- 2Q17 net income available to common
shareholders of $344 million, or $0.45 per diluted common
share
- Results included a negative $0.01
impact on reported 2Q17 earnings per share resulting from a $9
million pre-tax (~$6 million after-tax) (a) charge related to the
valuation of the Visa total return swap
- Reported net interest income of $939
million; taxable equivalent net interest income of $945 million(b),
up 1% from 1Q17 and up 4% from 2Q16; excluding the 1Q17 card
remediation impact, up 2% from 1Q17(b)
- Taxable equivalent net interest margin
of 3.01%(b), down 1 bp from 1Q17 and up 13 bps from 2Q16; adjusted
net interest margin, excluding the 1Q17 card remediation impact, up
3 bps from 1Q17(b)
- Average portfolio loans and leases of
$92.0 billion, flat from 1Q17 and down 2% from 2Q16
- Noninterest income of $564 million, up
8% from 1Q17 and down 6% from 2Q16
- Noninterest expense of $957 million,
down 3% from both 1Q17 and 2Q16
- Net charge-offs (NCOs) of $64 million,
down $25 million from 1Q17 and down $23 million from 2Q16; NCO
ratio of 0.28% compared to 0.40% in 1Q17 and 0.37% in 2Q16
- Portfolio nonperforming asset (NPA)
ratio of 0.72% down 7 bps from 1Q17 and down 14 bps from 2Q16
- 2Q17 provision expense of $52 million
compared to $74 million in 1Q17 and $91 million in 2Q16
- Common equity Tier 1 (CET1)(c) ratio of
10.63%; fully phased-in CET1 ratio(b)(c) of 10.52%
- Tangible common equity ratio of
9.12%(b); 9.02% excluding unrealized gains/losses(b)
- Book value per share of $20.42 up 1%
from 1Q17 and up 2% from 2Q16; tangible book value per share(b) of
$17.11 up 1% from both 1Q17 and 2Q16
Fifth Third Bancorp (Nasdaq:FITB) today reported second quarter
2017 net income of $367 million versus net income of $305 million
in the first quarter of 2017 and $328 million in the second quarter
of 2016. After preferred dividends, net income available to common
shareholders was $344 million, or $0.45 per diluted share, in the
second quarter of 2017, compared with $290 million, or $0.38 per
diluted share, in the first quarter of 2017, and $305 million, or
$0.39 per diluted share, in the second quarter of 2016.
Second quarter 2017 included:
Income
- ($9 million) charge related to the
valuation of the Visa total return swap
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
Second quarter 2016 included:
Income
- $19 million positive valuation
adjustment on the Vantiv warrant
- $11 million gain on sale of
Pennsylvania branches as part of the previously announced branch
consolidation and sales plan
- $11 million gain on the sale of the
non-strategic agented bankcard loan portfolio
- ($50 million) charge related to the
valuation of the Visa total return swap, primarily reflecting the
rejection of the merchant litigation settlement
Expenses
- ($9 million) in compensation-related
expenses due to retirement eligibility changes
Earnings
Highlights
For the Three Months Ended %
Change June March December September June 2017
2017 2016 2016(d)
2016(d) Seq Yr/Yr
Earnings ($ in millions) Net income attributable to Bancorp
$367 $305 $395 $516 $328 20% 12% Net income available to common
shareholders $344 $290 $372 $501 $305 19% 13%
Common
Share Data Earnings per share, basic $0.46 $0.38 $0.49 $0.66
$0.40 21% 15% Earnings per share, diluted 0.45 0.38 0.49 0.65 0.39
18% 15% Cash dividends per common share 0.14 0.14 0.14 0.13 0.13 -
8% Common shares outstanding (in thousands) 738,873 750,145
750,479 755,582 766,346 (2%) (4%) Average common shares outstanding
(in thousands): Basic 741,401 747,668 746,367 750,886 759,105 (1%)
(2%) Diluted 752,328 760,809 757,704 757,856 764,811 (1%) (2%)
Financial Ratios bps Change Return on average assets
1.05 % 0.88 % 1.11 % 1.44 % 0.92 % 17 13 Return on average common
equity 9.0 7.8 9.7 12.8 8.0 120 100 Return on average tangible
common equity(b) 10.7 9.3 11.6 15.2 9.6 140 110 CET1 capital(c)
10.63 10.76 10.39 10.17 9.94 (13) 69 Tier I risk-based capital(c)
11.76 11.90 11.50 11.27 11.03 (14) 73 CET1 capital (fully-phased
in)(b)(c) 10.52 10.66 10.29 10.09 9.86 (14) 66 Net interest margin
(taxable equivalent)(b) 3.01 3.02 2.86 2.88 2.88 (1) 13 Efficiency
(taxable equivalent)(b) 63.4
67.4 62.8 55.5
65.3 (400)
(190)
“The strength of our second quarter performance reflects our
continued discipline with respect to expenses, credit quality, and
balance sheet management. We are very encouraged by the improvement
in all of our return metrics including our ROA and ROTCE both
sequentially as well as year over year,” said Greg D. Carmichael,
President and CEO of Fifth Third Bancorp.
“The recently announced CCAR results provide further proof of
our commitment to our shareholders. Over the next four quarters we
expect to return a significant amount of capital to our
shareholders based on our strong capital position, the improved
risk profile of our balance sheet and our strong internal capital
generation capacity. As previously announced, we expect to do so
through dividend increases along with a sizeable increase in
capital deployed for share repurchases.”
Income Statement Highlights
($ in millions,
except per-share data) For the Three Months Ended
% Change
June March December September June 2017 2017
2016 2016(d)
2016(d) Seq Yr/Yr
Condensed Statements of Income Net interest income (taxable
equivalent)(b) $945 $939 $909 $913 $908 1% 4% Provision for loan
and lease losses 52 74 54 80 91 (30%) (43%) Total noninterest
income 564 523 620 840 599 8% (6%) Total noninterest expense
957 986 960
973 983
(3%) (3%) Income before income taxes (taxable
equivalent)(b) $500 $402
$515 $700
$433 24% 15%
Taxable equivalent adjustment 6 6 6 6 6 - - Applicable income tax
expense 127 91
114 178 103
40% 23% Net income $367 $305
$395 $516 $324 20% 13% Less: Net income attributable to
noncontrolling interests -
- - -
(4) - (100%) Net
income attributable to Bancorp $367 $305 $395 $516 $328 20% 12%
Dividends on preferred stock 23
15 23 15
23 53% - Net
income available to common shareholders $344
$290 $372
$501 $305 19%
13% Earnings per share, diluted
$0.45 $0.38 $0.49
$0.65 $0.39
18% 15%
Net Interest Income
(Taxable equivalent basis; $ in millions)(b) For the
Three Months Ended % Change June March December
September June 2017 2017
2016 2016 2016
Seq Yr/Yr
Interest Income Total
interest income $1,112 $1,092 $1,058 $1,063 $1,052 2% 6% Total
interest expense 167 153
149 150
144 9% 16% Net interest
income $945 $939
$909 $913
$908 1% 4%
Average
Yield bps Change Yield on interest-earning assets 3.54% 3.51%
3.33% 3.36% 3.34% 3 20 Rate paid on interest-bearing liabilities
0.79% 0.73%
0.70% 0.70% 0.67%
6 12 Net interest rate spread
2.75% 2.78%
2.63% 2.66% 2.67%
(3) 8 Net interest margin 3.01%
3.02% 2.86% 2.88% 2.88% (1) 13
Average Balances %
Change Loans and leases, including held for sale $92,653 $92,791
$93,981 $94,417 $94,807 - (2%) Total securities and other
short-term investments 33,481 33,177 32,567 31,675 32,040 1% 4%
Total interest-earning assets 126,134 125,968 126,548 126,092
126,847 - (1%) Total interest-bearing liabilities 85,320 84,890
84,552 85,193 86,145 1% (1%) Bancorp shareholders' equity(d)
16,615 16,429
16,545 16,883
16,584 1% -
Net interest income for the first quarter of 2017 included the
$12 million reversal of a previously-estimated charge for refunds
to certain bankcard customers. Excluding the impact of this item,
taxable equivalent net interest income in the second quarter of
2017 was up $18 million sequentially, reflecting the impact of
higher short-term market rates during the quarter and a higher day
count. The taxable equivalent net interest margin was 3.01 percent,
up 3 bps from the prior quarter’s adjusted net interest margin,
primarily driven by higher short-term market rates, partially
offset by a higher day count.
Compared to the second quarter of 2016, taxable equivalent net
interest income was up 4 percent, primarily driven by higher
short-term market rates. The net interest margin was up 13 bps from
the second quarter of 2016, also primarily driven by higher
short-term market rates.
Securities
Average securities and other short-term investments were $33.5
billion in the second quarter of 2017 compared to $33.2 billion in
the previous quarter and $32.0 billion in the second quarter of
2016. Average other short-term investments were stable sequentially
at $1.3 billion.
Loans
($ in millions) For the Three
Months Ended % Change June March December September
June 2017 2017 2016
2016 2016
Seq Yr/Yr
Average Portfolio Loans and
Leases Commercial: Commercial and industrial loans $41,601
$41,854 $42,548 $43,116 $43,876 (1%) (5%) Commercial mortgage loans
6,845 6,941 6,957 6,888 6,831 (1%) - Commercial construction loans
4,306 3,987 3,890 3,848 3,551 8% 21% Commercial leases
4,036 3,901
3,921 3,962 3,898
3% 4% Total commercial loans and leases
$56,788 $56,683
$57,316 $57,814
$58,156 - (2%) Consumer:
Residential mortgage loans $15,417 $15,200 $14,854 $14,455 $14,046
1% 10% Home equity 7,385 7,581 7,779 7,918 8,054 (3%) (8%)
Automobile loans 9,410 9,786 10,162 10,508 10,887 (4%) (14%) Credit
card 2,080 2,141 2,180 2,165 2,134 (3%) (3%) Other consumer loans
and leases 892 755
673 651 654
18% 36% Total consumer loans and
leases $35,184 $35,463
$35,648 $35,697
$35,775 (1%) (2%)
Total average portfolio loans and leases $91,972 $92,146 $92,964
$93,511 $93,931 - (2%) Average loans held for sale
$681 $645
$1,017 $906 $876
6% (22%)
Average portfolio loan and lease balances were flat sequentially
and decreased $2.0 billion, or 2 percent, from the second quarter
of 2016. The year-over-year decrease was primarily driven by
declines in commercial and industrial (C&I) and automobile
loans. The year-over-year decline in C&I loans was primarily
due to deliberate exits from certain C&I loans that did not
meet risk-adjusted profitability targets. The year-over-year
decline in automobile loans continues to reflect our decision to
reduce lower-return originations to improve returns on
capital. Period end portfolio loans and leases of $91.4
billion, were also flat sequentially, and decreased $2.5 billion,
or 3 percent, from a year ago. On a year-over-year basis, the
decrease in period end loan balances 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 were flat
sequentially, and decreased $1.4 billion, or 2 percent, from the
second quarter of 2016. Average C&I loans decreased $253
million, or 1 percent, from the prior quarter and decreased $2.3
billion, or 5 percent, from the second quarter of 2016. The decline
in C&I loans was primarily due to the aforementioned deliberate
exits. Average commercial real estate loans increased $223 million,
or 2 percent, from the prior quarter and increased $769 million, or
7 percent, from the second quarter of 2016. Within commercial real
estate, average commercial mortgage balances decreased $96 million
and average commercial construction balances increased $319 million
sequentially. Period end commercial line utilization of 34 percent
was flat from the first quarter of 2017 and decreased 1 percent
from the second quarter of 2016.
Average consumer portfolio loan and lease balances decreased
$279 million, or 1 percent, sequentially and decreased $591
million, or 2 percent, from the second quarter of 2016. This was
primarily driven by average automobile loans which decreased 4
percent sequentially and 14 percent from a year ago. Average
residential mortgage loans increased 1 percent sequentially and 10
percent from the previous year. Average home equity loans decreased
3 percent sequentially and 8 percent from the second quarter of
2016. Average credit card loans decreased 3 percent sequentially
and from the second quarter of 2016.
Deposits
($ in millions) For the Three
Months Ended % Change June March December September
June 2017 2017 2016
2016 2016
Seq Yr/Yr
Average Deposits Demand
$34,915 $35,084 $36,412 $35,918 $35,912 - (3%) Interest checking
26,014 26,760 25,644 24,475 24,714 (3%) 5% Savings 14,238 14,117
13,979 14,232 14,576 1% (2%) Money market 20,278 20,603 20,476
19,706 19,243 (2%) 5% Foreign office(e) 380
454 497
524 484 (16%)
(21%) Total transaction deposits $95,825 $97,018
$97,008 $94,855 $94,929 (1%) 1% Other time
3,745 3,827 3,941
4,020 4,044
(2%) (7%) Total core deposits $99,570 $100,845
$100,949 $98,875 $98,973 (1%) 1% Certificates - $100,000 and over
2,623 2,579 2,539 2,768 2,819 2% (7%) Other
264 162 115
749 467 63%
(43%) Total average deposits $102,457
$103,586 $103,603
$102,392 $102,259
(1%) -
Average core deposits decreased $1.3 billion, or 1 percent,
sequentially and increased $597 million, or 1 percent, from the
second quarter of 2016. Average transaction deposits decreased $1.2
billion, or 1 percent, sequentially and increased $896 million, or
1 percent, from the second quarter of 2016. Sequential performance
was primarily driven by decreases in commercial demand deposit
account balances and money market account balances, partially
offset by higher consumer money market account balances and demand
deposit account balances. The year-over-year increase was primarily
driven by higher interest checking and consumer money market
account balances, partially offset by lower demand deposit account
balances. Other time deposits decreased by 2 percent sequentially
and 7 percent year-over-year.
Average total commercial transaction deposits of $42 billion
decreased 5 percent sequentially and 4 percent from the second
quarter of 2016. Average total consumer transaction deposits of $54
billion increased 2 percent sequentially and increased 5 percent
from the second quarter of 2016.
Wholesale Funding
($ in millions) For the
Three Months Ended % Change June March December
September June 2017 2017
2016 2016 2016
Seq Yr/Yr
Average Wholesale
Funding Certificates - $100,000 and over $2,623 $2,579 $2,539
$2,768 $2,819 2% (7%) Other deposits 264 162 115 749 467 63% (43%)
Federal funds purchased 311 639 280 446 693 (51%) (55%) Other
short-term borrowings 4,194 1,893 1,908 2,171 3,754 NM 12%
Long-term debt 13,273
13,856 15,173 16,102
15,351 (4%)
(14%) Total average wholesale funding $20,665
$19,129 $20,015
$22,236 $23,084
8% (10%)
Average wholesale funding of $20.7 billion increased $1.5
billion, or 8 percent, sequentially and decreased $2.4 billion, or
10 percent, compared with the second quarter of 2016. The
sequential increase in average wholesale funding was primarily
driven by an increase in short-term borrowings to offset a decline
in core deposits. The year-over-year decrease in wholesale funding
was primarily driven by lower long-term debt balances in response
to declining asset balances.
Noninterest Income
($ in millions) For the
Three Months Ended % Change June March December
September June 2017 2017 2016
2016 2016 Seq
Yr/Yr
Noninterest Income Service charges on deposits $139
$138 $141 $143 $138 1% 1% Corporate banking revenue 101 74 101 111
117 36% (14%) Mortgage banking net revenue 55 52 65 66 75 6% (27%)
Wealth and asset management revenue 103 108 100 101 101 (5%) 2%
Card and processing revenue 79 74 79 79 82 7% (4%) Other
noninterest income 85 77 137 336 80 10% 6% Securities gains
(losses), net - - (3) 4 6 - (100%) Securities gains, net -
non-qualifying hedges on mortgage servicing rights
2 - - -
- 100% 100% Total noninterest
income $564 $523
$620 $840 $599 8%
(6%)
Noninterest income of $564 million increased $41 million
sequentially and decreased $35 million compared with prior year
results. The sequential and year-over-year comparisons reflect the
impacts described below.
Noninterest Income excluding certain items
($ in
millions) For the Three Months Ended % Change
June March June 2017 2017 2016
Seq Yr/Yr
Noninterest Income excluding
certain items Noninterest income (U.S. GAAP) $564 $523 $599
Valuation of Visa total return swap 9 13 50 Vantiv warrant
valuation - - (19) Gain on sale of certain branches - - (11) Gain
on sale of the non-strategic agented bankcard loan portfolio - -
(11) Securities (gains) / losses - - (6) Securities gains, net -
non-qualifying
hedges on mortgage servicing rights
(2) - -
Noninterest income excluding
certain items(b) $571 $536
$602 7% (5%)
Excluding the items in the table above, noninterest income of
$571 million increased $35 million, or 7 percent, from the previous
quarter and decreased $31 million, or 5 percent, from the second
quarter of 2016. The sequential increase was primarily due to
increases in corporate banking revenue and other noninterest
income, partially offset by a decrease in wealth and asset
management revenue from the seasonally strong first quarter of
2017. The year-over-year decrease was driven by declines in
mortgage banking net revenue and corporate banking revenue.
Corporate banking revenue of $101 million increased 36 percent
sequentially and decreased 14 percent from the second quarter of
2016. The sequential increase reflected a $31 million lease
remarketing impairment related to an oilfield services exposure in
the first quarter of 2017. Excluding this impairment, corporate
banking revenue decreased 4 percent sequentially, primarily driven
by a decline in institutional sales revenue and foreign exchange
revenue, partially offset by increases in other corporate banking
revenue. The year-over-year decrease was primarily driven by a
decline in foreign exchange fees and loan syndication revenue,
partially offset by an increase in lease remarketing fees.
Mortgage banking net revenue was $55 million in the second
quarter of 2017, up $3 million from the first quarter of 2017 and
down $20 million from the second quarter of 2016. Originations of
$2.3 billion in the current quarter increased 17 percent
sequentially and decreased 16 percent from the second quarter of
2016. Second quarter 2017 originations resulted in $37 million of
origination fees and gains on loan sales, compared with $29 million
during the previous quarter and $54 million during the second
quarter of 2016. 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 off-balance sheet derivatives used to economically
hedge the MSR portfolio) was $18 million this quarter, $23 million
in the first quarter of 2017, and $21 million in the second quarter
of 2016. Gross mortgage servicing fees were $49 million this
quarter, $47 million in the first quarter of 2017, and $50 million
in the second quarter of 2016. MSR decay/amortization was $30
million this quarter, $27 million in the first quarter of 2017, and
$35 million in the second quarter of 2016. Net servicing asset
valuation adjustments resulted in a negative $1 million impact in
the second quarter of 2017, positive $3 million in the first
quarter of 2017, and positive $6 million in the second quarter of
2016.
Wealth and asset management revenue of $103 million decreased 5
percent from the first quarter of 2017 and increased 2 percent from
the second quarter of 2016. The sequential decrease was primarily
driven by seasonally lower tax-related private client services
revenue, partially offset by higher personal asset management
revenue. The year-over-year increase was primarily driven by higher
personal asset management and brokerage revenue.
Card and processing revenue of $79 million in the second quarter
of 2017 increased 7 percent sequentially and decreased 4 percent
from the second quarter of 2016. The sequential increase reflected
an increase in customer transactions and spend volume. The
year-over-year decrease was impacted by higher rewards in the
second quarter of 2017.
Other noninterest income totaled $85 million in the second
quarter of 2017, compared with $77 million in the previous quarter
and $80 million in the second quarter of 2016. The reported results
included the valuation of the Visa total return swap,
Vantiv-related adjustments, and other items as shown in the table
on page 9. For the second quarter of 2017, excluding these items,
other noninterest income of $94 million increased approximately $4
million, or 4 percent, from the first quarter of 2017 and increased
$5 million, or 6 percent, from the second quarter of 2016.
Net gains/losses on investment securities were immaterial in the
second quarter of 2017 and first quarter of 2017, compared with a
$6 million net gain in the second quarter of 2016. Net gains on
securities held as non-qualifying hedges for the MSR portfolio were
$2 million in the second quarter of 2017.
Noninterest
Expense
($ in millions)
For the Three Months Ended % Change June March
December September June 2017 2017 2016
2016 2016 Seq
Yr/Yr
Noninterest Expense Salaries, wages and
incentives $397 $411 $403 $400 $407 (3%) (2%) Employee benefits 86
111 76 78 85 (23%) 1% Net occupancy expense 70 78 73 73 75 (10%)
(7%) Technology and communications 57 58 56 62 60 (2%) (5%)
Equipment expense 29 28 29 29 30 4% (3%) Card and processing
expense 33 30 31 30 37 10% (11%) Other noninterest expense
285 270 292
301 289 6% (1%) Total
noninterest expense $957 $986
$960 $973 $983
(3%) (3%)
Noninterest expense of $957 million decreased $29 million, or 3
percent, compared with the first quarter of 2017 and decreased $26
million, or 3 percent, compared with the second quarter of 2016.
The sequential decrease was driven by lower compensation-related
expenses, primarily attributed to lower long-term incentive
compensation expense and seasonally lower FICA expense, as well as
lower occupancy expense. The sequential improvement was partially
offset by higher other noninterest expense, primarily due to higher
marketing expense associated with the new brand campaign. The
year-over-year decrease was driven by lower compensation-related
expenses, lower occupancy expense, and lower card and processing
expense predominantly due to contract renegotiations. As previously
disclosed, both the sequential and year-over-year comparisons were
impacted by $18 million in long-term incentive compensation expense
recognized in the first quarter of 2017 that would have otherwise
been recognized in the second quarter. This was due to a change in
the grant date for employee share-based compensation.
Credit Quality
($ in millions)
For the Three Months Ended June March December September June 2017
2017 2016 2016
2016
Total net losses charged-off Commercial and
industrial loans ($18) ($36) ($25) ($61) ($39) Commercial mortgage
loans (5) (5) (2) (2) (6) Commercial construction loans - - - - -
Commercial leases (1) (1) (1) - (1) Residential mortgage loans (2)
(5) (2) (2) (2) Home equity (5) (6) (6) (7) (6) Automobile loans
(6) (11) (11) (9) (8) Credit card (22) (22) (19) (20) (21) Other
consumer loans and leases (5)
(3) (7) (6) (4) Total net
losses charged-off ($64) ($89) ($73) ($107) ($87) Total
losses charged-off ($95) ($107) ($97) ($137) ($105) Total
recoveries of losses previously charged-off 31
18 24 30 18
Total net losses charged-off ($64) ($89) ($73) ($107) ($87)
Ratios (annualized) Net losses charged-off as a percent of
average portfolio loans and leases (excluding held for sale) 0.28%
0.40% 0.31% 0.45% 0.37% Commercial 0.17% 0.29% 0.20% 0.43% 0.32%
Consumer 0.46% 0.56%
0.49% 0.49% 0.45%
Net charge-offs were $64 million, or 28 bps of average portfolio
loans and leases on an annualized basis, in the second quarter of
2017 compared with net charge-offs of $89 million, or 40 bps, in
the first quarter of 2017 and $87 million, or 37 bps, in the second
quarter of 2016.
Commercial net charge-offs of $24 million, or 17 bps, decreased
$18 million sequentially. This primarily reflected an $18 million
decrease in net charge-offs of C&I loans. C&I net
charge-offs were positively impacted by higher than normal
recoveries.
Consumer net charge-offs of $40 million, or 46 bps, decreased $7
million sequentially. Compared with the previous quarter, net
charge-offs on residential mortgage loans decreased $3 million. Net
charge-offs on the home equity portfolio decreased $1 million from
the previous quarter. Net charge-offs on the auto portfolio
decreased $5 million from the previous quarter. Net charge-offs on
credit card loans were flat from the first quarter of 2017. Net
charge-offs on other consumer loans increased $2 million
sequentially.
($ in
millions) For the Three Months Ended June
March December September
June 2017 2017 2016
2016 2016
Allowance for Credit
Losses Allowance for loan and lease losses, beginning $1,238
$1,253 $1,272 $1,299 $1,295 Total net losses charged-off (64) (89)
(73) (107) (87) Provision for loan and lease losses
52 74 54 80
91 Allowance for loan and lease losses, ending $1,226 $1,238
$1,253 $1,272 $1,299 Reserve for unfunded commitments,
beginning $159 $161 $162 $151 $144 Provision for unfunded
commitments 3 (2)
(1) 11 7 Reserve for unfunded
commitments, ending $162 $159 $161 $162 $151 Components of
allowance for credit losses: Allowance for loan and lease losses
$1,226 $1,238 $1,253 $1,272 $1,299 Reserve for unfunded commitments
162 159 161
162 151 Total allowance for credit losses
$1,388 $1,397 $1,414 $1,434 $1,450
Allowance for loan and lease
losses ratio As a percent of portfolio loans and leases 1.34%
1.35% 1.36% 1.37% 1.38% As a percent of nonperforming loans and
leases(f) 200% 188% 190% 212% 188% As a percent of nonperforming
assets(f) 185% 172%
170% 182% 161%
Provision for loan and lease losses totaled $52 million in the
second quarter of 2017. As of quarter end the allowance represented
1.34 percent of total portfolio loans and leases outstanding as of
quarter end, compared with 1.35 percent last quarter, and
represented 200 percent of nonperforming loans and leases, and 185
percent of nonperforming assets.
Provision for loan and lease losses decreased $22 million from
the first quarter of 2017 and $39 million from the second quarter
of 2016, primarily driven by improving criticized assets and
nonperforming loans. The allowance for loan and lease losses
decreased $12 million sequentially.
($ in millions) As of
June March December
September June
Nonperforming Assets and Delinquent
Loans 2017 2017 2016
2016 2016 Nonaccrual portfolio loans and
leases: Commercial and industrial loans $225 $251 $302 $235 $254
Commercial mortgage loans 15 21 27 31 39 Commercial construction
loans - - - - - Commercial leases 1 - 2 - 4 Residential mortgage
loans 19 21 17 19 27 Home equity 52
53 55 59 61
Total nonaccrual portfolio loans and leases (excludes restructured
loans) $312 $346 $403 $344 $385 Nonaccrual restructured portfolio
commercial loans and leases(g) 244 251 192 194 242 Nonaccrual
restructured portfolio consumer loans and leases
58 60 65 63
66 Total nonaccrual portfolio loans and leases $614
$657 $660 $601 $693 Repossessed property 11 14 15 13 15 OREO
37 50 i 63 i 84 i
97 i Total nonperforming portfolio assets(f) $662 $721 $738 $698
$805 Nonaccrual loans held for sale 7 7 4 91 20 Nonaccrual
restructured loans held for sale 1
2 9 9 -
Total nonperforming assets $670
$730 $751 $798 $825
Restructured Portfolio consumer loans and leases
(accrual) $933 $950 $959 $972 $982 Restructured Portfolio
commercial loans and leases (accrual)(g) $224 $277 $321 $408 $431
Total loans and leases 30-89 days past due (accrual) $190
$180 $231 $205 $196 Total loans and leases 90 days past due
(accrual) $75 $75 $84 $76 $65 Nonperforming portfolio loans
and leases as a percent of portfolio loans, leases and other
assets, including OREO(f) 0.67% 0.72% 0.72% 0.64% 0.74%
Nonperforming portfolio assets as a percent of portfolio loans and
leases and OREO(f) 0.72% 0.79%
0.80% 0.75% 0.86%
Total nonperforming portfolio assets decreased $59 million, or 8
percent, from the previous quarter to $662 million. Portfolio
nonperforming loans (NPLs) at quarter-end decreased $43 million
from the previous quarter to $614 million, or 0.67 percent of total
portfolio loans, leases and OREO.
Commercial portfolio NPLs decreased $38 million from last
quarter to $485 million, or 0.86 percent of commercial portfolio
loans, leases and OREO. Consumer portfolio NPLs decreased $5
million from last quarter to $129 million, or 0.37 percent of
consumer portfolio loans, leases and OREO.
OREO balances decreased $13 million from the prior quarter to
$37 million, and included $23 million in commercial OREO and $14
million in consumer OREO. Repossessed personal property decreased
$3 million from the prior quarter to $11 million.
Loans over 90 days past due and still accruing were flat from
the first quarter of 2017 at $75 million. Loans 30-89 days past due
of $190 million increased $10 million from the previous
quarter.
Capital and Liquidity Position
For the Three Months
Ended June March December September June 2017 2017
2016 2016 2016
Capital
Position Average total Bancorp shareholders' equity to average
assets 11.84% 11.72% 11.66% 11.83% 11.60% Tangible equity(b) 9.98%
10.12% 9.82% 9.73% 9.59% Tangible common equity (excluding
unrealized gains/losses)(b) 9.02% 9.15% 8.87% 8.78% 8.64% Tangible
common equity (including unrealized gains/losses)(b) 9.12% 9.20%
8.91% 9.24% 9.18%
Regulatory capital
ratios:
CET1 capital(c) 10.63% 10.76% 10.39% 10.17% 9.94% Tier I
risk-based capital(c) 11.76% 11.90% 11.50% 11.27% 11.03% Total
risk-based capital(c) 15.22% 15.45% 15.02% 14.88% 14.66% Tier I
leverage 10.07% 10.15% 9.90% 9.80% 9.64% CET1 capital (fully
phased-in)(b)(c) 10.52% 10.66% 10.29% 10.09% 9.86% Book
value per share $20.42 $20.13 $19.82 $20.44 $20.09 Tangible book
value per share(b) $17.11 $16.89 $16.60 $17.22 $16.93
Modified liquidity coverage ratio (LCR)(h)
122% 119% 128% 115%
110%
Capital ratios remained strong during the quarter. The CET1
ratio was 10.63 percent, the tangible common equity to tangible
assets ratio(b) was 9.02 percent (excluding unrealized
gains/losses), and 9.12 percent (including unrealized
gains/losses). The Tier I risk-based capital ratio was 11.76
percent, the Total risk-based capital ratio was 15.22 percent, and
the Tier I leverage ratio was 10.07 percent.
Book value per share at June 30, 2017 was $20.42 and tangible
book value per share(b) was $17.11, compared with the March 31,
2017 book value per share of $20.13 and tangible book value per
share(b) of $16.89.
On May 1, 2017, Fifth Third initially settled a share repurchase
agreement whereby Fifth Third would purchase $342 million of its
outstanding stock. This reduced second quarter common shares
outstanding by 11.6 million shares. Settlement of the forward
contract related to this agreement is expected to occur on or
before July 26, 2017.
On June 28, 2017, Fifth Third announced that the Board of
Governors of the Federal Reserve System did not object to Fifth
Third’s 2017 CCAR capital plan for the period beginning July 1,
2017 and ending June 30, 2018. Fifth Third’s capital plan included
the following capital actions related to common dividends and share
repurchases:
- The increase in the quarterly common
stock dividend to $0.16 from $0.14 beginning 3Q 2017 and to $0.18
beginning 2Q 2018, a 29 percent increase over the current dividend
rate
- The repurchase of common shares in an
amount up to $1.161 billion, or a 76 percent increase over the 2016
capital plan. These repurchases include:
- $88 million in repurchases related to
share issuances under employee benefit plans
- $48 million in repurchases related to
previously-recognized Vantiv tax receivable agreement (“TRA”)
transaction after-tax gains
- The additional ability to repurchase
common shares in the amount of any after-tax capital generated from
the sale of Vantiv, Inc. (“Vantiv”) common stock
- The additional ability to repurchase
common shares in the amount of any after-tax cash income generated
from the termination and settlement of gross cash flows from
existing TRAs with Vantiv or potential future TRAs that may be
generated from additional sales of Vantiv
Tax Rate
The effective tax rate was 25.9 percent in the second quarter of
2017 compared with 22.9 percent in the first quarter of 2017 and
23.9 percent in the second quarter of 2016.
Other
Fifth Third Bank owns approximately 35 million units
representing a 17.7 percent interest in Vantiv Holding, LLC,
convertible into shares of Vantiv, Inc., a publicly traded firm.
Based upon Vantiv’s closing price of $63.34 on June 30, 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 $430 million as of
March 31, 2017. 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 10:00 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 August 4, 2017 by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
44812729#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of June 30, 2017, the Company
had $141 billion in assets and operates 1,157 full-service Banking
Centers, and 2,461 Fifth Third branded ATMs in Ohio, Kentucky,
Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia,
Georgia and North Carolina. In total, Fifth Third provides its
customers with access to more than 45,000 fee-free ATMs across the
United States. Fifth Third operates four main businesses:
Commercial Banking, Branch Banking, Consumer Lending, and Wealth
& Asset Management. Fifth Third also has a 17.7% interest in
Vantiv Holding, LLC. Fifth Third is among the largest money
managers in the Midwest and, as of June 30, 2017, had $330 billion
in assets under care, of which it managed $34 billion for
individuals, corporations and not-for-profit organizations through
its Trust and Registered Investment Advisory businesses. Investor
information and press releases can be viewed at www.53.com. Fifth
Third’s common stock is traded on the NASDAQ® Global Select Market
under the symbol “FITB.”
Earnings Release End Notes
(a) Assumes a 35% tax rate. (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 07/21/17. (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 $5 million and $0 were reclassified from capital
surplus to applicable income tax expense and average common shares
outstanding – diluted were adjusted at 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
June 30, 2017, 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, and June
30, 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/20170721005249/en/
Fifth Third BancorpInvestorsSameer Gokhale,
513-534-2219orMediaLarry Magnesen, 513-534-8055
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