Diluted earnings per share of $0.96, including
a positive $0.28 impact from certain items on page 2 of the 4Q19
earnings release
Fifth Third Bancorp (FITB):
Key Highlights
- Record full year net income of $2.5 billion
- Generated $345 million pre-tax gain in 4Q19 from Worldpay tax
receivable agreement (TRA) transaction with FIS
- 4Q19 net interest income, NIM, noninterest income, and expense
performance in-line with or better than prior guidance
- Effectively managed interest-bearing core deposit costs better
than prior guidance (down 19 bps vs. 3Q19), while continuing to
grow core deposits (up 1% vs. 3Q19)
- Generated record capital markets revenue in 4Q19; full year
revenue up 12%
- Several credit metrics impacted by conversion to national
charter; excluding conversion, total NCO ratio up 1 bp from 3Q19
with consumer NCO ratio flat from 3Q19
- Remain on-track to achieve MB expense savings by the end of
1Q20 ($255 million pre-tax)
- Continue to realize desired MB employee and client
outcomes
Key Financial Data
$ millions for all balance sheet and
income statement items
4Q19
3Q19
4Q18
Income Statement Data
Net income available to common
shareholders
$
701
$
530
$
432
Net interest income (U.S. GAAP)
1,228
1,242
1,081
Net interest income (FTE)(a)
1,232
1,246
1,085
Noninterest income
1,035
740
575
Noninterest expense
1,160
1,159
975
Per Share Data
Earnings per share, basic
$
0.97
$
0.72
$
0.65
Earnings per share, diluted
0.96
0.71
0.64
Book value per share
27.41
27.32
23.07
Tangible book value per share(a)
21.13
21.06
19.17
Balance Sheet & Credit
Quality
Average portfolio loans and leases
$
109,787
$
109,541
$
94,757
Average deposits
126,116
125,206
107,495
Net charge-off ratio(b)
0.41
%
0.36
%
0.35
%
Nonperforming asset ratio(c)
0.62
0.47
0.41
Financial Ratios
Return on average assets
1.72
%
1.28
%
1.25
%
Return on average common equity
14.2
10.7
11.8
Return on average tangible common
equity(a)
18.7
14.2
14.3
CET1 capital(d)(e)
9.75
9.56
10.24
Net interest margin(a)
3.27
3.32
3.29
Efficiency(a)
51.2
58.4
58.7
Other than the Quarterly Financial Review
tables beginning on page 14 of the 4Q19 earnings release,
commentary is on a fully taxable-equivalent (FTE) basis unless
otherwise noted. Consistent with SEC guidance in Industry Guide 3
that contemplates the calculation of tax-exempt income on a
taxable-equivalent basis, net interest income, net interest margin,
net interest rate spread, total revenue and the efficiency ratio
are provided on an FTE basis.
CEO Commentary
“Our fourth quarter and full year results were strong,
reflecting the strength of our diversified revenue streams, our
continued expense discipline, and our ability to achieve our
targeted financial outcomes from the MB Financial acquisition. Net
interest income, noninterest income, and noninterest expense were
in-line with or better than our previous guidance. We generated
very strong fee revenue, including a new record in capital markets.
Additionally, our net interest income results continue to reflect
our ability to successfully manage the balance sheet despite the
lower rate environment, which led to better than expected NIM
performance for the quarter. Also, we continued to diligently
manage our expenses, reflecting our ongoing focus on generating
efficiencies throughout the Bank while still investing in high
priority areas to support revenue growth.”
“We also successfully completed a transaction with FIS that has
addressed the future payments related to our TRA. Similar to all
the strategic decisions over the past ten years related to this
relationship, this agreement has created significant value for our
shareholders. We have successfully recognized over $7 billion on a
pre-tax basis for shareholders from all sources since the spin-off
of our legacy processing business, with another $195 million in TRA
cash flows beyond this quarter’s transaction yet to be
monetized.”
“From a balance sheet perspective, our loan growth was
consistent with our prior guidance, reflective of the generally
subdued macroeconomic environment. Also, we again generated strong
core deposit growth while also proactively reducing deposit costs
more than our previous guidance.”
“We remain on-track to achieve the previously-stated expense and
revenue synergy targets related to the MB Financial acquisition. We
continue to be pleased with the low client and employee attrition
levels.”
“Our clearly defined strategic growth priorities, proactive
balance sheet management, and ongoing discipline throughout the
Bank position us well for the future. We expect to build on our
strong fourth quarter NIM performance and maintain our expense
discipline in order to generate positive operating leverage this
year while continuing to invest for long-term outperformance.”
-Greg D. Carmichael, Chairman, President and CEO
Income Statement Highlights
($ in millions, except per share
data)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Condensed Statements of Income
Net interest income (NII)(a)
$
1,232
$
1,246
$
1,085
(1
%)
14
%
Provision for credit losses
162
134
97
21
%
67
%
Noninterest income
1,035
740
575
40
%
80
%
Noninterest expense
1,160
1,159
975
-
19
%
Income before income taxes(a)
$
945
$
693
$
588
36
%
61
%
Taxable equivalent adjustment
4
4
4
-
-
Applicable income tax expense
207
140
129
48
%
60
%
Net income
$
734
$
549
$
455
34
%
61
%
Less: Net income attributable to
noncontrolling interests
-
-
-
NM
NM
Net income attributable to Bancorp
$
734
$
549
$
455
34
%
61
%
Dividends on preferred stock
33
19
23
74
%
43
%
Net income available to common
shareholders
$
701
$
530
$
432
32
%
62
%
Earnings per share, diluted
$
0.96
$
0.71
$
0.64
35
%
50
%
Fifth Third Bancorp (Nasdaq: FITB) today reported fourth quarter
2019 net income of $734 million compared to net income of $455
million in the year-ago quarter. Net income available to common
shareholders was $701 million, or $0.96 per diluted share, compared
to $432 million, or $0.64 per diluted share in the year-ago
quarter. Prior quarter net income was $549 million and net income
available to common shareholders was $530 million, or $0.71 per
diluted share.
Diluted earnings per share impact of
certain items - 4Q19
(after-tax impacts(f); $ in millions,
except per share data)
Valuation of Visa total return swap
($34
)
Fifth Third Foundation contribution
($15
)
Provision impact from conversion to a
national charter
($7
)
Merger-related expenses
($7
)
Gain recognized from Worldpay TRA
transaction
$265
After-tax impact(f) of certain items
$202
Average diluted common shares outstanding
(thousands)
724,968
Diluted earnings per share impact
$0.28
Reported full year 2019 net income was $2.5 billion compared to
full year 2018 net income of $2.2 billion. Full year 2019 net
income available to common shareholders was $2.4 billion, or $3.33
per diluted share, compared to 2018 full year net income available
to common shareholders of $2.1 billion, or $3.06 per diluted
share.
Net Interest Income
(FTE; $ in millions)(a)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Interest Income
Interest income
$
1,563
$
1,629
$
1,397
(4
%)
12
%
Interest expense
331
383
312
(14
%)
6
%
Net interest income (NII)
$
1,232
$
1,246
$
1,085
(1
%)
14
%
Adjusted NII(a)
$
1,214
$
1,218
$
1,085
-
12
%
Average Yield/Rate Analysis
bps Change
Yield on interest-earning assets
4.15
%
4.34
%
4.23
%
(19
)
(8
)
Rate paid on interest-bearing
liabilities
1.22
%
1.41
%
1.33
%
(19
)
(11
)
Ratios
Net interest rate spread
2.93
%
2.93
%
2.90
%
-
3
Net interest margin (NIM)
3.27
%
3.32
%
3.29
%
(5
)
(2
)
Adjusted NIM(a)
3.22
%
3.25
%
3.29
%
(3
)
(7
)
Compared to the year-ago quarter, reported NII increased $147
million, or 14%. Excluding purchase accounting accretion of $18
million in the fourth quarter of 2019, adjusted NII increased $129
million, or 12%, reflecting an increase in interest-earning assets,
including the impact from the MB Financial acquisition, partially
offset by the declining rate environment. Compared to the year-ago
quarter, reported NIM decreased 2 bps, or 7 bps excluding purchase
accounting accretion.
Compared to the prior quarter, reported NII decreased $14
million, or 1%. Excluding purchase accounting accretion, adjusted
NII decreased $4 million primarily reflecting lower short-term
market rates, partially offset by growth in the indirect secured
consumer portfolio (predominantly indirect automobile), as well as
the favorable impact of previously executed cash flow hedges.
Compared to the prior quarter, reported NIM decreased 5 bps.
Excluding purchase accounting accretion, adjusted NIM decreased 3
bps, primarily reflecting lower short-term market rates, partially
offset by the favorable impact of previously executed hedges,
proactive management of deposit rates, and a decrease in other
short-term investments.
Noninterest Income
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Noninterest Income
Service charges on deposits
$
149
$
143
$
135
4
%
10
%
Corporate banking revenue
153
168
130
(9
%)
18
%
Mortgage banking net revenue
73
95
54
(23
%)
35
%
Wealth and asset management revenue
129
124
109
4
%
18
%
Card and processing revenue
95
94
84
1
%
13
%
Other noninterest income
427
111
93
285
%
359
%
Securities gains (losses), net
10
5
(32
)
100
%
NM
Securities (losses) gains, net -
non-qualifying
hedges on mortgage servicing rights
(1
)
-
2
NM
NM
Total noninterest income
$
1,035
$
740
$
575
40
%
80
%
Reported noninterest income increased $460 million, or 80%, from
the year-ago quarter, and increased $295 million, or 40%, from the
prior quarter. The reported results reflect the impact of certain
items in the table below, in both the prior quarter and the
year-ago quarter.
Noninterest Income excluding certain
items
($ in millions)
For the Three Months Ended
December
September
December
2019
2019
2018
Noninterest Income excluding certain
items
Noninterest income (U.S. GAAP)
$
1,035
$
740
$
575
Valuation of Visa total return swap
44
11
(7
)
GreenSky equity securities losses
-
-
21
Gain recognized from Worldpay TRA
transaction
(345
)
-
-
Securities (gains) losses, net (excluding
GreenSky)
(10
)
(5
)
11
Noninterest income excluding certain
items(a)
$
724
$
746
$
600
Compared to the year-ago quarter, noninterest income excluding
the items in the preceding table increased $124 million, or 21%.
Compared to the prior quarter, noninterest income excluding the
items in the preceding table decreased $22 million, or 3%.
Compared to the year-ago quarter, service charges on deposits
increased $14 million, or 10%, driven by higher commercial deposit
fees, partially offset by lower consumer deposit fees. Corporate
banking revenue increased $23 million, or 18%, primarily driven by
leasing business revenue resulting from the MB Financial
acquisition, as well as an increase in corporate bond fees.
Mortgage banking net revenue increased $19 million, or 35%,
primarily driven by higher mortgage originations of $3.8 billion,
an increase of 144%. Wealth and asset management revenue increased
$20 million, or 18%, primarily driven by higher personal asset
management revenue.
Compared to the prior quarter, service charges on deposits
increased $6 million, or 4%, driven by higher consumer and
commercial deposit fees. Corporate banking revenue decreased $15
million, or 9%, primarily driven by a decrease in leasing business
revenue, partially offset by an increase in loan syndications
revenue. Mortgage banking net revenue decreased $22 million, or
23%, primarily driven by a seasonally lower gain on sale margin
partially offset by a 13% increase in origination volumes. Wealth
and asset management revenue increased $5 million, or 4%, primarily
driven by higher personal asset management revenue and brokerage
fees.
Other noninterest income results on a reported basis in the
current quarter were impacted by the gain recognized from the
Worldpay TRA transaction. Current and previous quarters were also
impacted by the Visa total return swap valuation adjustments.
Excluding these items, other noninterest income of $126 million
increased $40 million, or 47%, compared to the year-ago quarter,
primarily driven by operating lease revenue from MB Financial.
Compared to the prior quarter, other noninterest income excluding
these item increased $4 million, or 3%, reflecting higher private
equity investment income.
Noninterest Expense
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Noninterest Expense
Compensation and benefits
$
576
$
584
$
506
(1
%)
14
%
Net occupancy expense
84
84
73
-
15
%
Technology and communications
103
100
79
3
%
30
%
Equipment expense
33
33
31
-
6
%
Card and processing expense
33
33
33
-
Intangible amortization expense
14
14
1
-
NM
Other noninterest expense
317
311
252
2
%
26
%
Total noninterest expense
$
1,160
$
1,159
$
975
-
19
%
Impacts of Merger-Related
Expenses
($ in millions)
For the Three Months Ended
December
September
December
2019
2019
2018
Merger-Related Expenses
Compensation and benefits
$
1
$
14
$
1
Net occupancy expense
3
3
-
Technology and communications
4
8
6
Equipment expense
-
-
-
Card and processing expense
-
-
1
Intangible amortization expense
-
-
-
Other noninterest expense
1
3
19
Total merger-related expenses
$
9
$
28
$
27
Noninterest Expense excluding
Merger-Related Expenses(a)
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Noninterest Expense excluding
Merger-Related Expenses
Compensation and benefits
$
575
$
570
$
505
1
%
14
%
Net occupancy expense
81
81
73
-
11
%
Technology and communications
99
92
73
8
%
36
%
Equipment expense
33
33
31
-
6
%
Card and processing expense
33
33
32
-
3
%
Intangible amortization expense
14
14
1
-
NM
Other noninterest expense
316
308
233
3
%
36
%
Total noninterest expense excluding
merger-related expenses
$
1,151
$
1,131
$
948
2
%
21
%
Compared to the year-ago quarter, reported noninterest expense
increased $185 million, or 19%, impacted by the expenses associated
with the MB Financial acquisition. Excluding the merger-related
expenses, intangible amortization expense, and a $20 million
contribution to the Fifth Third Foundation (included in other
noninterest expense) in the current quarter, noninterest expense
increased $170 million, or 18%, reflecting the operating expenses
resulting from the MB Financial acquisition as well as continued
technology investments.
Compared to the prior quarter, reported noninterest expense
increased $1 million. Excluding the aforementioned merger-related
expenses, intangible amortization expense, and contribution to the
Fifth Third Foundation, noninterest expense was flat driven by
investments in technology and offset by the continued benefits from
the MB Financial expense synergies.
Average Interest-Earning Assets
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Average Portfolio Loans and
Leases
Commercial loans and leases:
Commercial and industrial loans
$
50,938
$
51,241
$
43,829
(1
%)
16
%
Commercial mortgage loans
10,831
10,692
6,864
1
%
58
%
Commercial construction loans
5,334
5,267
4,885
1
%
9
%
Commercial leases
3,384
3,562
3,632
(5
%)
(7
%)
Total commercial loans and leases
$
70,487
$
70,762
$
59,210
-
19
%
Consumer loans:
Residential mortgage loans
$
16,697
$
16,736
$
15,520
-
8
%
Home equity
6,147
6,267
6,438
(2
%)
(5
%)
Indirect secured consumer loans
11,281
10,707
8,970
5
%
26
%
Credit card
2,496
2,448
2,373
2
%
5
%
Other consumer loans
2,679
2,621
2,246
2
%
19
%
Total consumer loans
$
39,300
$
38,779
$
35,547
1
%
11
%
Total average portfolio loans and
leases
$
109,787
$
109,541
$
94,757
-
16
%
Average Loans and Leases Held for
Sale
Commercial loans and leases held for
sale
$
43
$
127
$
88
(66
%)
(51
%)
Consumer loans held for sale
1,156
998
553
16
%
109
%
Total average loans and leases held for
sale
$
1,199
$
1,125
$
641
7
%
87
%
Securities and other short-term
investments
$
38,326
$
38,188
$
35,674
-
7
%
Total average interest-earning assets
$
149,312
$
148,854
$
131,072
-
14
%
Compared to the year-ago quarter, total average portfolio loans
and leases increased 16%, reflecting the impact of the MB Financial
acquisition. Average commercial portfolio loans and leases
increased 19%, reflecting the impact of MB Financial as well as
higher commercial mortgage and commercial and industrial (C&I)
loans, partially offset by a decline in commercial leases. Average
consumer portfolio loans increased 11%, reflecting the impact of MB
Financial as well as growth in indirect secured consumer loans and
other consumer loans.
Compared to the prior quarter, total average portfolio loans and
leases were flat, as higher indirect secured consumer loans were
partially offset by lower C&I loans and commercial leases.
Average commercial portfolio loans and leases were flat, as higher
commercial mortgage and construction loans were offset by lower
C&I loans. Average consumer portfolio loans increased 1%,
reflecting growth in indirect secured consumer loans (predominantly
automobile) and other consumer loans, partially offset by a decline
in home equity loans.
Period end commercial line utilization was 36%, consistent with
both the year-ago quarter and prior quarter.
Average securities and other short-term investments were $38.3
billion compared to $35.7 billion in the year-ago quarter and $38.2
billion in the prior quarter. Average available-for-sale debt and
other securities of $35.4 billion increased 6% compared to the
year-ago quarter and increased 2% compared to the prior
quarter.
Average Deposits
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Average Deposits
Demand
$
35,710
$
35,223
$
31,571
1
%
13
%
Interest checking
38,628
37,729
32,428
2
%
19
%
Savings
14,274
14,405
12,933
(1
%)
10
%
Money market
27,429
26,962
22,517
2
%
22
%
Foreign office(g)
244
222
272
10
%
(10
%)
Total transaction deposits
$
116,285
$
114,541
$
99,721
2
%
17
%
Other time
5,507
5,823
4,366
(5
%)
26
%
Total core deposits
$
121,792
$
120,364
$
104,087
1
%
17
%
Certificates - $100,000 and over
4,072
4,795
2,662
(15
%)
53
%
Other deposits
252
47
746
436
%
(66
%)
Total average deposits
$
126,116
$
125,206
$
107,495
1
%
17
%
Compared to the year-ago quarter, average core deposits
increased 17%, reflecting the impact of the MB Financial
acquisition. Average core deposit growth was primarily driven by an
increase in interest checking, money market, and demand deposits.
Average commercial transaction deposits increased 22% and average
consumer transaction deposits increased 12%.
Compared to the prior quarter, average core deposits increased
1%, primarily driven by higher interest checking, demand, and money
market deposits. Average demand deposits represented 29% of total
core deposits in both the current and prior quarter. Average
commercial transaction deposits increased 2%, and average consumer
transaction deposits increased 1%.
Average Wholesale Funding
($ in millions)
For the Three Months Ended
% Change
December
September
December
2019
2019
2018
Seq
Yr/Yr
Average Wholesale Funding
Certificates - $100,000 and over
$
4,072
$
4,795
$
2,662
(15
%)
53
%
Other deposits
252
47
746
436
%
(66
%)
Federal funds purchased
1,174
739
2,254
59
%
(48
%)
Other short-term borrowings
1,133
1,278
578
(11
%)
96
%
Long-term debt
14,860
15,633
14,420
(5
%)
3
%
Total average wholesale funding
$
21,491
$
22,492
$
20,660
(4
%)
4
%
Compared to the year-ago quarter, average wholesale funding
increased 4% driven by growth in jumbo CD balances associated with
the acquisition of MB Financial, as well as increased other
short-term borrowings, partially offset by a decrease in federal
funds borrowings. Compared to the prior quarter, average wholesale
funding decreased 4%, reflecting the ability to fund the balance
sheet through strong core deposit growth.
Credit Quality Summary(1)
($ in millions)
For the Three Months Ended
December
September
June
March
December
2019
2019
2019
2019
2018
Total nonaccrual portfolio loans and
leases (NPLs)
$
618
$
482
$
521
$
450
$
348
Repossessed property
10
9
8
11
10
OREO
52
28
31
37
37
Total nonperforming portfolio loans and
leases and OREO (NPAs)
$
680
$
519
$
560
$
498
$
395
NPL ratio(h)
0.56
%
0.44
%
0.48
%
0.41
%
0.37
%
NPA ratio(c)
0.62
%
0.47
%
0.51
%
0.45
%
0.41
%
Total loans and leases 30-89 days past due
(accrual)
364
402
383
322
297
Total loans and leases 90 days past due
(accrual)
130
132
128
132
93
Allowance for loan and lease losses,
beginning
$
1,143
$
1,115
$
1,115
$
1,103
$
1,091
Total net losses charged-off
(113
)
(99
)
(78
)
(77
)
(83
)
Provision for loan and lease losses
172
127
78
89
95
Allowance for loan and lease losses,
ending
$
1,202
$
1,143
$
1,115
$
1,115
$
1,103
Reserve for unfunded commitments,
beginning
$
154
$
147
$
133
$
131
$
129
Reserve for acquired commitments
-
-
7
1
-
(Benefit from) provision for the reserve
for unfunded commitments
(10
)
7
7
1
2
Reserve for unfunded commitments,
ending
$
144
$
154
$
147
$
133
$
131
Total allowance for credit losses
$
1,346
$
1,297
$
1,262
$
1,248
$
1,234
Allowance for loan and lease losses
ratios
As a percent of portfolio loans and
leases
1.10
%
1.04
%
1.02
%
1.02
%
1.16
%
As a percent of nonperforming portfolio
loans and leases
194
%
237
%
214
%
248
%
317
%
As a percent of nonperforming portfolio
assets
177
%
221
%
199
%
224
%
279
%
Total losses charged-off
$
(152
)
$
(130
)
$
(119
)
$
(108
)
$
(116
)
Total recoveries of losses previously
charged-off
39
31
41
31
33
Total net losses charged-off
$
(113
)
$
(99
)
$
(78
)
$
(77
)
$
(83
)
Net charge-off ratio (NCO ratio)(b)
0.41
%
0.36
%
0.29
%
0.32
%
0.35
%
Commercial NCO ratio
0.20
%
0.18
%
0.13
%
0.11
%
0.19
%
Consumer NCO ratio
0.78
%
0.68
%
0.59
%
0.68
%
0.61
%
(1) Upon conversion of Fifth Third Bank to a national charter in
the fourth quarter of 2019, Fifth Third changed its accounting
policy to conform to Office of the Comptroller of the Currency
(OCC) guidance regarding non-reaffirmed loans included in Chapter 7
bankruptcy filings to be accounted for as nonperforming troubled
debt restructurings (TDRs) and collateral dependent loans
regardless of payment history and capacity to pay in the future. As
a result of the change in accounting policy, TDRs increased $105
million, of which $83 million were transferred to NPL status. Due
to the fact that the collateral dependent loans require the
carrying value to be less than or equal to the appraised value less
the cost to sell, Fifth Third also incurred a $10 million increase
in charge-offs during the quarter, which resulted in a $9 million
impact to provision for loan and lease losses. In addition, Fifth
Third changed its accounting policy to conform to OCC guidance
associated with branch-related real estate no longer intended to be
used for banking purposes, which resulted in an increase in OREO of
$30 million, with an offsetting reduction to bank premises and
equipment.
Nonperforming portfolio loans and leases were $618 million in
the current quarter, with the resulting NPL ratio of 0.56%. NPLs
included an $83 million unfavorable impact due to the
aforementioned accounting policy change, or 7 bps to the NPL ratio.
Compared to the year-ago quarter, NPLs increased $270 million with
the NPL ratio increasing 19 bps. Compared to the prior quarter,
NPLs increased $136 million with the NPL ratio increasing 12
bps.
Nonperforming portfolio assets were $680 million in the current
quarter, with the resulting NPA ratio of 0.62%. NPAs included a
$113 million unfavorable impact due to the aforementioned
accounting policy changes, or 10 bps to the NPA ratio. Compared to
the year-ago quarter, NPAs increased $285 million with the NPA
ratio increasing 21 bps. Compared to the prior quarter, NPAs
increased $161 million, or with the NPA ratio increasing 15
bps.
The provision for loan and lease losses totaled $172 million in
the current quarter, which included a $9 million unfavorable impact
due to the aforementioned accounting policy change. The provision
for loan and lease losses increased $77 million compared to the
year-ago quarter, and $45 million compared to the prior quarter.
The allowance for loan and lease losses ratio represented 1.10% of
total portfolio loans and leases outstanding in the current
quarter, compared with 1.16% in the year-ago quarter and 1.04% in
the prior quarter. The allowance for loan and lease losses
represented 194% of nonperforming portfolio loans and leases in the
current quarter. The allowance for loan and lease losses
represented 177% of nonperforming portfolio assets in the current
quarter.
Net charge-offs were $113 million in the current quarter, with
the resulting NCO ratio of 0.41%. NCOs included a $10 million
unfavorable impact due to the aforementioned accounting policy
changes, or 4 bps to the NCO ratio. Compared to the year-ago
quarter, net charge-offs increased $30 million and the NCO ratio
increased 6 bps. Compared to the prior quarter, net charge-offs
increased $14 million and the NCO ratio increased 5 bps.
Capital Position
For the Three Months Ended
December
September
June
March
December
2019
2019
2019
2019
2018
Capital Position
Average total Bancorp shareholders' equity
as a percent of average assets
12.58
%
12.43
%
12.02
%
11.43
%
10.95
%
Tangible equity(a)
9.52
%
9.29
%
9.09
%
9.03
%
9.63
%
Tangible common equity (excluding
AOCI)(a)
8.44
%
8.21
%
8.27
%
8.21
%
8.71
%
Tangible common equity (including
AOCI)(a)
9.08
%
9.09
%
8.91
%
8.44
%
8.64
%
Regulatory Capital Ratios(e)
CET1 capital(d)
9.75
%
9.56
%
9.57
%
9.60
%
10.24
%
Tier I risk-based capital(d)
10.99
%
10.81
%
10.62
%
10.67
%
11.32
%
Total risk-based capital(d)
13.84
%
13.68
%
13.53
%
13.57
%
14.48
%
Tier I leverage
9.54
%
9.36
%
9.24
%
10.32
%
9.72
%
Capital ratios remained strong during the quarter. The CET1
capital ratio was 9.75%, the tangible common equity to tangible
assets ratio was 8.44% excluding AOCI, and 9.08% including AOCI.
The Tier I risk-based capital ratio was 10.99%, the Total
risk-based capital ratio was 13.84%, and the Tier I leverage ratio
was 9.54%.
On October 25, 2019, Fifth Third initially settled a share
repurchase agreement whereby Fifth Third would purchase $300
million of its outstanding stock. The initial settlement reduced
third quarter common shares outstanding by 9.0 million shares. On
December 17, 2019, Fifth Third settled the forward contract, which
resulted in an additional 1.1 million shares repurchased in
connection with the completion of this agreement.
Tax Rate
The effective tax rate was 22.0% compared with 22.4% in the
year-ago quarter and 20.2% in the prior quarter.
Other
On December 27, 2019, Fifth Third Bancorp entered into a
transaction with FIS and Worldpay which grants each of Fifth Third
Bancorp and Worldpay the ability to terminate and settle certain
cash flows payable under Fifth Third Bancorp’s Tax Receivable
Agreement with Worldpay. Under the TRA transaction, Worldpay may be
obligated to pay up to a total of approximately $366 million to
Fifth Third Bancorp to terminate and settle certain remaining cash
flows Fifth Third Bancorp expected to receive under the TRA in the
years 2021 to 2035, totaling an estimated $720 million. If
exercised, certain of the obligations would be settled with four
quarterly payments beginning in April 2020, a second set of the
obligations would be settled with four quarterly payments beginning
in April 2022, and a third set of the obligations would be settled
with four quarterly payments beginning in April 2023. Fifth Third
Bancorp recognized a pre-tax gain and corresponding receivable of
$345 million in the fourth quarter of 2019 associated with these
options.
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 5, 2020 by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
3389028#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio, and the indirect parent company
of Fifth Third Bank, National Association, a federally chartered
institution. As of December 31, 2019, the Company had $169 billion
in assets and operates 1,149 full-service Banking Centers, and
2,481 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 approximately 53,000 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 is among the largest money managers in the
Midwest and, as of December 31, 2019, had $413 billion in assets
under care, of which it managed $49 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)
Non-GAAP measure; see discussion
of non-GAAP and Reg. G reconciliation beginning on page 27 of the
4Q19 earnings release.
(b)
Net losses charged-off as a
percent of average portfolio loans and leases.
(c)
Nonperforming portfolio assets as
a percent of portfolio loans and leases and OREO.
(d)
Under the U.S. 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.
(e)
Current period regulatory capital
ratios are estimated.
(f)
Assumes a 23% tax rate.
(g)
Includes commercial customer
Eurodollar sweep balances for which the Bank pays rates comparable
to other commercial deposit accounts.
(h)
Nonperforming portfolio loans and
leases as a percent of portfolio loans and leases and OREO.
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,” “is anticipated,”
“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 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. We undertake no obligation
to release revisions to these forward-looking statements or reflect
events or circumstances after the date of this document.
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) deteriorating
credit quality; (2) loan concentration by location or industry of
borrowers or collateral; (3) problems encountered by other
financial institutions; (4) inadequate sources of funding or
liquidity; (5) unfavorable actions of rating agencies; (6)
inability to maintain or grow deposits; (7) limitations on the
ability to receive dividends from subsidiaries; (8) cyber-security
risks; (9) Fifth Third’s ability to secure confidential information
and deliver products and services through the use of computer
systems and telecommunications networks; (10) failures by
third-party service providers; (11) inability to manage strategic
initiatives and/or organizational changes; (12) inability to
implement technology system enhancements; (13) failure of internal
controls and other risk management systems; (14) losses related to
fraud, theft or violence; (15) inability to attract and retain
skilled personnel; (16) adverse impacts of government regulation;
(17) governmental or regulatory changes or other actions; (18)
failures to meet applicable capital requirements; (19) regulatory
objections to Fifth Third’s capital plan; (20) regulation of Fifth
Third’s derivatives activities; (21) deposit insurance premiums;
(22) assessments for the orderly liquidation fund; (23) replacement
of LIBOR; (24) weakness in the national or local economies; (25)
global political and economic uncertainty or negative actions; (26)
changes in interest rates; (27) changes and trends in capital
markets; (28) fluctuation of Fifth Third’s stock price; (29)
volatility in mortgage banking revenue; (30) litigation,
investigations, and enforcement proceedings by governmental
authorities; (31) breaches of contractual covenants,
representations and warranties; (32) competition and changes in the
financial services industry; (33) changing retail distribution
strategies, customer preferences and behavior; (34) risks relating
to Fifth Third’s ability to realize anticipated benefits of the
merger with MB Financial, Inc.; (35) difficulties in identifying,
acquiring or integrating suitable strategic partnerships,
investments or acquisitions; (36) potential dilution from future
acquisitions; (37) loss of income and/or difficulties encountered
in the sale and separation of businesses, investments or other
assets; (38) results of investments or acquired entities; (39)
changes in accounting standards or interpretation or declines in
the value of Fifth Third’s goodwill or other intangible assets;
(40) inaccuracies or other failures from the use of models; (41)
effects of critical accounting policies and judgments or the use of
inaccurate estimates; (42) weather-related events or other natural
disasters; and (43) the impact of reputational risk created by
these or other 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200122005153/en/
Investor contact: Chris Doll (513) 534-2345 | Media contact:
Gary Rhodes (513) 534-4225
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