2017 Earnings Per Diluted Share of
$2.83
- 4Q17 net income available to common
shareholders of $486 million, or $0.67 per diluted common
share
- Results included a net positive $0.15
impact on reported 4Q17 EPS:
― Items primarily resulting from the Tax Cuts
and Jobs Act(a):
- $220 million income tax reduction from
a remeasurement of the deferred tax liability
- $68 million pre-tax (~$44 million
after-tax)(b) impairment related to affordable housing investments
within noninterest expense
- $27 million pre-tax (~$18 million
after-tax)(b) remeasurement related to the tax treatment of
leveraged leases reducing interest income
- $15 million pre-tax (~$10 million
after-tax)(b) expense related to one-time employee bonuses
- $15 million pre-tax (~$10 million
after-tax)(b) contribution to the Fifth Third Foundation
― $20 million tax expense related to a gain
on the sale of Vantiv(c) shares sold in 3Q17
― $11 million pre-tax (~$7 million
after-tax)(b) charge related to the valuation of the Visa total
return swap
- Net interest income (NII) of $956
million; taxable equivalent NII of $963 million(d), down 1% from
3Q17 and up 6% from 4Q16
- Reported results were negatively
impacted by the $27 million leveraged lease remeasurement in 4Q17
and $16 million estimated card refund charge in 4Q16
- Adjusted taxable equivalent NII(d) of
$990 million, up 1% from 3Q17 and up 7% from 4Q16, driven by higher
interest earning asset yields and higher yielding consumer
loans
- Taxable equivalent net interest margin
(NIM) of 3.02%(d), down 5 bps from 3Q17 and up 16 bps from
4Q16
- Reported results were negatively
impacted by 8 bps from the leveraged lease remeasurement in 4Q17
and 5 bps from the estimated card refund charge in 4Q16
- Adjusted taxable equivalent NIM(d) of
3.10%, up 3 bps from 3Q17 and up 19 bps from 4Q16, impacted by
higher securities portfolio and consumer loan yields
- Noninterest income of $577 million,
compared with $1.561 billion in 3Q17 and $620 million in 4Q16
- Sequential decrease primarily reflected
a gain on the sale of Vantiv shares in 3Q17
- Excluding the Vantiv gain, Visa total
return swap charges and securities gains, noninterest income
increased 3% from 3Q17 reflecting a $44 million Vantiv TRA payment
and higher wealth and asset management revenue
- Noninterest expense of $1.073 billion,
up 10% from 3Q17 and up 12 percent from 4Q16
- Sequential increase was driven
primarily by the affordable housing impairment, one-time employee
bonuses, and contribution to the Fifth Third Foundation in
4Q17
- Excluding these items, noninterest
expense of $975 million was flat from 3Q17 reflecting lower other
noninterest expense offset by higher employee benefits
- Average portfolio loans and leases of
$92.3 billion, flat from 3Q17 and down 1% from 4Q16
- Portfolio nonperforming asset (NPA)
ratio of 0.53%, down 7 bps from 3Q17 and down 27 bps from 4Q16
- Net charge-offs (NCOs) of $76 million,
up $8 million from 3Q17 and up $3 million from 4Q16; NCO ratio of
0.33% compared to 0.29% in 3Q17 and 0.31% in 4Q16
- 4Q17 provision expense of $67 million
flat from 3Q17 and up $13 million from 4Q16
- Common equity Tier 1 (CET1)(e) ratio of
10.61%
- Tangible common equity ratio of
8.99%(d); 8.94% excluding unrealized gains/losses(d)
- Book value per share of $21.67, up 2%
from 3Q17 and up 9% 4Q16; tangible book value per share(d) of
$18.10 up 1% from 3Q17 and up 9% from 4Q16
Fifth Third Bancorp (Nasdaq:FITB) today reported full year 2017
net income of $2.2 billion, up 41 percent from net income of $1.6
billion in 2016. After preferred dividends, 2017 net income
available to common shareholders was $2.1 billion, or $2.83 per
diluted share, compared with 2016 net income available to common
shareholders of $1.5 billion, or $1.93 per diluted share. Results
were significantly impacted by Vantiv-related transactions
throughout 2016 and 2017 and items resulting from the Tax Cuts and
Jobs Act in 2017.
Fourth quarter 2017 net income was $509 million, a decrease of
50 percent from net income of $1.014 billion in the third quarter
of 2017 and an increase of 29 percent from net income of $395
million in the fourth quarter of 2016. After preferred dividends,
net income available to common shareholders was $486 million, or
$0.67 per diluted share, in the fourth quarter 2017, compared with
$999 million, or $1.35 per diluted share, in the third quarter of
2017, and $372 million, or $0.49 per diluted share, in the fourth
quarter of 2016. Results were significantly impacted by a
Vantiv-related transaction in the third quarter of 2017 and items
resulting from the Tax Cuts and Jobs Act in the fourth quarter of
2017.
“Our strong fourth quarter and full year 2017 results reflect
continued progress toward achieving our long term financial goals.
Our business strategies are well aligned with the interests of our
shareholders, our customers, our employees, and the communities we
serve. Our balance sheet remains strong and positions us well for
growth in 2018,” said Greg D. Carmichael, President and CEO of
Fifth Third Bancorp.
“The investments that we have made following the passage of the
new tax law demonstrate our commitment to improving the lives of
our employees and our communities. In addition to the immediate
positive impact of lower corporate taxes on our company’s results,
we are optimistic that the new tax law will help to reinvigorate
the economy and support further growth in our businesses.”
“Underlying quarterly performance showed continued NIM
expansion, disciplined expense management, and another quarter of
strong credit metrics. As we discussed at our recent Investor Day,
we have continued to generate positive momentum over the past year.
We remain focused on driving improved shareholder returns in 2018
and beyond as we execute on our strategic initiatives under Project
North Star.”
Earnings
Highlights
For the Three Months Ended
% Change December September June March December 2017
2017 2017 2017
2016 Seq Yr/Yr
Income Statement Data
($ in millions) Net income attributable to Bancorp $509 $1,014
$367 $305 $395 (50%) 29% Net income available to common
shareholders $486 $999 $344 $290 $372 (51%) 31%
Earnings
Per Share Data Average common shares outstanding (in
thousands): Basic 703,372 721,280 741,401 747,668 746,367 (2%) (6%)
Diluted 716,908 733,285 752,328 760,809 757,704 (2%) (5%) Earnings
per share, basic $0.68 $1.37 $0.46 $0.38 $0.49 (50%) 39% Earnings
per share, diluted 0.67 1.35 0.45 0.38 0.49 (50%) 37%
Common Share Data Cash dividends per common share $0.16
$0.16 $0.14 $0.14 $0.14 - 14% Book value per share 21.67 21.30
20.42 20.13 19.82 2% 9% Tangible book value per share(d) 18.10
17.86 17.11 16.89 16.60 1% 9% Common shares outstanding (in
thousands) 693,805 705,474 738,873 750,145 750,479 (2%) (8%)
Financial Ratios bps Change Return on average assets 1.43 %
2.85 % 1.05 % 0.88 % 1.11 % (142) 32 Return on average common
equity 12.7 25.6 9.0 7.8 9.7 (1290) 300 Return on average tangible
common equity(d) 15.2 30.4 10.7 9.3 11.6 (1520) 360 CET1 capital(e)
10.61 10.59 10.63 10.76 10.39 2 22 Tier I risk-based capital(e)
11.74 11.72 11.76 11.90 11.50 2 24 Net interest margin (taxable
equivalent)(d) 3.02 3.07 3.01 3.02 2.86 (5) 16 Efficiency (taxable
equivalent)(d) 69.7 38.4
63.4 67.4 62.8 3130
690
Net Interest Income
(Taxable equivalent basis; $ in millions)(d) For the
Three Months Ended % Change December September June March
December 2017 2017 2017 2017 2016
Seq Yr/Yr
Interest Income Total interest
income $1,151 $1,159 $1,112 $1,092 $1,058 (1%) 9% Total interest
expense
188 182 167 153 149
3% 26% Net interest income
$963 $977
$945 $939 $909 (1%) 6%
Average Yield bps Change Yield on interest-earning assets
3.61% 3.64% 3.54% 3.51% 3.33% (3) 28 Adjusted yield on
interest-earning assets 3.69% 3.64% 3.54% 3.51% 3.33% 5 36 Rate
paid on interest-bearing liabilities 0.88% 0.85% 0.79% 0.73% 0.70%
3 18
Ratios Net interest rate spread 2.73% 2.79%
2.75% 2.78% 2.63% (6) 10 Net interest margin 3.02% 3.07% 3.01%
3.02% 2.86% (5) 16 Adjusted net interest margin 3.10% 3.07% 3.01%
2.98% 2.91% 3 19
Average Balances % Change Loans and
leases, including held for sale $92,865 $92,617 $92,653 $92,791
$93,981 - (1%) Total securities and other short-term investments
33,756 33,826 33,481 33,177 32,567 - 4% Total interest-earning
assets 126,621 126,443 126,134 125,968 126,548 - - Total
interest-bearing liabilities 84,820 85,328 85,320 84,890 84,552
(1%) - Bancorp shareholders' equity
16,493 16,820
16,615 16,429 16,545 (2%) -
Income
Statement Highlights
($ in millions, except per-share data) For the Three
Months Ended % Change December September June March
December 2017 2017 2017 2017 2016
Seq Yr/Yr
Condensed Statements of Income Net
interest income (taxable equivalent)(d) $963 $977 $945 $939 $909
(1%) 6% Provision for loan and lease losses 67 67 52 74 54 - 24%
Total noninterest income 577 1,561 564 523 620 (63%) (7%) Total
noninterest expense 1,073
975 957 986 960 10% 12%
Income before income taxes (taxable equivalent)(d)
$400 $1,496 $500
$402 $515 (73%) (22%) Taxable
equivalent adjustment 7 7 6 6 6 - 17% Applicable income tax
(benefit) expense (116)
475 127 91 114 NM NM Net
income $509 $1,014 $367 $305 $395 (50%) 29% Less: Net income
attributable to noncontrolling interests
- - - - -
NM NM Net income attributable to Bancorp $509 $1,014 $367
$305 $395 (50%) 29% Dividends on preferred stock
23 15 23 15
23 53% - Net income available to common shareholders
$486 $999
$344 $290 $372 (51%) 31% Earnings per
share, diluted $0.67
$1.35 $0.45 $0.38 $0.49 (50%)
37%
Taxable equivalent net interest income of $963 million in the
fourth quarter of 2017 was down $14 million, or 1 percent from the
prior quarter, primarily due to the $27 million impact from the
leveraged lease remeasurement described on page 1. Excluding the
remeasurement, taxable equivalent net interest income of $990
million in the fourth quarter of 2017 was up $13 million, or 1
percent from the prior quarter, reflecting higher interest earning
asset yields as well as the continued shift into higher yielding
consumer loans. The taxable equivalent net interest margin of 3.02
percent was negatively impacted 8 bps from the aforementioned
remeasurement. The adjusted taxable equivalent net interest margin
was 3.10 percent, up 3 bps sequentially, primarily driven by higher
securities portfolio and consumer loan yields, partially offset by
an increase in funding costs associated with deposit rate changes
and the full quarter impact of an auto securitization executed in
third quarter of 2017.
Compared to the fourth quarter of 2016, taxable equivalent net
interest income was up $54 million, or 6 percent, primarily driven
by higher short-term market rates and the $16 million estimated
card refund charge during the fourth quarter of 2016, partially
offset by the aforementioned leveraged lease remeasurement.
Excluding the leveraged lease remeasurement and the estimated card
refund charge, adjusted taxable equivalent net interest income was
up 7 percent. The year-over-year increase was primarily driven by
higher short-term market rates. The taxable equivalent net interest
margin increased 16 bps from the fourth quarter of 2016, primarily
driven by higher short-term market rates and a 5 bps positive
impact from the estimated card refund charge, partially offset by a
negative 8 bps impact from the leveraged lease remeasurement.
Excluding the remeasurement and card refunds impact, adjusted
taxable equivalent net interest margin was up 19 bps from the
fourth quarter of 2016. The year-over-year increase was primarily
driven by higher-short-term market rates.
Securities
Average securities and other short-term investments were $33.8
billion in the fourth quarter of 2017 compared to $33.8 billion in
the previous quarter and $32.6 billion in the fourth quarter of
2016. Available-for-sale securities were $31.8 billion in the
fourth quarter of 2017 up $340 million, or 1 percent, sequentially
and up $637 million, or 2 percent, from the fourth quarter of
2016.
Loans
($ in millions) For the
Three Months Ended % Change December September June
March December 2017 2017 2017 2017 2016
Seq Yr/Yr
Average Portfolio Loans and
Leases Commercial loans and leases: Commercial and industrial
loans $41,438 $41,302 $41,601 $41,854 $42,548 - (3%) Commercial
mortgage loans 6,751 6,807 6,845 6,941 6,957 (1%) (3%) Commercial
construction loans 4,660 4,533 4,306 3,987 3,890 3% 20% Commercial
leases 4,016 4,072 4,036
3,901 3,921 (1%)
2% Total commercial loans and leases $56,865
$56,714 $56,788 $56,683
$57,316 - (1%) Consumer loans and
leases: Residential mortgage loans $15,590 $15,523 $15,417 $15,200
$14,854 - 5% Home equity 7,066 7,207 7,385 7,581 7,779 (2%) (9%)
Automobile loans 9,175 9,267 9,410 9,786 10,162 (1%) (10%) Credit
card 2,202 2,140 2,080 2,141 2,180 3% 1% Other consumer loans and
leases 1,352 1,055 892
755 673 28% NM
Total consumer loans and leases $35,385
$35,192 $35,184 $35,463
$35,648 1% (1%) Total average portfolio loans
and leases $92,250 $91,906 $91,972 $92,146 $92,964 - (1%)
Average loans held for sale $615 $711
$681 $645 $1,017
(14%) (40%)
Average portfolio loan and lease balances were flat sequentially
and decreased 1 percent from the fourth quarter of 2016. Sequential
performance was primarily driven by increases in commercial real
estate and other consumer loans and leases, offset by decreases in
home equity and automobile loans. The year-over-year decrease was
primarily driven by declines in commercial and industrial (C&I)
and automobile loans, partially offset by increases in commercial
real estate and other consumer loans and leases. Period end
portfolio loans and leases of $92.0 billion were flat sequentially
and year-over-year.
Average commercial portfolio loan and lease balances were flat
sequentially, and decreased 1 percent from the fourth quarter of
2016. Sequential performance was primarily driven by an increase in
commercial real estate loans, offset by a decrease in commercial
leases. Average C&I loans were flat sequentially and decreased
3 percent from the fourth quarter of 2016. The year-over-year
decline in C&I loans was primarily due to deliberate exits from
certain C&I loans that did not meet our targeted risk or return
profile. Average commercial real estate loans increased $71
million, or 1 percent, from the prior quarter and increased $564
million, or 5 percent, from the fourth quarter of 2016. Period end
commercial line utilization of 34 percent was flat from both the
third quarter of 2017 and the fourth quarter of 2016.
Average consumer portfolio loan and lease balances were up 1
percent sequentially and decreased 1 percent from the fourth
quarter of 2016. The sequential increase was primarily driven by
the increase in other consumer loans and leases, partially offset
by a decline in average home equity loans. The year-over-year
decrease was primarily driven by the decline in average automobile
loans which continues to reflect a decision to reduce lower-return
originations to improve returns on capital.
Deposits
($ in millions) For the
Three Months Ended % Change December September June
March December 2017 2017 2017 2017 2016
Seq Yr/Yr
Average Deposits Demand $35,519
$34,850 $34,915 $35,084 $36,412 2% (2%) Interest checking 26,992
25,765 26,014 26,760 25,644 5% 5% Savings 13,593 13,889 14,238
14,117 13,979 (2%) (3%) Money market 20,023 20,028 20,278 20,603
20,476 - (2%) Foreign office(f) 323 395
380 454 497
(18%) (35%) Total transaction deposits $96,450 $94,927
$95,825 $97,018 $97,008 2% (1%) Other time 3,792
3,722 3,745 3,827
3,941 2% (4%) Total core deposits
$100,242 $98,649 $99,570 $100,845 $100,949 2% (1%) Certificates -
$100,000 and over 2,429 2,625 2,623 2,579 2,539 (7%) (4%) Other
119 560 264
162 115 (79%) 3% Total average
deposits $102,790 $101,834
$102,457 $103,586 $103,603
1% (1%)
Average core deposits increased 2 percent sequentially and
decreased 1 percent from the fourth quarter of 2016. Average
transaction deposits increased 2 percent sequentially and decreased
1 percent from the fourth quarter of 2016. The sequential increase
was primarily driven by increases in commercial interest checking
deposit and commercial demand deposit account balances, partially
offset by lower consumer savings and commercial money market
account balances. Year-over-year performance was primarily driven
by lower commercial money market and commercial demand deposit
account balances, largely offset by higher consumer money market
and commercial interest checking deposit account balances. Other
time deposits increased by 2 percent sequentially and decreased 4
percent year-over-year.
Average total commercial transaction deposits of $43 billion
increased 4 percent sequentially and decreased 4 percent from the
fourth quarter of 2016. Average total consumer transaction deposits
of $53 billion were flat sequentially and increased 3 percent from
the fourth quarter of 2016.
Wholesale Funding
($ in millions)
For the Three Months Ended % Change December
September June March December 2017 2017 2017
2017 2016 Seq Yr/Yr
Average Wholesale
Funding Certificates - $100,000 and over $2,429 $2,625 $2,623
$2,579 $2,539 (7%) (4%) Other deposits 119 560 264 162 115 (79%) 3%
Federal funds purchased 602 675 311 639 280 (11%) NM Other
short-term borrowings 2,316 4,212 4,194 1,893 1,908 (45%) 21%
Long-term debt 14,631 13,457
13,273 13,856 15,173
9% (4%) Total average wholesale funding
$20,097 $21,529 $20,665
$19,129 $20,015 (7%) -
Average wholesale funding of $20.1 billion decreased $1.4
billion, or 7 percent, sequentially and was flat compared with the
fourth quarter of 2016. The sequential decline was primarily due to
a decrease in other short-term borrowings reflecting higher core
deposit balances, partially offset by an increase in long-term debt
from 3-year bank debt issued in October of 2017. The year-over-year
results reflect an increase in other short-term borrowings, largely
offset by a decrease in long-term debt.
Noninterest Income
($ in millions) For the Three Months Ended %
Change December September June March December 2017 2017
2017 2017 2016 Seq Yr/Yr
Noninterest Income Service charges on deposits $138 $138
$139 $138 $141 - (2%) Corporate banking revenue 77 101 101 74 101
(24%) (24%) Mortgage banking net revenue 54 63 55 52 65 (14%) (17%)
Wealth and asset management revenue 106 102 103 108 100 4% 6% Card
and processing revenue 80 79 79 74 79 1% 1% Other noninterest
income 123 1,076 85 77 137 (89%) (10%) Securities gains (losses),
net 1 - - - (3) NM NM Securities gains (losses), net -
non-qualifying hedges on mortgage servicing rights
(2) 2 2 - - NM NM Total
noninterest income $577 $1,561 $564
$523 $620 (63%) (7%)
Noninterest income of $577 million decreased $984 million
sequentially and decreased $43 million compared with prior year
results. The sequential and year-over-year comparisons reflect the
impact of the following items.
Noninterest Income excluding certain items
($ in millions)
For the Three Months Ended % Change December
September December 2017
2017 2016 Seq Yr/Yr
Noninterest Income excluding certain items Noninterest
income (U.S. GAAP) $577 $1,561 $620 Valuation of Visa total return
swap 11 47 (6) Gain on sale of Vantiv shares - (1,037) - Vantiv
warrant valuation - - (9) Securities (gains) / losses (1)
- 3
Noninterest income excluding certain items(d) $587
$571 $608 3% (3%)
Excluding the items in the table above, noninterest income of
$587 million was up 3 percent from the previous quarter and
decreased 3 percent from the fourth quarter of 2016. The sequential
increase was primarily due to $44 million in revenue recognized
from Vantiv related to the tax receivable agreement in the fourth
quarter of 2017, and an increase in wealth and asset management
revenue. This was partially offset by declines in corporate banking
and mortgage banking revenue. Corporate banking revenue was
negatively impacted by a $25 million lease remarketing impairment
in the fourth quarter of 2017. The year-over-year decrease was
driven by lower corporate banking and mortgage banking revenue.
Corporate banking revenue of $77 million was down 24 percent
both sequentially and year-over-year. The sequential and
year-over-year decreases were primarily driven by the
aforementioned lease remarketing impairment. Excluding the impact
of the lease impairment, corporate banking revenue was flat
sequentially and year-over-year.
Mortgage
Banking Net Revenue
($ in millions) For the Three Months Ended %
Change December September June March December 2017 2017
2017 2017 2016 Seq Yr/Yr
Mortgage Banking Net Revenue Origination fees and gains on
loan sales $32 $40 $37 $29 $30 (20%) 7% Net mortgage servicing
revenue: Gross mortgage servicing fees 54 56 49 47 48 (4%) 13% MSR
amortization - - - - (35) NM NM Net valuation adjustments on MSRs
and (32) (33) (31) (24) 22 (3%) NM free-standing derivatives
purchased to economically hedge MSRs
Net mortgage servicing revenue 22
23 18 23 35 (4%) (37%)
Total mortgage banking net revenue $54 $63
$55 $52 $65 (14%) (17%)
Mortgage banking net revenue was $54 million in the fourth
quarter of 2017, down $9 million from the third quarter of 2017 and
down $11 million from the fourth quarter of 2016. The sequential
decrease was driven by lower origination fees and gains on loan
sales. The year-over-year decrease was driven by a reduction in net
valuation adjustments (including MSR amortization) of $19 million.
Originations of $1.9 billion in the current quarter decreased 10
percent sequentially and decreased 30 percent from the fourth
quarter of 2016.
Wealth and asset management revenue of $106 million increased 4
percent from the third quarter of 2017 and increased 6 percent from
the fourth quarter of 2016. The sequential and year-over-year
increase was primarily driven by higher personal asset management
revenue.
Card and processing revenue of $80 million in the fourth quarter
of 2017 was up 1 percent both sequentially and year-over-year. The
sequential and year-over-year performance reflected increased
credit card spend volume, largely offset by higher rewards.
Other noninterest income totaled $123 million in the fourth
quarter of 2017, compared with $1.076 billion in the previous
quarter and $137 million in the fourth quarter of 2016. The
reported results included Vantiv-related transactions and
adjustments and the valuation of the Visa total return swap in the
table on page 8. For the fourth quarter of 2017, excluding these
items, other noninterest income of $134 million increased
approximately $48 million, or 56 percent, from the third quarter of
2017 and increased $12 million, or 10 percent, from the fourth
quarter of 2016. The sequential increase was primarily due to the
$44 million in revenue recognized from Vantiv related to the tax
receivable agreement in the fourth quarter of 2017. The
year-over-year increase was due to an $11 million increase in the
aforementioned tax receivable agreement.
Net gains on investment securities were $1 million in the fourth
quarter of 2017, compared with no gains or losses in the third
quarter of 2017 and a $3 million net loss in the fourth quarter of
2016. Net gains/losses on securities held as non-qualifying hedges
for the MSR portfolio were net losses of $2 million in the fourth
quarter of 2017 and net gains of $2 million in the third quarter of
2017.
Noninterest Expense
($ in millions) For the Three Months Ended
% Change December September June March December 2017
2017 2017 2017 2016
Seq Yr/Yr
Noninterest Expense Salaries,
wages and incentives $418 $407 $397 $411 $403 3% 4% Employee
benefits 82 77 86 111 76 6% 8% Net occupancy expense 74 74 70 78 73
- 1% Technology and communications 68 62 57 58 56 10% 21% Equipment
expense 29 30 29 28 29 (3%) - Card and processing expense 34 32 33
30 31 6% 10% Other noninterest expense 368
293 285 270 292
26% 26% Total noninterest expense
$1,073 $975 $957
$986 $960 10% 12%
Noninterest expense of $1.073 billion increased $98 million, or
10 percent, compared with the third quarter of 2017, and increased
$113 million, or 12 percent, compared with the fourth quarter of
2016. Results reflected the affordable housing impairment, one-time
employee bonuses, and the Fifth Third Foundation contribution
referenced on page 2. Excluding these items, noninterest expense of
$975 million was flat compared with the third quarter of 2017,
impacted by lower other noninterest expense and salaries, wages and
incentives, offset by higher employee benefits and technology and
communications expense. Excluding the aforementioned items,
noninterest expense increased 2 percent compared to the fourth
quarter of 2016, impacted by higher employee benefits and
technology and communications expense, offset by lower other
noninterest expense.
Summary of Credit Loss
Experience
($ in millions) For the Three Months Ended December
September June March December 2017 2017 2017
2017 2016
Net losses charged-off Commercial and
industrial loans ($32) ($27) ($18) ($36) ($25) Commercial mortgage
loans 1 (3) (5) (5) (2) Commercial leases (1) - (1) (1) (1)
Residential mortgage loans (1) 1 (2) (5) (2) Home equity (4) (3)
(5) (6) (6) Automobile loans (10) (8) (6) (11) (11) Credit card
(20) (20) (22) (22) (19) Other consumer loans and leases
(9) (8) (5) (3)
(7) Total net losses charged-off ($76) ($68) ($64)
($89) ($73) Total losses charged-off ($94) ($85) ($95)
($107) ($97) Total recoveries of losses previously charged-off
18 17 31 18
24 Total net losses charged-off ($76) ($68) ($64)
($89) ($73)
Ratios (annualized) Net losses
charged-off as a percent of average portfolio loans and leases
(excluding held for sale) 0.33% 0.29% 0.28% 0.40% 0.31% Commercial
0.22% 0.21% 0.17% 0.29% 0.20% Consumer 0.51%
0.43% 0.46% 0.56%
0.49%
Net charge-offs were $76 million, or 33 bps of average portfolio
loans and leases on an annualized basis, in the fourth quarter of
2017 compared with net charge-offs of $68 million, or 29 bps, in
the third quarter of 2017 and $73 million, or 31 bps, in the fourth
quarter of 2016.
Commercial net charge-offs of $32 million, or 22 bps, increased
$2 million sequentially. This primarily reflected a $5 million
increase in net charge-offs of C&I loans, partially offset by a
$4 million reduction in net charge-offs of commercial mortgage
loans.
Consumer net charge-offs of $44 million, or 51 bps, increased $6
million sequentially. This primarily reflected a $2 million
increase in net charge-offs on residential mortgage loans and the
automobile loans.
($ in millions)
For the Three Months Ended December September June
March December 2017 2017 2017
2017 2016
Allowance for Credit Losses Allowance for
loan and lease losses, beginning $1,205 $1,226 $1,238 $1,253 $1,272
Total net losses charged-off (76) (68) (64) (89) (73) Provision for
loan and lease losses 67 67 52 74 54 Deconsolidation of a variable
interest entity - (20) -
- - Allowance for loan and lease
losses, ending $1,196 $1,205 $1,226 $1,238 $1,253 Reserve
for unfunded commitments, beginning $157 $162 $159 $161 $162
Provision for unfunded commitments 4
(5) 3 (2) (1) Reserve for
unfunded commitments, ending $161 $157 $162 $159 $161
Components of allowance for credit losses: Allowance for loan and
lease losses $1,196 $1,205 $1,226 $1,238 $1,253 Reserve for
unfunded commitments 161 157
162 159 161 Total allowance for
credit losses $1,357 $1,362 $1,388 $1,397 $1,414
Allowance for
loan and lease losses ratio As a percent of portfolio loans and
leases 1.30% 1.31% 1.34% 1.35% 1.36% As a percent of nonperforming
portfolio loans and leases(g) 274% 238% 200% 188% 190% As a percent
of nonperforming portfolio assets(g) 245%
217% 185% 172%
170%
The provision for loan and lease losses totaled $67 million in
the fourth quarter of 2017, flat sequentially, reflecting
improvement in criticized assets and nonperforming loans, offset by
an increase in net charge-offs and higher period-end portfolio loan
balances. Provision expense increased $13 million from the fourth
quarter of 2016.
As of quarter end, the allowance for loan and lease loss ratio
represented 1.30 percent of total portfolio loans and leases
outstanding, compared with 1.31 percent last quarter, and
represented 274 percent of nonperforming loans and leases, and 245
percent of nonperforming assets.
($ in millions) As
of December September June March
December
Nonperforming Assets and Delinquent Loans 2017
2017 2017 2017 2016 Nonaccrual
portfolio loans and leases: Commercial and industrial loans $144
$144 $225 $251 $302 Commercial mortgage loans 12 14 15 21 27
Commercial leases - 1 1 - 2 Residential mortgage loans 17 19 19 21
17 Home equity 56 56 52 53
55 Total nonaccrual portfolio loans and leases (excludes
restructured loans) $229 $234 $312 $346 $403 Nonaccrual
restructured portfolio commercial loans and leases(h) 150 214 244
251 192 Nonaccrual restructured portfolio consumer loans and leases
58 58 58 60 65 Total
nonaccrual portfolio loans and leases $437 $506 $614 $657 $660
Repossessed property 9 10 11 14 15 OREO 43 39i
37i 50i 63i Total nonperforming portfolio
assets(g) $489 $555 $662 $721 $738 Nonaccrual loans held for sale 5
18 7 7 4 Nonaccrual restructured loans held for sale
1 2 1 2 9 Total nonperforming assets
$495 $575 $670 $730 $751
Restructured portfolio consumer loans and leases (accrual)
$927 $929 $933 $950 $959 Restructured portfolio commercial loans
and leases (accrual)(h) $249 $232 $224 $277 $321 Total loans
and leases 30-89 days past due (accrual) $280 $252 $190 $180 $231
Total loans and leases 90 days past due (accrual) $97 $77 $75 $75
$84 Nonperforming portfolio loans and leases as a percent of
portfolio loans and leases and OREO(g) 0.48% 0.55% 0.67% 0.72%
0.72% Nonperforming portfolio assets as a percent of portfolio
loans and leases and OREO(g) 0.53% 0.60%
0.72% 0.79% 0.80%
Total nonperforming portfolio assets decreased $66 million, or
12 percent, from the previous quarter to $489 million. Portfolio
nonperforming loans and leases (NPLs) at quarter-end decreased $69
million from the previous quarter to $437 million. NPLs as a
percent of total loans, leases and OREO at quarter end decreased 7
bps from the previous quarter to 0.48 percent.
Commercial portfolio NPLs decreased $67 million from last
quarter to $306 million, or 0.54 percent of commercial portfolio
loans, leases and OREO. Consumer portfolio NPLs decreased $2
million from last quarter to $131 million, or 0.37 percent of
consumer portfolio loans, leases and OREO.
OREO balances increased $4 million from the prior quarter to $43
million, and included $18 million in commercial OREO and $25
million in consumer OREO. Repossessed personal property decreased
$1 million from the prior quarter to $9 million.
Loans over 90 days past due and still accruing increased $20
million from the third quarter of 2017 at $97 million. Loans 30-89
days past due of $280 million increased $28 million from the
previous quarter.
Capital and Liquidity
Position
For the
Three Months Ended December September June March December 2017
2017 2017 2017 2016
Capital
Position Average total Bancorp shareholders' equity to average
assets 11.69% 11.93% 11.84% 11.72% 11.66% Tangible equity(d) 9.90%
9.84% 9.98% 10.12% 9.82% Tangible common equity (excluding
unrealized gains/losses)(d) 8.94% 8.89% 9.02% 9.15% 8.87% Tangible
common equity (including unrealized gains/losses)(d) 8.99% 9.00%
9.12% 9.20% 8.91%
Regulatory Capital and Liquidity
Ratios CET1 capital(e) 10.61% 10.59% 10.63% 10.76% 10.39% Tier
I risk-based capital(e) 11.74% 11.72% 11.76% 11.90% 11.50% Total
risk-based capital(e) 15.16% 15.16% 15.22% 15.45% 15.02% Tier I
leverage 10.01% 9.97% 10.07% 10.15% 9.90% Modified liquidity
coverage ratio (LCR)(i) 129% 124%
115% 119% 128%
Capital ratios remained strong during the quarter. The CET1
ratio was 10.61 percent, the tangible common equity to tangible
assets ratio(d) was 8.94 percent (excluding unrealized
gains/losses), and 8.99 percent (including unrealized
gains/losses). The Tier I risk-based capital ratio was 11.74
percent, the Total risk-based capital ratio was 15.16 percent, and
the Tier I leverage ratio was 10.01 percent.
Fifth Third entered into or completed multiple share repurchases
during the quarter. Below is a summary of those share
repurchases.
- On December 18, 2017, Fifth Third
settled the forward contract related to the August 15, 2017 $990
million share repurchase agreement. An additional 4.3 million
shares were repurchased in connection with the completion of this
agreement.
- On December 19, 2017, Fifth Third
initially settled a share repurchase agreement whereby Fifth Third
would purchase $273 million of its outstanding stock. This reduced
fourth quarter common shares outstanding by 7.7 million shares.
Settlement of the forward contract related to this agreement is
expected to occur on or before March 19, 2018.
In total, common shares outstanding decreased by approximately
11.7 million shares in the fourth quarter of 2017 from the third
quarter of 2017.
Tax Rate
An income tax benefit was recognized in the fourth quarter of
2017. This was a result of the new tax legislation and was
primarily due to the remeasurement of deferred tax liabilities at
the lower statutory rate. The benefit was partially offset by a tax
expense related to a gain on the sale of Vantiv shares sold in the
prior quarter. The prior quarter’s tax rate was also impacted by
the aforementioned gain on the sale of Vantiv shares. On a full
year basis, the 2017 effective rate was 20.8 percent compared with
24.4 percent for the full year of 2016.
Other
As of December 31, 2017, Fifth Third Bank owned approximately 15
million units representing an 8.6 percent interest in Vantiv
Holding, LLC, convertible into shares of Vantiv, Inc., a publicly
traded firm. Based upon Vantiv’s closing price of $73.55 on
December 31, 2017, our interest in Vantiv was valued at
approximately $1.1 billion. 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 February 6, 2018 by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
8195768#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of December 31, 2017, the
Company had $142 billion in assets and operates 1,154 full-service
Banking Centers, and 2,469 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 54,000 fee-free
ATMs across the United States. Fifth Third operates four main
businesses: Commercial Banking, Branch Banking, Consumer Lending,
and Wealth & Asset Management. As of December 31, 2017, Fifth
Third also had an 8.6% interest in Vantiv Holding, LLC. Fifth Third
is among the largest money managers in the Midwest and, as of
December 31, 2017, had $362 billion in assets under care, of which
it managed $37 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)
Certain tax legislation amounts are
considered reasonable estimates as of December 31, 2017. As a
result, the amounts could be adjusted during the measurement
period, which will end in December 2018.
(b)
Assumes a 35% tax rate.
(c)
On January 16, 2018, Vantiv, Inc. changed
its name to Worldpay, Inc. and completed the previously announced
acquisition of Worldpay Group Limited, formerly Worldpay Group
plc.
(d)
Non-GAAP measure; see discussion of
non-GAAP and Reg. G reconciliation beginning on page 30 in Exhibit
99.1 of 8-K filing dated 1/23/2018.
(e)
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 weighted values
are added together resulting in the total risk-weighted assets.
Under the banking agencies’ Final Rule published in November 2017
pertaining to certain regulatory capital items for banks subject to
the standardized approach, the Bancorp is no longer subject to
certain transition provisions and phase-outs beyond 2017. Current
period regulatory capital ratios are estimated.
(f)
Includes commercial customer Eurodollar
sweep balances for which the Bancorp pays rates comparable to other
commercial deposit accounts.
(g)
Excludes nonaccrual loans held for
sale.
(h)
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.
(i)
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) loss of income from
any sale or potential sale of businesses (24) difficulties in
separating the operations of any branches or other assets divested;
(25) losses or adverse impacts on the carrying values of branches
and long-lived assets in connection with their sales or anticipated
sales; (26) inability to achieve expected benefits from branch
consolidations and planned sales within desired timeframes, if at
all; (27) ability to secure confidential information and deliver
products and services through the use of computer systems and
telecommunications networks; (28) the acquisition of Worldpay Group
Limited, formerly Worldpay Group plc. by Worldpay, Inc., formerly
Vantiv, Inc.; and(29)difficulties from Fifth Third’s investment in,
relationship with, and nature of operations of Worldpay, Inc. and
(30) 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 a
discussion of these non-GAAP measures and reconciliation to the
most directly comparable GAAP measures beginning on page 31 in
Exhibit 99.1 of 8-K filing dated 1/23/2018.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180123005527/en/
Fifth Third BancorpInvestorsSameer Gokhale,
513-534-2219orMediaKatrina Booker,
513-534-6858
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