the third quarter of 2016 and decreased 3 percent from
the fourth quarter of 2015. The sequential comparison reflects
decreases in institutional sales revenue and lease remarketing
fees, partially offset by an increase in foreign exchange fees. The
year-over-year decrease was primarily driven by lower lease
remarketing fees and letter of credit fees, partially offset by
higher foreign exchange fees and institutional sales revenue.
Mortgage banking net revenue was $65 million in the fourth
quarter of 2016, down $1 million from the third quarter of 2016 and
down $9 million from the fourth quarter of 2015. Originations of
$2.7 billion in the current quarter decreased 5 percent
sequentially and increased 54 percent from the same quarter last
year. Fourth quarter 2016 originations resulted in $30 million of
origination fees and gains on loan sales, compared with $61 million
during the previous quarter and $37 million during the fourth
quarter of 2015. Net mortgage servicing revenue (which consists of
gross mortgage servicing fees, MSR amortization, and net valuation
adjustments on MSRs and mark-to-market adjustments on free-standing
derivatives used to economically hedge the MSR portfolio) was $35
million this quarter, $5 million in the third quarter of 2016, and
$37 million in the fourth quarter of 2015. Gross mortgage servicing
fees were $48 million this quarter, $49 million in the third
quarter of 2016, and $53 million in the fourth quarter of 2015. MSR
amortization was $35 million this quarter, $35 million in the third
quarter of 2016, and $29 million in the fourth quarter of 2015. Net
servicing asset valuation adjustments resulted in a positive $23
million impact in the fourth quarter of 2016, negative $9 million
in the third quarter of 2016, and positive $13 million in the
fourth quarter of 2015.
Wealth and asset management revenue of $100 million decreased 1
percent from the third quarter of 2016 and decreased 2 percent from
the fourth quarter of 2015. The sequential decrease was primarily
driven by lower personal asset management fees. The year-over-year
decline was primarily driven by lower securities and brokerage
fees, partially offset by an increase in institutional trust
fees.
Card and processing revenue of $79 million in the fourth quarter
of 2016 was flat sequentially and increased 3 percent from the
fourth quarter of 2015. The year-over-year increase reflected
higher spend volume and actively used cards.
Other noninterest income totaled $137 million in the fourth
quarter of 2016, compared with $336 million in the previous quarter
and $602 million in the fourth quarter of 2015. As previously
described, the results included the adjustments in the table on
page 9 with the exception of securities gains / (losses) in all
comparable periods. Excluding these items, other noninterest income
of $122 million increased approximately $26 million, or 27 percent,
from the third quarter of 2016 and was flat from the fourth quarter
of 2015. The sequential increase was primarily due to the $33
million annual payment received from Vantiv pursuant to the tax
receivable agreement in the fourth quarter of 2016.
Net losses on investment securities were $3 million in the
fourth quarter of 2016, compared with $4 million net gains in the
previous quarter and a $1 million net gain in the fourth quarter of
2015.
Noninterest Expense
For the
Three Months Ended % Change December September June
March December 2016 2016 2016
2016 2015 Seq Yr/Yr
Noninterest Expense ($ in millions) Salaries, wages and
incentives $403 $400 $407 $403 $386 1% 4% Employee benefits 76 78
85 100 74 (3%) 3% Net occupancy expense 73 73 75 77 83 - (12%)
Technology and communications 56 62 60 56 59 (10%) (5%) Equipment
expense 29 29 30 30 32 - (9%) Card and processing expense 31 30 37
35 40 3% (23%) Other noninterest expense 292
301 289 285 289
(3%) 1% Total noninterest expense $960
$973 $983 $986
$963 (1%) -
Noninterest expense of $960 million declined $13 million, or 1
percent, compared with the third quarter of 2016 and was flat
compared with the fourth quarter of 2015. The sequential decrease
primarily reflected lower technology and communications expense,
the change in provision for unfunded commitments, and seasonally
lower marketing expense. The year-over-year decrease was primarily
driven by lower card and processing expense, predominantly due to
contract renegotiations as well as lower net occupancy expense,
partially offset by increased compensation expense mainly as a
result of personnel additions in risk and compliance and
information technology.
Credit Quality
For the Three
Months Ended December September June March December 2016
2016 2016 2016 2015
Total net losses
charged-off ($ in millions) Commercial and industrial loans
($25) ($61) ($39) ($46) ($30) Commercial mortgage loans (2) (2) (6)
(6) (3) Commercial construction loans - - - - - Commercial leases
(1) - (1) (2) (1) Residential mortgage loans (2) (2) (2) (2) (3)
Home equity (6) (7) (6) (8) (9) Automobile loans (11) (9) (8) (9)
(9) Credit card (19) (20) (21) (20) (19) Other consumer
loans and leases (7) (6) (4)
(3) (6) Total net losses charged-off
($73) ($107) ($87) ($96) ($80) Total losses charged-off
($97) ($137) ($105) ($116) ($105) Total recoveries of losses
previously charged-off 24 30 18
20 25 Total net losses charged-off
($73) ($107) ($87) ($96) ($80)
Ratios (annualized) Net
losses charged-off as a percent of average portfolio loans and
leases (excluding held for sale) 0.31% 0.45% 0.37% 0.42% 0.34%
Commercial 0.20% 0.43% 0.32% 0.38% 0.24% Consumer
0.49% 0.49% 0.45% 0.48%
0.49%
Net charge-offs were $73 million, or 31 bps of average portfolio
loans and leases on an annualized basis, in the fourth quarter of
2016 compared with net charge-offs of $107 million, or 45 bps, in
the third quarter of 2016 and $80 million, or 34 bps, in the fourth
quarter of 2015.
Commercial net charge-offs were $28 million, or 20 bps, and were
down $35 million sequentially. The decrease was primarily due to
lower charge-offs of C&I loans, which decreased by $36 million
from the third quarter of 2016. Commercial real estate net
charge-offs were flat from the previous quarter.
Consumer net charge-offs were $45 million, or 49 bps, and were
up $1 million sequentially. Compared with the previous quarter, net
charge-offs on residential mortgage loans were flat. Net
charge-offs on the auto portfolio were up $2 million. Net
charge-offs on home equity and credit card loans were each down $1
million from the third quarter of 2016. Net charge-offs on other
consumer loans of $7 million were up $1 million sequentially.
For the Three Months Ended December September
June March December 2016 2016 2016
2016 2015
Allowance for Credit Losses ($ in
millions) Allowance for loan and lease losses, beginning $1,272
$1,299 $1,295 $1,272 $1,261 Total net losses charged-off (73) (107)
(87) (96) (80) Provision for loan and lease losses 54
80 91 119 91
Allowance for loan and lease losses, ending $1,253 $1,272 $1,299
$1,295 $1,272 Reserve for unfunded commitments, beginning
$162 $151 $144 $138 $134 Provision for unfunded commitments
(1) 11 7 6
4 Reserve for unfunded commitments, ending $161 $162 $151 $144 $138
Components of allowance for credit losses: Allowance for
loan and lease losses $1,253 $1,272 $1,299 $1,295 $1,272 Reserve
for unfunded commitments 161 162
151 144 138 Total allowance for credit
losses $1,414 $1,434 $1,450 $1,439 $1,410
Allowance for loan and
lease losses ratio As a percent of portfolio loans and leases
1.36% 1.37% 1.38% 1.38% 1.37% As a percent of nonperforming loans
and leases(a) 190% 212% 188% 185% 252% As a percent of
nonperforming assets(a) 170% 182% 161% 157% 197% (a)
Excludes nonaccrual loans in loans held for sale.
Provision for loan and lease losses totaled $54 million in the
fourth quarter of 2016. The allowance represented 1.36 percent of
total portfolio loans and leases outstanding as of quarter end,
compared with 1.37 percent last quarter, and represented 190
percent of nonperforming loans and leases, and 170 percent of
nonperforming assets.
Provision for loan and lease losses decreased $26 million from
the third quarter of 2016 and $37 million from the fourth quarter
of 2015, impacted by improving criticized assets. The allowance for
loan and lease losses decreased $19 million sequentially. As of
December 31, the reserve allocated to the energy portfolio was
approximately 4.04%, down from approximately 4.95% last
quarter.
As of December September June
March December
Nonperforming Assets and Delinquent
Loans ($ in millions) 2016 2016 2016 2016
2015 Nonaccrual portfolio loans and leases: Commercial and
industrial loans $302 $235 $254 $278 $82 Commercial mortgage loans
27 31 39 51 56 Commercial construction loans - - - - - Commercial
leases 2 - 4 4 - Residential mortgage loans 17 19 27 25 28
Home equity 55 59 61
61 62 Total nonaccrual portfolio loans
and leases (excludes restructured loans) $403 $344 $385 $419 $228
Nonaccrual restructured portfolio commercial loans and leases(b)
192 194 242 210 203 Nonaccrual restructured portfolio
consumer loans and leases 65 63
66 72 75 Total nonaccrual
portfolio loans and leases $660 $601 $693 $701 $506 Repossessed
property 15 13 15 17 18 OREO 63 84 i 97
i 107 i 123 i Total nonperforming portfolio assets(a)
$738 $698 $805 $825 $647 Nonaccrual loans held for sale 4 91 20 3 1
Nonaccrual restructured loans held for sale 9
9 - 2 11 Total
nonperforming assets $751 $798
$825 $830 $659
Restructured Portfolio Consumer loans and leases (accrual) $959
$972 $982 $998 $979 Restructured Portfolio Commercial loans and
leases (accrual)(b) $321 $408 $431 $461 $491 Total loans and
leases 30-89 days past due (accrual) $231 $205 $196 $208 $244 Total
loans and leases 90 days past due (accrual) $84 $76 $65 $73 $75
Nonperforming portfolio loans and leases as a percent of
portfolio loans, leases and other assets, including OREO(a) 0.72%
0.64% 0.74% 0.75% 0.55% Nonperforming portfolio assets as a percent
of portfolio loans and leases and OREO(a) 0.80% 0.75% 0.86% 0.88%
0.70% (a) Does not include nonaccrual loans held for sale.
(b) As of December 31, 2016, excludes $7 million of restructured
accruing loans and $19 million of restructured nonaccrual loans
associated with a consolidated VIE in which the Bancorp has no
continuing credit risk due to the risk being assumed by a third
party. As of September 30, 2016, June 30, 2016, March 31, 2016 and
December 31, 2015, excludes $7 million of restructured accruing
loans and $20 million of restructured nonaccrual loans associated
with a consolidated VIE in which the Bancorp has no continuing
credit risk due to the risk being assumed by a third party.
Total nonperforming portfolio assets increased $40 million, or 6
percent, from the previous quarter to $738 million. Portfolio
nonperforming loans (NPLs) at quarter-end increased $59 million, or
10 percent, from the previous quarter to $660 million, or 0.72
percent of total portfolio loans, leases and OREO.
Commercial portfolio NPLs increased $63 million from last
quarter to $523 million, or 0.93 percent of commercial portfolio
loans, leases and OREO. Consumer portfolio NPLs decreased $4
million from last quarter to $137 million, or 0.38 percent of
consumer portfolio loans, leases and OREO.
OREO balances were down $21 million from the prior quarter to
$63 million, and included $34 million in commercial OREO and $29
million in consumer OREO. Repossessed personal property increased
$2 million from the prior quarter to $15 million.
Loans over 90 days past due and still accruing increased $11
million from the third quarter of 2016 to $84 million. Loans 30-89
days past due of $232 million were up $27 million from the previous
quarter. The above delinquency figures exclude nonaccruals
described previously.
Capital and Liquidity
Position
For the
Three Months Ended December September June March December 2016
2016 2016 2016 2015
Capital
Position Average total Bancorp shareholders' equity to average
assets 11.66% 11.83% 11.60% 11.57% 11.26% Tangible equity(a) 9.82%
9.73% 9.59% 9.51% 9.55% Tangible common equity (excluding
unrealized gains/losses)(a) 8.87% 8.78% 8.64% 8.55% 8.59% Tangible
common equity (including unrealized gains/losses)(a) 8.91% 9.24%
9.18% 8.97% 8.71%
Regulatory capital
ratios:
CET1 capital(b) 10.40% 10.17% 9.94% 9.81% 9.82% Tier I
risk-based capital(b) 11.51% 11.27% 11.03% 10.91% 10.93% Total
risk-based capital(b) 15.00% 14.88% 14.66% 14.66% 14.13% Tier I
leverage 9.90% 9.80% 9.64% 9.57% 9.54% CET1 capital (fully
phased-in)(a)(b) 10.30% 10.09% 9.86% 9.72% 9.72% Book value
per share $19.82 $20.44 $20.09 $19.46 $18.48 Tangible book value
per share(a) $16.60 $17.22 $16.93 $16.32 $15.39 Modified
liquidity coverage ratio (LCR)(c)(d) 128% 115% 110% 118% N/A
(a) Non-GAAP measure; see discussion of non-GAAP and Reg. G
reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing
dated 1/24/17. (b) Under the banking agencies Basel III Final Rule,
assets and credit equivalent amounts of off-balance sheet exposures
are calculated based upon the standardized approach for
risk-weighted assets. The resulting values are added together
resulting in the Bancorp's total risk-weighted assets. (c) Current
period regulatory capital and liquidity ratios are estimated. (d)
The Bancorp became subject to the Modified LCR regulations
effective January 1, 2016.
Capital ratios remained strong and grew during the quarter. The
CET1 ratio was 10.40 percent, the tangible common equity to
tangible assets ratio* was 8.87 percent (excluding unrealized
gains/losses), and 8.91 percent (including unrealized
gains/losses). The Tier I risk-based capital ratio was 11.51
percent, the Total risk-based capital ratio was 15.00 percent, and
the Tier I leverage ratio was 9.90 percent.
Book value per share at December 31, 2016 was $19.82 and
tangible book value per share* was $16.60, compared with the
September 30, 2016 book value per share of $20.44 and tangible book
value per share* of $17.22.
Fifth Third entered into or completed multiple share repurchases
during the quarter. Below is a summary of those share
repurchases.
- On November 7, 2016, Fifth Third
settled the forward contract related to the August 5, 2016 $240
million share repurchase agreement. An additional 1.1 million
shares were repurchased in connection with the completion of this
agreement.
- On December 20, 2016, Fifth Third
initially settled a share repurchase agreement whereby Fifth Third
would purchase $155 million of its outstanding stock. This reduced
fourth quarter common shares outstanding by 4.8 million shares.
Settlement of the forward contract related to this agreement is
expected to occur on or before March 15, 2017.
* Non-GAAP measure; see discussion of non-GAAP and Reg. G
reconciliation beginning on page 32 in Exhibit 99.1 of 8-K filing
dated 1/24/17.
Tax Rate
The effective tax rate was 22.6 percent in the fourth quarter of
2016 compared with 25.6 percent in the third quarter of 2016 and
30.7 percent in the fourth quarter of 2015. The tax rate in the
fourth quarter of 2016 was impacted by a $6 million tax benefit
associated with the early adoption of ASU 2016-09, “Improvements to
Employee Share-Based Payment Accounting”, using the modified
retrospective transition method. Additionally, the early adoption
resulted in incremental tax expense of $1 million in the first
quarter of 2016 and $5 million in the second quarter of 2016. The
tax rate in the third quarter of 2016 was impacted by
Vantiv-related gains, which were partially offset by an $8 million
tax benefit in connection with certain commercial lease
terminations.
Other
On November 21, 2016, Vantiv, Inc. conducted a secondary
offering of 4.8 million shares of its Class A common stock on
behalf of Fifth Third. Vantiv also concurrently repurchased 850,000
shares of Vantiv Class A common stock from Fifth Third. The 5.65
million shares sold by Fifth Third through these transactions were
obtained through the net exercise of the entire remaining warrant
position in Vantiv Holding, LLC and the exchange of those Vantiv
Holding, LLC units for Class A shares of common stock in Vantiv,
Inc. The warrant position gave Fifth Third the right to purchase
approximately 7.8 million Class C units at a $15.98 strike price,
which was settled through the net issuance of 5.65 million units.
For more detail, see the 8-K dated November 22, 2016.
Fifth Third Bank owns approximately 35 million units
representing a 17.9 percent interest in Vantiv Holding, LLC,
convertible into shares of Vantiv, Inc., a publicly traded firm.
Based upon Vantiv’s closing price of $59.62 on December 31, 2016,
our interest in Vantiv was valued at approximately $2.1 billion.
Next month in our 10-K, we will update our disclosure of the
carrying value of our interest in Vantiv stock, which was $404
million as of September 30, 2016. The difference between the market
value and the book value of Fifth Third’s interest in Vantiv’s
shares is not recognized in Fifth Third’s equity or capital.
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 by Thomson Financial and may
be accessed through the Fifth Third Investor Relations website at
www.53.com (click on “About Us” then “Investor Relations”).
Institutional investors can access the call via Thomson Financial’s
password-protected event management site, StreetEvents
(www.streetevents.com).
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 beginning approximately two hours
after the conference call until Tuesday, February 7, 2017 by
dialing 855-859-2056 for domestic access or 404-537-3406 for
international access (passcode 44810588#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of December 31, 2016, the
Company had $142 billion in assets and operates 1,191 full-service
Banking Centers, including 94 Bank Mart® locations, most open seven
days a week, inside select grocery stores and 2,495 ATMs in Ohio,
Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West
Virginia, Georgia and North Carolina. Fifth Third operates four
main businesses: Commercial Banking, Branch Banking, Consumer
Lending, and Wealth & Asset Management. Fifth Third also has a
17.9% interest in Vantiv Holding, LLC. Fifth Third is among the
largest money managers in the Midwest and, as of December 31, 2016,
had $291 billion in assets under care, of which it managed $27
billion for individuals, corporations and not-for-profit
organizations. 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.”
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,” “anticipates,”
“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 from time to time by our Quarterly Reports on Form
10-Q. When considering these forward-looking statements, you should
keep in mind these risks and uncertainties, as well as any
cautionary statements we may make. Moreover, you should treat these
statements as speaking only as of the date they are made and based
only on information then actually known to us. There is a risk that
additional information may become known during the company’s
quarterly closing process or as a result of subsequent events that
could affect the accuracy of the statements and financial
information contained herein.
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 or
real estate market conditions, either nationally or in the states
in which Fifth Third, one or more acquired entities and/or the
combined company do business, weaken or 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 and adequate
sources of funding and liquidity 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; (22) difficulties in separating the operations of any
branches or other assets divested; (23) losses or adverse impacts
on the carrying values of branches and long-lived assets in
connection with their sales or anticipated sales; (24) inability to
achieve expected benefits from branch consolidations and planned
sales within desired timeframes, if at all; (25) ability to secure
confidential information and deliver products and services through
the use of computer systems and telecommunications networks; and
(26) 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.
In this release, we may sometimes provide non-GAAP financial
information. Please note that although non-GAAP financial measures
provide useful insight to analysts, investors and regulators, they
should not be considered in isolation or relied upon as a
substitute for analysis using GAAP measures. We provide GAAP
reconciliations for non-GAAP measures in our earnings release and
presentation, both of which are available in the investor relations
section of our website, www.53.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170124005612/en/
Fifth Third BancorpInvestorsSameer Gokhale,
513-534-2219orMediaLarry Magnesen, 513-534-8055
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