- 1Q17 net income available to common
shareholders of $290 million, or $0.38 per diluted common
share
- Results included the following items
which had a net neutral impact on reported 1Q17 earnings per share:
- A $13 million pre-tax (~$8 million
after-tax)(a) charge related to the valuation of the Visa total
return swap
- A $12 million pre-tax (~$8 million
after-tax)(a) benefit related to the revision to the 4Q16 estimated
charge to net interest income for refunds to certain bankcard
customers
- Reported net interest income of $933
million; taxable equivalent net interest income of $939 million(b),
up 3% from both 4Q16 and 1Q16; excluding the 4Q16 and 1Q17 card
remediation impacts, flat from 4Q16 and up 2% from 1Q16(b)
- Taxable equivalent net interest margin
of 3.02%(b), up 16 bps from 4Q16 and up 11 bps from 1Q16; adjusted
net interest margin, excluding the 4Q16 and 1Q17 card remediation
impact, of 2.98%(b), up 7 bps both from 4Q16 and 1Q16
- Average portfolio loans and leases of
$92.1 billion, down 1% from 4Q16 and down 1% from 1Q16
- Noninterest income of $523 million
compared with $620 million in 4Q16 and $637 million in 1Q16;
sequential decline primarily driven by the $33 million annual
payment recognized from Vantiv pursuant to the tax receivable
agreement in the prior quarter and other items mentioned on page
9
- Noninterest expense of $986 million, up
3% from 4Q16 and flat from 1Q16; sequential increase primarily
driven by seasonally higher compensation-related expenses and $18
million in long-term incentive expense that would have otherwise
been recognized in the second quarter without a change in the grant
date
- Net charge-offs (NCOs) of $89 million,
up $16 million from 4Q16 and down $7 million from 1Q16; NCO ratio
of 0.40% compared to 0.31% in 4Q16 and 0.42% in 1Q16
- Portfolio nonperforming asset (NPA)
ratio of 0.79% down 1 bp from 4Q16 and down 9 bps from 1Q16
- 1Q17 provision expense of $74 million
compared to $54 million in 4Q16 and $119 million in 1Q16
- Common equity Tier 1 (CET1)(c) ratio of
10.76%; fully phased-in CET1 ratio(b)(c) of 10.66%
- Tangible common equity ratio of
9.20%(b); 9.15% excluding unrealized gains/losses(b)
- Book value per share of $20.13 up 2%
from 4Q16 and up 3% from 1Q16; tangible book value per share(b) of
$16.89 up 2% from 4Q16 and up 3% from 1Q16
Fifth Third Bancorp (Nasdaq: FITB) today reported first quarter
2017 net income of $305 million versus net income of $395 million
in the fourth quarter of 2016 and $326 million in the first quarter
of 2016. After preferred dividends, net income available to common
shareholders was $290 million, or $0.38 per diluted share, in the
first quarter of 2017, compared with $372 million, or $0.49 per
diluted share, in the fourth quarter of 2016, and $311 million, or
$0.40 per diluted share, in the first quarter of 2016.
First quarter 2017 included:
Income
- $12 million benefit related to the
revision to the 4Q16 estimated charge to net interest income for
refunds to certain bankcard customers
- ($13 million) charge related to the
valuation of the Visa total return swap
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 estimated refunds to be 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.
First quarter 2016 included:
Income
- $47 million positive valuation
adjustment on the remaining Vantiv warrant
- $8 million gain on sale of certain St.
Louis branches as part of the previously announced branch
consolidation and sales plan
- $1 million benefit related to the
valuation of the Visa total return swap
Expenses
- ($15 million) in severance expense,
primarily consisting of $14 million related to the voluntary early
retirement program
Earnings Highlights
For the Three
Months Ended % Change March December September
June March 2017 2016
2016(d) 2016(d) 2016(d) Seq Yr/Yr
Earnings ($ in millions) Net income attributable to Bancorp
$305 $395 $516 $328 $326 (23%) (6%) Net income available to common
shareholders $290 $372 $501 $305 $311 (22%) (7%)
Common
Share Data Earnings per share, basic $0.38 $0.49 $0.66 $0.40
$0.40 (22%) (5%) Earnings per share, diluted 0.38 0.49 0.65 0.39
0.40 (22%) (5%) Cash dividends per common share 0.14 0.14 0.13 0.13
0.13 - 8% Common shares outstanding (in thousands) 750,145
750,479 755,582 766,346 770,471 - (3%) Average common shares
outstanding (in thousands): Basic 747,668 746,367 750,886 759,105
773,564 - (3%) Diluted 760,809 757,704 757,856 764,811 777,758 -
(2%)
Financial Ratios bps Change Return on average
assets 0.88 % 1.11 % 1.44 % 0.92 % 0.93 % (23) (5) Return on
average common equity 7.8 9.7 12.8 8.0 8.3 (190) (50) Return on
average tangible common equity(b) 9.3 11.6 15.2 9.6 9.9 (230) (60)
CET1 capital(c) 10.76 10.39 10.17 9.94 9.81 37 95 Tier I risk-based
capital(c) 11.90 11.50 11.27 11.03 10.91 40 99 CET1 capital
(fully-phased in)(b)(c) 10.66 10.29 10.09 9.86 9.72 37 94 Net
interest margin (taxable equivalent)(b) 3.02 2.86 2.88 2.88 2.91 16
11 Efficiency (taxable equivalent)(b) 67.4
62.8 55.5 65.3 63.8
460 360
“During the first quarter we continued to make progress towards
our long term performance goals under North Star,” said Greg D.
Carmichael, President and CEO of Fifth Third Bancorp.
“Our net interest margin continued to improve as our balance
sheet positioning allowed us to benefit from increased short term
market rates. The growth in our net interest income and our focus
on expense management are indicative of our ability to achieve
positive operating leverage. Credit quality metrics also continue
to support a benign credit outlook for the foreseeable future.”
Income Statement Highlights
($ in millions,
except per-share data) For the Three Months Ended
% Change March December September June
March 2017 2016 2016(d) 2016(d)
2016(d) Seq Yr/Yr
Condensed Statements of
Income Net interest income
(taxable equivalent)(b) $939 $909 $913 $908 $909 3% 3% Provision
for loan and lease losses 74 54 80 91 119 37% (38%) Total
noninterest income 523 620 840 599 637 (16%) (18%) Total
noninterest expense 986 960 973 983
986 3% - Income before income taxes (taxable
equivalent)(b) $402 $515 $700 $433
$441 (22%) (9%) Taxable equivalent
adjustment 6 6 6 6 6 - - Applicable income tax expense 91
114 178 103 109 (20%)
(17%) Net income $305 $395 $516 $324 $326 (23%) (6%) Less: Net
income attributable to noncontrolling interests - -
- (4) - - - Net income
attributable to Bancorp $305 $395 $516 $328 $326 (23%) (6%)
Dividends on preferred stock 15 23 15
23 15 (35%) - Net income available to common
shareholders $290 $372 $501 $305
$311 (22%) (7%) Earnings per share, diluted
$0.38 $0.49 $0.65 $0.39 $0.40
(22%) (5%)
Net Interest Income
(Taxable equivalent basis; $ in millions)(b) For the
Three Months Ended % Change March December
September June March 2017 2016
2016 2016 2016 Seq Yr/Yr
Interest Income Total interest income $1,092 $1,058 $1,063
$1,052 $1,044 3% 5% Total interest expense 153
149 150 144 135
3% 13% Net interest income $939
$909 $913 $908 $909
3% 3%
Average Yield bps Change
Yield on interest-earning assets 3.51% 3.33% 3.36% 3.34% 3.34% 18
17 Rate paid on interest-bearing liabilities 0.73%
0.70% 0.70% 0.67%
0.64% 3 9 Net interest rate spread
2.78% 2.63% 2.66% 2.67%
2.70% 15 8 Net interest margin
3.02% 2.86% 2.88% 2.88% 2.91% 16 11
Average Balances
% Change Loans and leases, including held for sale $92,791 $93,981
$94,417 $94,807 $94,078 (1%) (1%) Total securities and other
short-term investments 33,177 32,567 31,675 32,040 31,573 2% 5%
Total interest-earning assets 125,968 126,548 126,092 126,847
125,651 - - Total interest-bearing liabilities 84,890 84,552 85,193
86,145 85,450 - (1%) Bancorp shareholders' equity(d) 16,429
16,545 16,883 16,584
16,376 (1%) -
Net interest income for the fourth quarter of 2016 included a
$16 million estimated charge for refunds to certain bankcard
customers. In the first quarter of 2017 with the completion of the
analysis, this charge was revised and resulted in a $12 million
reversal of the prior charge. Excluding the impact of these items,
net interest income was up $2 million from the fourth quarter of
2016, reflecting higher short-term market rates and lower wholesale
funding balances, partially offset by declining loan balances and a
lower day count. The adjusted net interest margin was 2.98 percent,
up 7 bps from the prior quarter’s adjusted net interest margin,
primarily driven by higher short-term market rates and a lower day
count, partially offset by lower investment yields resulting from
lower net discount accretion.
Compared to the first quarter of 2016, adjusted taxable
equivalent net interest income was up 2 percent, primarily driven
by higher short-term market rates. The adjusted net interest margin
was up 7 bps from the first quarter of 2016, driven primarily by
higher short-term market rates.
Securities
Average securities and other short-term investments were $33.2
billion in the first quarter of 2017 compared to $32.6 billion in
the previous quarter and $31.6 billion in the first quarter of
2016. Average balances of other short-term investments decreased by
$502 million sequentially to $1.3 billion.
Loans
($ in millions) For the
Three Months Ended % Change March December
September June March 2017 2016
2016 2016 2016 Seq Yr/Yr
Average Portfolio Loans and Leases Commercial: Commercial
and industrial loans $41,854 $42,548 $43,116 $43,876 $43,089 (2%)
(3%) Commercial mortgage loans 6,941 6,957 6,888 6,831 6,886 - 1%
Commercial construction loans 3,987 3,890 3,848 3,551 3,297 2% 21%
Commercial leases 3,901 3,921
3,962 3,898 3,874 (1%)
1% Total commercial loans and leases $56,683
$57,316 $57,814 $58,156
$57,146 (1%) (1%) Consumer: Residential
mortgage loans $15,200 $14,854 $14,455 $14,046 $13,788 2% 10% Home
equity 7,581 7,779 7,918 8,054 8,217 (3%) (8%) Automobile loans
9,786 10,162 10,508 10,887 11,283 (4%) (13%) Credit card 2,141
2,180 2,165 2,134 2,179 (2%) (2%) Other consumer loans and leases
755 673 651 654
662 12% 14% Total consumer loans
and leases $35,463 $35,648
$35,697 $35,775 $36,129
(1%) (2%) Total average portfolio loans and leases $92,146
$92,964 $93,511 $93,931 $93,275 (1%) (1%) Average loans held
for sale $645 $1,017 $906
$876 $803 (37%) (20%)
Average portfolio loan and lease balances decreased $818
million, or 1 percent, sequentially and decreased $1.1 billion, or
1 percent, from the first quarter of 2016. The sequential and
year-over-year decrease was primarily driven by declines in
automobile and commercial and industrial (C&I) loans. The
decline in auto loans continues to reflect our 2016 decision to
reduce lower-return auto loan originations to improve returns on
shareholders’ equity. The decline in C&I loans was partially
due to deliberate exits from certain C&I loans that did not
meet risk-adjusted profitability targets, as well as softer loan
demand. Period end portfolio loans and leases of $91.6 billion
decreased $470 million, or 1 percent, sequentially and $2.0
billion, or 2 percent, from a year ago. On both a sequential and
year-over-year basis, the average and period end loan decrease was
primarily due to declines in C&I and automobile loans,
partially offset by increases in residential mortgage and
commercial construction loans.
Average commercial portfolio loan and lease balances decreased
$633 million, or 1 percent, sequentially, and were down $463
million, or 1 percent, from the first quarter of 2016. Average
C&I loans decreased $694 million, or 2 percent, from the prior
quarter and decreased $1.2 billion, or 3 percent, from the first
quarter of 2016. Average commercial real estate loans increased $81
million, or 1 percent, from the prior quarter and increased $745
million, or 7 percent, from the first quarter of 2016. Within
commercial real estate, average commercial mortgage balances
decreased $16 million and average commercial construction balances
increased $97 million sequentially. Period end commercial line
utilization of 34% was flat from the fourth quarter of 2016 and
decreased 1 percent from the first quarter of 2016.
Average consumer portfolio loan and lease balances were down
$185 million, or 1 percent, sequentially and decreased $666
million, or 2 percent, from the first quarter of 2016. This was
primarily driven by average automobile loans which decreased 4
percent sequentially and 13 percent from a year ago. Average
residential mortgage loans increased 2 percent sequentially and 10
percent from the previous year. Average home equity loans decreased
3 percent sequentially and 8 percent from the first quarter of
2016. Average credit card loans decreased 2 percent sequentially
and decreased 2 percent from the first quarter of 2016.
Deposits
($ in millions)
For the Three Months Ended % Change March
December September June March
2017 2016 2016 2016 2016 Seq
Yr/Yr
Average Deposits Demand $35,084 $36,412 $35,918
$35,912 $35,201 (4%) - Interest checking 26,760 25,644 24,475
24,714 25,740 4% 4% Savings 14,117 13,979 14,232 14,576 14,601 1%
(3%) Money market 20,603 20,476 19,706 19,243 18,655 1% 10% Foreign
office(e) 454 497 524
484 483 (9%) (6%) Total
transaction deposits $97,018 $97,008 $94,855 $94,929 $94,680 - 2%
Other time 3,827 3,941 4,020
4,044 4,035 (3%)
(5%) Total core deposits $100,845 $100,949 $98,875 $98,973 $98,715
- 2% Certificates - $100,000 and over 2,579 2,539 2,768 2,819 2,815
2% (8%) Other 162 115 749
467 - 41% NM Total
average deposits $103,586 $103,603
$102,392 $102,259 $101,530
- 2%
Average core deposits were flat sequentially and increased $2.1
billion, or 2 percent, from the first quarter of 2016. Average
transaction deposits were also flat sequentially and increased $2.3
billion, or 2 percent, from the first quarter of 2016. Sequential
performance was primarily driven by increases in commercial and
consumer interest checking account balances, offset by lower
commercial demand deposit account balances. The year-over-year
increase was primarily driven by higher consumer money market and
interest checking account balances, partially offset by lower
savings account balances. Other time deposits decreased by 3
percent sequentially and 5 percent year-over-year.
Average total commercial transaction deposits of $44 billion
decreased 3 percent sequentially and decreased 1 percent from the
first quarter of 2016. Average total consumer transaction deposits
of $53 billion increased 2 percent sequentially and increased 5
percent from the first quarter of 2016.
Wholesale Funding
($ in millions)
For the Three Months Ended % Change March
December September June March
2017 2016 2016 2016 2016
Seq Yr/Yr
Average Wholesale Funding Certificates -
$100,000 and over $2,579 $2,539 $2,768 $2,819 $2,815 2% (8%) Other
deposits 162 115 749 467 - 41% NM Federal funds purchased 639 280
446 693 608 NM 5% Other short-term borrowings 1,893 1,908 2,171
3,754 3,564 (1%) (47%) Long-term debt 13,856
15,173 16,102 15,351
14,949 (9%) (7%) Total average wholesale
funding $19,129 $20,015 $22,236
$23,084 $21,936 (4%)
(13%)
Average wholesale funding of $19.1 billion decreased $886
million, or 4 percent, sequentially and decreased $2.8 billion, or
13 percent, compared with the first quarter of 2016. The sequential
decrease in average wholesale funding was primarily driven by a
decline in long-term debt reflecting the full quarter impact of
debt maturing in the previous quarter as well as debt maturing at
the beginning of the current quarter. The year-over-year decline in
wholesale funding was primarily driven by lower short-term
borrowings and debt maturities in response to declining asset
balances.
Noninterest Income
($ in millions) For the Three Months Ended %
Change March December September June
March 2017 2016 2016 2016
2016 Seq Yr/Yr
Noninterest Income Service
charges on deposits $138 $141 $143 $138 $137 (2%) 1% Corporate
banking revenue 74 101 111 117 102 (27%) (27%) Mortgage banking net
revenue 52 65 66 75 78 (20%) (33%) Wealth and asset management
revenue 108 100 101 101 102 8% 6% Card and processing revenue 74 79
79 82 79 (6%) (6%) Other noninterest income 77 137 336 80 136 (44%)
(43%) Securities gains (losses), net - (3) 4
6 3 NM NM Total noninterest income
$523 $620 $840 $599 $637
(16%) (18%)
Noninterest income of $523 million decreased $97 million
sequentially and decreased $114 million compared with prior year
results. The sequential and year-over-year comparisons reflect the
impacts described below.
Noninterest Income excluding certain items
($ in millions) For the Three Months Ended %
Change March December March 2017
2016 2016 Seq Yr/Yr
Noninterest Income
excluding certain items Noninterest income (U.S. GAAP) $523
$620 $637 Valuation of Visa total return swap 13 (6) (1) Gain on
Vantiv warrant actions - (9) - Gain on sale of certain branches - -
(8) Vantiv warrant valuation - - (47) Securities (gains) / losses
- 3 (3)
Noninterest income excluding certain items(b) $536
$608 $578 (12%) (7%)
Excluding the items in the table above, noninterest income of
$536 million decreased $72 million, or 12 percent, from the
previous quarter and decreased $42 million, or 7 percent, from the
first quarter of 2016. The sequential decrease was primarily due to
the $33 million annual payment recognized from Vantiv pursuant to
the tax receivable agreement in the fourth quarter of 2016, and
decreases in corporate banking revenue and mortgage banking net
revenue, partially offset by an increase in wealth and asset
management revenue. The year-over-year decrease was driven by
declines in corporate banking revenue and mortgage banking net
revenue.
Service charges on deposits of $138 million decreased 2 percent
from the fourth quarter of 2016, and increased 1 percent compared
with the first quarter of 2016. The sequential decrease was
primarily driven by a seasonal decrease in retail service charges.
The increase from the first quarter of 2016 was primarily due to
both increases in commercial and retail service charges.
Corporate banking revenue of $74 million decreased 27 percent
both sequentially and from the first quarter of 2016. The
sequential and year-over-year decreases were primarily driven by a
$31 million lease remarketing impairment related to an oilfield
services exposure. Excluding the impact of the lease impairment,
corporate banking revenue increased 4 percent compared to the
fourth quarter of 2016 and increased 3 percent from the first
quarter of 2016. The sequential and year-over-year performance was
driven by increases in institutional sales and syndication fees,
partially offset by a decrease in foreign exchange fees.
Mortgage banking net revenue was $52 million in the first
quarter of 2017, down $13 million from the fourth quarter of 2016
and down $26 million from the first quarter of 2016. Originations
of $1.9 billion in the current quarter decreased 29 percent
sequentially and increased 10 percent from the first quarter of
2016. First quarter 2017 originations resulted in $29 million of
origination fees and gains on loan sales, compared with $30 million
during the previous quarter and $42 million during the first
quarter of 2016. Effective January 1, 2017, the Bancorp elected to
measure its MSR portfolio at fair value rather than at amortized
cost. Net mortgage servicing revenue (which consists of gross
mortgage servicing fees, MSR decay/amortization, net valuation
adjustments on MSRs and mark-to-market adjustments on free-standing
derivatives used to economically hedge the MSR portfolio) was $23
million this quarter, $35 million in the fourth quarter of 2016,
and $36 million in the first quarter of 2016. Gross mortgage
servicing fees were $47 million this quarter, $48 million in the
fourth quarter of 2016, and $52 million in the first quarter of
2016. MSR decay/amortization was $27 million this quarter, $35
million in the fourth quarter of 2016, and $27 million in the first
quarter of 2016. Net servicing asset valuation adjustments resulted
in a positive $3 million impact in the first quarter of 2017,
positive $23 million in the fourth quarter of 2016, and positive
$11 million in the first quarter of 2016.
Wealth and asset management revenue of $108 million increased 8
percent from the fourth quarter of 2016 and increased 6 percent
from the first quarter of 2016. The sequential increase was
primarily driven by strong brokerage revenue and seasonally strong
tax-related private client service revenue. The year-over-year
increase was primarily driven by higher personal asset management
and brokerage revenue.
Card and processing revenue of $74 million in the first quarter
of 2017 decreased 6 percent both sequentially and from the first
quarter of 2016. The sequential decrease reflected lower
transaction volumes compared with seasonally strong fourth quarter
volumes, while the year-over-year decrease was impacted by higher
reward expense and the sale of the agent bankcard portfolio in the
second quarter of last year.
Other noninterest income totaled $77 million in the first
quarter of 2017, compared with $137 million in the previous quarter
and $136 million in the first quarter of 2016. The reported results
included the valuation of the Visa total return swap, the gain on
sale of certain branches and Vantiv-related adjustments shown in
the table on page 9. For the first quarter of 2017, excluding these
items, other noninterest income of $90 million decreased
approximately $32 million, or 26 percent, from the fourth quarter
of 2016 and was up 13 percent from the first quarter of 2016. The
sequential decrease was primarily due to the $33 million annual
payment recognized from Vantiv pursuant to the tax receivable
agreement in the fourth quarter of 2016.
Net gains on investment securities were immaterial in the first
quarter of 2017, compared with a $3 million net loss in the
previous quarter and a $3 million net gain in the first quarter of
2016.
Noninterest Expense
($ in millions)
For the Three Months Ended % Change March
December September June
March 2017 2016
2016 2016 2016
Seq Yr/Yr
Noninterest Expense Salaries, wages
and incentives $411 $403 $400 $407 $403 2% 2% Employee benefits 111
76 78 85 100 46% 11% Net occupancy expense 78 73 73 75 77 7% 1%
Technology and communications 58 56 62 60 56 4% 4% Equipment
expense 28 29 29 30 30 (3%) (7%) Card and processing expense 30 31
30 37 35 (3%) (14%) Other noninterest expense 270
292 301 289 285
(8%) (5%) Total noninterest expense
$986 $960 $973 $983
$986 3% -
Noninterest expense of $986 million increased $26 million, or 3
percent, compared with the fourth quarter of 2016 and was flat
compared with the first quarter of 2016. The sequential increase
primarily reflected seasonally higher compensation-related expenses
driven by FICA and other employee benefits expense as well as
long-term incentive expense, partially offset by declines in loan
and lease expense, losses and adjustments, and other noninterest
expense. The year-over-year performance was impacted by lower
losses and adjustments, other noninterest expense, and lower card
and processing expense, predominantly due to contract
renegotiations, partially offset by the impact of $18 million in
long-term incentive expense that would have otherwise been
recognized in the second quarter without a change in the grant
date.
Credit Quality
($ in millions) For the Three Months Ended
March December September June
March 2017 2016 2016 2016 2016
Total
net losses charged-off Commercial and industrial loans ($36)
($25) ($61) ($39) ($46) Commercial mortgage loans (5) (2) (2) (6)
(6) Commercial construction loans - - - - - Commercial leases (1)
(1) - (1) (2) Residential mortgage loans (5) (2) (2) (2) (2) Home
equity (6) (6) (7) (6) (8) Automobile loans (11) (11) (9) (8) (9)
Credit card (22) (19) (20) (21) (20) Other consumer loans
and leases (3) (7) (6)
(4) (3) Total net losses charged-off ($89)
($73) ($107) ($87) ($96) Total losses charged-off ($107)
($97) ($137) ($105) ($116) Total recoveries of losses previously
charged-off 18 24 30
18 20 Total net losses charged-off ($89) ($73)
($107) ($87) ($96)
Ratios (annualized)
Net losses charged-off as a percent of
average portfolio loans and leases (excluding held for sale)
0.40% 0.31% 0.45% 0.37% 0.42% Commercial 0.29% 0.20% 0.43% 0.32%
0.38% Consumer 0.56% 0.49%
0.49% 0.45% 0.48%
Net charge-offs were $89 million, or 40 bps of average portfolio
loans and leases on an annualized basis, in the first quarter of
2017 compared with net charge-offs of $73 million, or 31 bps, in
the fourth quarter of 2016 and $96 million, or 42 bps, in the first
quarter of 2016.
Commercial net charge-offs of $42 million, or 29 bps, were up
$14 million sequentially. The increase was primarily due to higher
charge-offs of C&I loans, which increased by $11 million from
the fourth quarter of 2016. Commercial real estate net charge-offs
were up $3 million from the previous quarter.
Consumer net charge-offs of $47 million, or 56 bps, were up $2
million sequentially. Compared with the previous quarter, net
charge-offs on residential mortgage loans were up $3 million. Net
charge-offs on the home equity and auto portfolios were flat from
the previous quarter. Net charge-offs on credit card loans were up
$3 million from the fourth quarter of 2016. Net charge-offs on
other consumer loans of $3 million were down $4 million
sequentially.
($ in millions) For the Three
Months Ended March December September June
March 2017 2016 2016 2016 2016
Allowance for Credit Losses Allowance for loan and lease
losses, beginning $1,253 $1,272 $1,299 $1,295 $1,272 Total net
losses charged-off (89) (73) (107) (87) (96) Provision for loan and
lease losses 74 54 80
91 119 Allowance for loan and lease losses,
ending $1,238 $1,253 $1,272 $1,299 $1,295 Reserve for
unfunded commitments, beginning $161 $162 $151 $144 $138 Provision
for unfunded commitments (2) (1)
11 7 6 Reserve for unfunded
commitments, ending $159 $161 $162 $151 $144 Components of
allowance for credit losses: Allowance for loan and lease losses
$1,238 $1,253 $1,272 $1,299 $1,295 Reserve for unfunded commitments
159 161 162 151
144 Total allowance for credit losses $1,397 $1,414
$1,434 $1,450 $1,439
Allowance for loan and lease losses
ratio As a percent of portfolio loans and leases 1.35% 1.36%
1.37% 1.38% 1.38% As a percent of nonperforming loans and leases(f)
188% 190% 212% 188% 185% As a percent of nonperforming assets(f)
172% 170% 182%
161% 157%
Provision for loan and lease losses totaled $74 million in the
first quarter of 2017. The allowance represented 1.35 percent of
total portfolio loans and leases outstanding as of quarter end,
compared with 1.36 percent last quarter, and represented 188
percent of nonperforming loans and leases, and 172 percent of
nonperforming assets.
Provision for loan and lease losses increased $20 million from
the fourth quarter of 2016, primarily driven by an increase in net
charge-offs, and decreased $45 million from the first quarter of
2016, impacted by improving criticized assets and nonperforming
loans. The allowance for loan and lease losses decreased $15
million sequentially. As of March 31, the reserve allocated to the
energy portfolio was approximately 4.20%, up from approximately
4.04% last quarter.
($ in millions) As of
March December September June
March
Nonperforming Assets and Delinquent Loans 2017
2016 2016 2016 2016 Nonaccrual portfolio loans
and leases: Commercial and industrial loans $251 $302 $235 $254
$278 Commercial mortgage loans 21 27 31 39 51 Commercial
construction loans - - - - - Commercial leases - 2 - 4 4
Residential mortgage loans 21 17 19 27 25 Home equity
53 55 59 61 61 Total nonaccrual
portfolio loans and leases (excludes restructured loans) $346 $403
$344 $385 $419 Nonaccrual restructured portfolio commercial loans
and leases(g) 251 192 194 242 210 Nonaccrual restructured
portfolio consumer loans and leases 60 65 63
66 72 Total nonaccrual portfolio loans and leases
$657 $660 $601 $693 $701 Repossessed property 14 15 13 15 17 OREO
50 63
84
97
107
Total nonperforming portfolio assets(f) $721 $738 $698 $805 $825
Nonaccrual loans held for sale 7 4 91 20 3 Nonaccrual restructured
loans held for sale 2 9 9 - 2
Total nonperforming assets $730 $751 $798
$825 $830 Restructured Portfolio consumer
loans and leases (accrual) $950 $959 $972 $982 $998 Restructured
Portfolio commercial loans and leases (accrual)(g) $277 $321 $408
$431 $461 Total loans and leases 30-89 days past due
(accrual) $180 $231 $205 $196 $208 Total loans and leases 90 days
past due (accrual) $75 $84 $76 $65 $73
Nonperforming portfolio loans and leases
as a percent of portfolio loans, leases and other assets, including
OREO(f)
0.72% 0.72% 0.64% 0.74% 0.75%
Nonperforming portfolio assets as a
percent of portfolio loans and leases and OREO(f)
0.79% 0.80% 0.75% 0.86% 0.88%
Total nonperforming portfolio assets decreased $17 million, or 2
percent, from the previous quarter to $721 million. Portfolio
nonperforming loans (NPLs) at quarter-end decreased $3 million from
the previous quarter to $657 million, or 0.72 percent of total
portfolio loans, leases and OREO.
Commercial portfolio NPLs were flat from last quarter at $523
million, or 0.93 percent of commercial portfolio loans, leases and
OREO. Consumer portfolio NPLs decreased $3 million from last
quarter to $134 million, or 0.38 percent of consumer portfolio
loans, leases and OREO.
OREO balances were down $13 million from the prior quarter to
$50 million, and included $29 million in commercial OREO and $21
million in consumer OREO. Repossessed personal property decreased
$1 million from the prior quarter to $14 million.
Loans over 90 days past due and still accruing decreased $9
million from the fourth quarter of 2016 to $75 million. Loans 30-89
days past due of $180 million were down $51 million from the
previous quarter.
Capital and Liquidity Position
For the Three Months Ended March December
September June March 2017 2016 2016
2016 2016
Capital Position Average total
Bancorp shareholders' equity to average assets 11.72% 11.66% 11.83%
11.60% 11.57% Tangible equity(b) 10.12% 9.82% 9.73% 9.59% 9.51%
Tangible common equity (excluding unrealized gains/losses)(b) 9.15%
8.87% 8.78% 8.64% 8.55% Tangible common equity (including
unrealized gains/losses)(b) 9.20% 8.91% 9.24% 9.18% 8.97%
Regulatory capital
ratios:
CET1 capital(c) 10.76% 10.39% 10.17% 9.94% 9.81% Tier I
risk-based capital(c) 11.90% 11.50% 11.27% 11.03% 10.91% Total
risk-based capital(c) 15.45% 15.02% 14.88% 14.66% 14.66% Tier I
leverage 10.15% 9.90% 9.80% 9.64% 9.57% CET1 capital (fully
phased-in)(b)(c) 10.66% 10.29% 10.09% 9.86% 9.72% Book value
per share $20.13 $19.82 $20.44 $20.09 $19.46 Tangible book value
per share(b) $16.89 $16.60 $17.22 $16.93 $16.32 Modified
liquidity coverage ratio (LCR)(h) 119% 128%
115% 110% 118%
Capital ratios remained strong and grew during the quarter. The
CET1 ratio was 10.76 percent, the tangible common equity to
tangible assets ratio(b) was 9.15 percent (excluding unrealized
gains/losses), and 9.20 percent (including unrealized
gains/losses). The Tier I risk-based capital ratio was 11.90
percent, the Total risk-based capital ratio was 15.45 percent, and
the Tier I leverage ratio was 10.15 percent.
Book value per share at March 31, 2017 was $20.13 and tangible
book value per share(b) was $16.89, compared with the December 31,
2016 book value per share of $19.82 and tangible book value per
share(b) of $16.60.
On February 6, 2017, Fifth Third settled the forward contract
related to the $155 million share repurchase agreement initially
settled on December 20, 2016. An additional 1.1 million shares were
repurchased in connection with the completion of this
agreement.
Tax Rate
The effective tax rate was 22.9 percent in the first quarter of
2017 compared with 22.6 percent in the fourth quarter of 2016 and
25.1 percent in the first quarter of 2016. The tax rate in the
first quarter of 2017 was impacted by an $8 million tax benefit
associated with the exercise and vesting of employee equity awards.
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.
Other
Fifth Third Bank owns approximately 35 million units
representing a 17.8 percent interest in Vantiv Holding, LLC,
convertible into shares of Vantiv, Inc., a publicly traded firm.
Based upon Vantiv’s closing price of $64.12 on March 31, 2017, our
interest in Vantiv was valued at approximately $2.2 billion. Next
month in our 10-Q, we will update our disclosure of the carrying
value of our interest in Vantiv stock, which was $414 million as of
December 31, 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 and may be accessed through
the Fifth Third Investor Relations website at www.53.com (click on
“About Us” then “Investor Relations”).
Those unable to listen to the live webcast may access a webcast
replay through the Fifth Third Investor Relations website at the
same web address. Additionally, a telephone replay of the
conference call will be available after the conference call until
approximately May 9, 2017 by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
44811759#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of March 31, 2017, the
Company had $140 billion in assets and operates 1,155 full-service
Banking Centers, and 2,471 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 17.8% interest in
Vantiv Holding, LLC. Fifth Third is among the largest money
managers in the Midwest and, as of March 31, 2017, had $323 billion
in assets under care, of which it managed $33 billion for
individuals, corporations and not-for-profit organizations through
its Trust, Brokerage and Insurance businesses. Investor information
and press releases can be viewed at www.53.com. Fifth Third’s
common stock is traded on the NASDAQ® Global Select Market under
the symbol “FITB.”
Earnings Release End Notes
(a)
Assumes a 35% tax rate.
(b)
Non-GAAP measure; see discussion of
non-GAAP and Reg. G reconciliation beginning on page 31 in Exhibit
99.1 of 8-K filing dated 04/25/17.
(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)
Net tax deficiencies of $1 million, $5
million and $0 were reclassified 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.
(e)
Includes commercial customer Eurodollar
sweep balances for which the Bancorp pays rates comparable to other
commercial deposit accounts.
(f)
Excludes nonaccrual loans in loans held
for sale.
(g)
As of March 31, 2017 and 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 and March 31, 2016 , 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.
(h)
The Bancorp became subject to the Modified
LCR regulations effective January 1, 2016. (Current period LCR is
estimated)
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) changes in customer preferences or
information technology systems; (12) effects of critical accounting
policies and judgments; (13) changes in accounting policies or
procedures as may be required by the Financial Accounting Standards
Board (FASB) or other regulatory agencies; (14) 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; (15) ability to maintain favorable ratings from rating
agencies; (16) failure of models or risk management systems or
controls; (17) fluctuation of Fifth Third’s stock price; (18)
ability to attract and retain key personnel; (19) ability to
receive dividends from its subsidiaries; (20) potentially dilutive
effect of future acquisitions on current shareholders’ ownership of
Fifth Third; (21) declines in the value of Fifth Third’s goodwill
or other intangible assets; (22) effects of accounting or financial
results of one or more acquired entities; (23) difficulties from
Fifth Third’s investment in, relationship with, and nature of the
operations of Vantiv Holding, LLC; (24) loss of income from any
sale or potential sale of businesses (25) difficulties in
separating the operations of any branches or other assets divested;
(26) losses or adverse impacts on the carrying values of branches
and long-lived assets in connection with their sales or anticipated
sales; (27) inability to achieve expected benefits from branch
consolidations and planned sales within desired timeframes, if at
all; (28) ability to secure confidential information and deliver
products and services through the use of computer systems and
telecommunications networks; and (29) 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 a later slide in this
presentation as well as in our earnings release, 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/20170425005447/en/
Fifth Third BancorpSameer Gokhale (Investors),
513-534-2219orLarry Magnesen (Media), 513-534-8055
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