Reported diluted earnings per share of
$0.04
Reported results included a negative $0.64
impact from certain items on page 2, including $0.09 from notable
items, and $0.55 from provision in excess of net charge-offs
Fifth Third Bancorp (FITB):
Key Highlights
Taking significant action for our customers, employees and
communities in response to virus impacts
- Proactive, ongoing outreach to provide customer hardship
assistance including participation in government programs
- Prudently extending credit to customers in order to support
economic activity
- Keeping virtually all branches open, with amended hours and
safety measures
- Taking several measures for employees, including front-line
employee bonuses, enhanced cleaning, and large scale migration to
remote workforce
First quarter 2020
- Net interest income, NIM, noninterest income, and expense
performance in-line with or better than prior guidance
- NCO ratio consistent with previous expectations
- Growth in the allowance for credit losses reflects adoption of
CECL1 and the impact of COVID-19
- Maintained robust capital and liquidity levels
Key Financial Data
$ millions for all balance sheet and
income statement items
1Q20
4Q19
1Q19
Income Statement Data
Net income available to common
shareholders
$29
$701
$760
Net interest income (U.S. GAAP)
1,229
1,228
1,082
Net interest income (FTE)(a)
1,233
1,232
1,086
Noninterest income
671
1,035
1,101
Noninterest expense
1,200
1,160
1,097
Per Share Data
Earnings per share, basic
$0.04
$0.97
$1.14
Earnings per share, diluted
0.04
0.96
1.12
Book value per share
28.26
27.41
24.77
Tangible book value per share(a)
22.02
21.13
18.64
Balance Sheet & Credit
Quality
Average portfolio loans and leases
$110,779
$109,787
$97,773
Average deposits
126,789
126,116
109,591
Net charge-off ratio(b)
0.44
%
0.41
%
0.32
%
Nonperforming asset ratio(c)
0.60
0.62
0.45
Financial Ratios
Return on average assets
0.11
%
1.72
%
2.11
%
Return on average common equity
0.6
14.2
19.6
Return on average tangible common
equity(a)
1.0
18.7
23.9
CET1 capital(d)(e)
9.36
9.75
9.60
Net interest margin(a)
3.28
3.27
3.28
Efficiency(a)
63.0
51.2
50.2
Other than the Quarterly Financial Review tables beginning on
page 14 of the 1Q20 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. 1Refers to the current expected credit losses (CECL)
methodology implemented upon the Bancorp's adoption of ASU
2016-13.
CEO Commentary
“The unprecedented nature of the environment that we are
operating in today undoubtedly reprioritizes our focus to the
significant and ongoing actions we are taking for our customers,
our employees, and our communities. We are leveraging our balance
sheet strength to help solve the spiraling economic effects of this
health crisis, and we will continue to respond rapidly and do what
is necessary to help mitigate the effects of the downturn. I am
very proud of the way our employees have responded in extraordinary
ways to support our customers and each other.
Our operating results during the first quarter were very strong
given the speed and extent of the deterioration in the economic
environment that we experienced in the latter part of the quarter.
The results show the impact of the strength of our franchise and
the strategic decisions we have made in managing our balance sheet,
our interest rate risk and our liquidity risk exposures. Net
interest income, net interest margin, noninterest income, and
expenses all performed in-line with or better than our January
guidance, with the net charge off ratio also consistent with our
previous expectations.
Our allowance for credit losses now reflects both the adoption
of the new CECL methodology and the impact of COVID-19. After
assessing the impact of the deteriorating economic conditions and
the counter impact of the unprecedented fiscal and monetary
stimulus programs on our loan portfolios, we increased our reserves
compared to last quarter, which includes the impact of the loan
growth that we experienced during the quarter.
While we do not know the duration or severity of the crisis, we
have spent the past decade strengthening our balance sheet,
diversifying our revenue streams, and stress testing our firm-wide
resilience under a range of conditions worse than the last crisis
and more severe than the regulatory-run stress tests. During that
time, we have consistently communicated our ‘through-the-cycle’
principles of disciplined client selection, conservative
underwriting, and an overall balance sheet management approach
focused on a long-term performance horizon. Our unwavering
adherence to these principles and our balance sheet strength give
us confidence as we navigate this uncertain environment.”
-Greg D. Carmichael, Chairman, President and CEO
Income Statement Highlights
($ in millions, except per share
data)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Condensed Statements of Income
Net interest income (NII)(a)
$
1,233
$
1,232
$
1,086
-
14
%
Provision for credit losses
640
162
90
295
%
611
%
Noninterest income
671
1,035
1,101
(35
%)
(39
%)
Noninterest expense
1,200
1,160
1,097
3
%
9
%
Income before income taxes(a)
$
64
$
945
$
1,000
(93
%)
(94
%)
Taxable equivalent adjustment
4
4
4
-
-
Applicable income tax expense
14
207
221
(93
%)
(94
%)
Net income
$
46
$
734
$
775
(94
%)
(94
%)
Dividends on preferred stock
17
33
15
(48
%)
13
%
Net income available to common
shareholders
$
29
$
701
$
760
(96
%)
(96
%)
Earnings per share, diluted
$
0.04
$
0.96
$
1.12
(96
%)
(97
%)
Fifth Third Bancorp (Nasdaq: FITB) today reported first quarter
2020 net income of $46 million compared to net income of $775
million in the year-ago quarter. Net income available to common
shareholders was $29 million, or $0.04 per diluted share, compared
to $760 million, or $1.12 per diluted share in the year-ago
quarter. Prior quarter net income was $734 million and net income
available to common shareholders was $701 million, or $0.96 per
diluted share.
Diluted earnings per share impact of
certain items - 1Q20
(after-tax impacts(f); $ in millions,
except per share data)
Provision in excess of net charge-offs
($399)
Diluted earnings per share impact from
provision in excess of net charge-offs
($0.55)
Unfavorable credit valuation adjustment
(CVA) within other noninterest expense
($28)
Valuation of Visa total return swap within
other noninterest income
($17)
Net impairment on private equity
investments
($12)
Merger-related expenses
($5)
After-tax impact(f) of other notable
items
($62)
Diluted earnings per share impact of other
notable items
($0.09)
Diluted earnings per share impact reflect
720.363 million average diluted shares outstanding
Net Interest Income
(FTE; $ in millions)(a)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Interest Income
Interest income
$
1,529
$
1,563
$
1,437
(2
%)
6
%
Interest expense
296
331
351
(11
%)
(16
%)
Net interest income (NII)
$
1,233
$
1,232
$
1,086
-
14
%
Adjusted NII(a)
$
1,217
$
1,214
$
1,085
-
12
%
Average Yield/Rate Analysis
bps Change
Yield on interest-earning assets
4.07
%
4.15
%
4.33
%
(8
)
(26
)
Rate paid on interest-bearing
liabilities
1.09
%
1.22
%
1.46
%
(13
)
(37
)
Ratios
Net interest rate spread
2.98
%
2.93
%
2.87
%
5
11
Net interest margin (NIM)
3.28
%
3.27
%
3.28
%
1
-
Adjusted NIM(a)
3.24
%
3.22
%
3.28
%
2
(4
)
Compared to the year-ago quarter, reported NII increased $147
million, or 14%. Excluding purchase accounting accretion of $16
million in the current quarter and $1 million in the year-ago
quarter, adjusted NII increased $132 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
remained flat, and decreased 4 bps excluding purchase accounting
accretion.
Compared to the prior quarter, reported NII increased $1
million. Excluding purchase accounting accretion, adjusted NII
increased $3 million, reflecting loan growth, the favorable impact
of previously executed cash flow hedges, and the benefit of
elevated short-term LIBOR rates on loan yields relative to funding
costs, partially offset by seasonally strong securities portfolio
income in the prior quarter as well as the impact of a lower day
count. Compared to the prior quarter, reported NIM increased 1 bp.
Excluding purchase accounting accretion, adjusted NIM increased 2
bps, reflecting the favorable impact of previously executed hedges,
proactive management of deposit rates, and a lower day count,
partially offset by the aforementioned securities portfolio income
from the prior quarter and a 3 bps unfavorable impact from elevated
cash balances.
Noninterest Income
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Noninterest Income
Service charges on deposits
$
148
$
149
$
131
(1
%)
13
%
Commercial banking revenue
124
127
103
(2
%)
20
%
Mortgage banking net revenue
120
73
56
64
%
114
%
Wealth and asset management revenue
134
129
112
4
%
20
%
Card and processing revenue
86
95
79
(9
%)
9
%
Leasing business revenue
73
71
32
3
%
128
%
Other noninterest income
7
382
569
(98
%)
(99
%)
Securities (losses) gains, net
(24
)
10
16
NM
NM
Securities gains (losses), net -
non-qualifying
hedges on mortgage servicing rights
3
(1
)
3
NM
-
Total noninterest income
$
671
$
1,035
$
1,101
(35
%)
(39
%)
(In the first quarter 2020, as a result of updating internal
management reporting processes and to provide more detailed
information, certain noninterest income disclosures were adjusted.
Leasing business revenue is a new line item with revenue previously
included in the Corporate banking revenue - with the remaining
revenue shown as Commercial banking revenue - and Other noninterest
income line items. These adjustments were retrospectively applied
to prior periods presented.)
Reported noninterest income decreased $430 million, or 39%, from
the year-ago quarter, and decreased $364 million, or 35%, from the
prior quarter. The reported results reflect the impact of certain
items in the table below, primarily from Worldpay transactions, in
both the prior quarter and the year-ago quarter.
Noninterest Income excluding certain
items
($ in millions)
For the Three Months Ended
March
December
March
2020
2019
2019
Noninterest Income excluding certain
items
Noninterest income (U.S. GAAP)
$671
$1,035
$1,101
Valuation of Visa total return swap
22
44
31
Net impairment on private equity
investments
15
-
-
Merger-related branch network impairment
charge
-
-
13
Gain on sale of Worldpay shares
-
-
(562)
Gain recognized from Worldpay TRA
transaction
-
(345)
-
GreenSky equity securities (gain)
-
-
(9)
Securities (gains) losses, net (excluding
GreenSky)
24
(10)
(7)
Noninterest income excluding certain
items(a)
$732
$724
$567
Compared to the year-ago quarter, noninterest income excluding
the items in the preceding table increased $165 million, or 29%.
Compared to the prior quarter, noninterest income excluding the
items in the preceding table increased $8 million, or 1%.
Compared to the year-ago quarter, service charges on deposits
increased $17 million, or 13%, driven by higher commercial deposit
fees. Commercial banking revenue increased $21 million, or 20%,
primarily driven by increases in financial risk management revenue
and corporate bond fees, partially offset by a decrease in loan
syndications revenue. Mortgage banking net revenue increased $64
million, or 114% primarily driven by an improved gain on sale
margin on higher mortgage originations of $4 billion in the current
quarter compared to $1.6 billion in the year-ago quarter. Wealth
and asset management revenue increased $22 million, or 20%,
primarily driven by higher personal asset management revenue and
brokerage fees. Card and processing revenue increased by $7
million, or 9%, reflecting increases in credit and debit
transaction volumes, partially offset by higher rewards. Leasing
business revenue increased $41 million, or 128%, primarily
reflecting the impacts from the MB Financial acquisition.
Compared to the prior quarter, service charges on deposits
decreased $1 million, or 1%, due to lower consumer deposit fees,
partially offset by higher commercial deposit fees. Commercial
banking revenue decreased $3 million, or 2%, primarily driven by
decreases in loan syndications and M&A advisory revenue,
partially offset by increases in financial risk management revenue
and corporate bond fees. Mortgage banking net revenue increased $47
million, or 64%, primarily driven by an improved gain on sale
margin, a 6% increase in origination volumes, and the impact of the
MSR valuation, net of hedges. Wealth and asset management revenue
increased $5 million, or 4%, primarily driven by higher brokerage
fees, partially offset by lower personal asset management revenue.
Card processing revenue decreased $9 million, or 9%, reflecting
decreases in credit and debit volumes in the final month of the
quarter, partially offset by lower rewards. Leasing business
revenue increased $2 million, or 3%, primarily driven by an
increase in lease syndication fees, partially offset by a decrease
in business solutions revenue.
Noninterest Expense
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Noninterest Expense
Compensation and benefits
$
647
$
576
$
610
12
%
6
%
Net occupancy expense
82
84
75
(2
%)
9
%
Technology and communications
93
103
83
(10
%)
12
%
Equipment expense
32
33
30
(3
%)
7
%
Card and processing expense
31
33
31
(6
%)
-
Leasing business expense
35
36
19
(3
%)
84
%
Marketing expense
31
44
36
(30
%)
(14
%)
Intangible amortization expense
13
14
3
(7
%)
NM
Other noninterest expense
236
237
210
-
12
%
Total noninterest expense
$
1,200
$
1,160
$
1,097
3
%
9
%
(In the first quarter 2020, as a result of updating internal
management reporting processes and to provide more detailed
information, certain noninterest expense disclosures were adjusted.
Leasing business expense and Marketing expense are new line items
shown reflecting expenses previously included in the Other
noninterest expense line item. These adjustments were
retrospectively applied to prior periods presented.)
Impacts of Merger-Related
Expenses
($ in millions)
For the Three Months Ended
March
December
March
2020
2019
2019
Merger-Related Expenses
Compensation and benefits
$2
$1
$35
Net occupancy expense
1
3
-
Technology and communications
3
4
11
Equipment expense
-
-
-
Card and processing expense
-
-
-
Leasing business expense
-
-
-
Marketing expense
-
-
4
Intangible amortization expense
-
-
-
Other noninterest expense
1
1
26
Total merger-related expenses
$7
$9
$76
Noninterest Expense excluding
Merger-Related Expenses(a)
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Noninterest Expense excluding
Merger-Related Expenses
Compensation and benefits
$
645
$
575
$
575
12
%
12
%
Net occupancy expense
81
81
75
-
8
%
Technology and communications
90
99
72
(9
%)
25
%
Equipment expense
32
33
30
(3
%)
7
%
Card and processing expense
31
33
31
(6
%)
-
Leasing business expense
35
36
19
(3
%)
84
%
Marketing expense
31
44
32
(30
%)
(3
%)
Intangible amortization expense
13
14
3
(7
%)
NM
Other noninterest expense
235
236
184
-
28
%
Total noninterest expense excluding
merger-related expenses
$
1,193
$
1,151
$
1,021
4
%
17
%
Compared to the year-ago quarter, reported noninterest expense
increased $103 million, or 9%. Excluding the merger-related
expenses, intangible amortization expense, and an unfavorable CVA
within other noninterest expense of $36 million in the current
quarter, noninterest expense increased $126 million, or 12%,
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 $40 million, or 3%. Excluding the aforementioned
merger-related expenses, intangible amortization expense,
unfavorable CVA, and a $20 million contribution to the Fifth Third
Foundation (included in other noninterest expense) in the prior
quarter, noninterest expense increased $27 million, or 2%, as
seasonally higher compensation and benefits as well as $3 million
in special payments to employees providing essential banking
services through the COVID-19 pandemic were partially offset by
lower marketing and technology expenses.
Average Interest-Earning Assets
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Average Portfolio Loans and
Leases
Commercial loans and leases:
Commercial and industrial loans
$
51,586
$
50,938
$
46,011
1
%
12
%
Commercial mortgage loans
11,019
10,831
7,414
2
%
49
%
Commercial construction loans
5,132
5,334
4,838
(4
%)
6
%
Commercial leases
3,201
3,384
3,555
(5
%)
(10
%)
Total commercial loans and leases
$
70,938
$
70,487
$
61,818
1
%
15
%
Consumer loans:
Residential mortgage loans
$
16,732
$
16,697
$
15,624
-
7
%
Home equity
6,006
6,147
6,355
(2
%)
(5
%)
Indirect secured consumer loans
11,809
11,281
9,176
5
%
29
%
Credit card
2,498
2,496
2,396
-
4
%
Other consumer loans
2,796
2,679
2,404
4
%
16
%
Total consumer loans
$
39,841
$
39,300
$
35,955
1
%
11
%
Total average portfolio loans and
leases
$
110,779
$
109,787
$
97,773
1
%
13
%
Average Loans and Leases Held for
Sale
Commercial loans and leases held for
sale
$
108
$
43
$
62
151
%
74
%
Consumer loans held for sale
1,293
1,156
527
12
%
145
%
Total average loans and leases held for
sale
$
1,401
$
1,199
$
589
17
%
138
%
Securities and other short-term
investments
$
39,033
$
38,326
$
36,101
2
%
8
%
Total average interest-earning assets
$
151,213
$
149,312
$
134,463
1
%
12
%
Compared to the year-ago quarter, total average portfolio loans
and leases increased 13%, reflecting the impact of the MB Financial
acquisition. Average commercial portfolio loans and leases
increased 15%, reflecting the impact of MB Financial as well as
higher commercial and industrial (C&I) and commercial mortgage
loans, partially offset by a decline in commercial leases. Average
consumer portfolio loans increased 11%, reflecting growth in
indirect secured consumer loans (predominantly indirect automobile)
as well as the impact of MB Financial.
Compared to the prior quarter, total average portfolio loans and
leases increased 1%, as higher C&I loans and indirect secured
consumer loans were partially offset by lower commercial
construction loans and commercial leases. Average commercial
portfolio loans and leases increased 1%, reflecting elevated
C&I line draws near the end of the quarter and growth in
commercial mortgage loans, partially offset by lower commercial
construction loans and commercial leases. Average consumer
portfolio loans increased 1%, reflecting growth in indirect secured
consumer loans (predominantly indirect automobile) and other
consumer loans, partially offset by a decline in home equity
loans.
Total period end commercial loans and leases of $78 billion
increased $6 billion, or 9%, from the year-ago quarter and
increased $8 billion, or 11%, from the prior quarter, primarily due
to the aforementioned C&I line draw activity. Period end
commercial revolving line utilization was 47%, compared to 38% in
the year-ago quarter and 36% in the prior quarter, reflecting line
draw activity at the end of the quarter predominantly from
corporate banking clients.
Average available-for-sale debt and other securities of $35.1
billion increased 5% compared to the year-ago quarter and decreased
1% compared to the prior quarter. Average other short-term
investments (which includes interest-bearing cash) of $2.9 billion
increased 65% compared to the year-ago quarter and increased 44%
compared to the prior quarter.
Average Deposits
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Average Deposits
Demand
$35,765
$35,710
$30,557
-
17
%
Interest checking
40,298
38,628
33,697
4
%
20
%
Savings
14,715
14,274
13,052
3
%
13
%
Money market
27,109
27,429
23,133
(1
%)
17
%
Foreign office(g)
209
244
208
(14
%)
-
Total transaction deposits
$118,096
$116,285
$100,647
2
%
17
%
Other time
5,081
5,507
4,860
(8
%)
5
%
Total core deposits
$123,177
$121,792
$105,507
1
%
17
%
Certificates - $100,000 and over
3,355
4,072
3,358
(18
%)
-
Other deposits
257
252
726
2
%
(65
%)
Total average deposits
$126,789
$126,116
$109,591
1
%
16
%
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, demand, and money market deposits.
Average commercial transaction deposits increased 25% and average
consumer transaction deposits increased 11%.
Compared to the prior quarter, average core deposits increased
1%, primarily driven by an increase in interest checking and
savings deposits. Average demand deposits represented 29% of total
core deposits in both the current and prior quarter. Average
commercial transaction deposits increased 1%, and average consumer
transaction deposits increased 2%.
Period end total transaction deposits of $128 billion increased
$9 billion, or 8%, compared to the prior quarter. Performance was
primarily driven by commercial transaction growth of $8 billion, or
14%, partially reflecting deposits from the aforementioned C&I
line draw activity near the end of the quarter.
Average Wholesale Funding
($ in millions)
For the Three Months Ended
% Change
March
December
March
2020
2019
2019
Seq
Yr/Yr
Average Wholesale Funding
Certificates - $100,000 and over
$3,355
$4,072
$3,358
(18
%)
-
Other deposits
257
252
726
2
%
(65
%)
Federal funds purchased
654
1,174
2,019
(44
%)
(68
%)
Other short-term borrowings
1,750
1,133
646
54
%
171
%
Long-term debt
15,816
14,860
15,438
6
%
2
%
Total average wholesale funding
$21,832
$21,491
$22,187
2
%
(2
%)
Compared to the year-ago quarter, average wholesale funding
decreased 2% primarily driven by a decrease in federal funds
borrowings, partially offset by an increase in other short-term
borrowings. Compared to the prior quarter, average wholesale
funding increased 2% primarily driven by debt issuances of $1.25
billion during the quarter and an increase in other short-term
borrowings, partially offset by decreases in jumbo CD balances and
federal funds borrowings.
Credit Quality Summary
($ in millions)
For the Three Months Ended
March
December
September
June
March
2020
2019
2019
2019
2019
Total nonaccrual portfolio loans and
leases (NPLs)
$647
$618
$482
$521
$450
Repossessed property
10
10
9
8
11
OREO
52
52
28
31
37
Total nonperforming portfolio loans and
leases and OREO (NPAs)
$709
$680
$519
$560
$498
NPL ratio(h)
0.55
%
0.56
%
0.44
%
0.48
%
0.41
%
NPA ratio(c)
0.60
%
0.62
%
0.47
%
0.51
%
0.45
%
Total loans and leases 30-89 days past due
(accrual)
409
364
402
383
322
Total loans and leases 90 days past due
(accrual)
151
130
132
128
132
Allowance for loan and lease losses,
beginning
$1,202
$1,143
$1,115
$1,115
$1,103
Impact of CECL adoption
643
-
-
-
-
Total net losses charged-off
(122
)
(113
)
(99
)
(78
)
(77
)
Provision for loan and lease losses
625
172
127
78
89
Allowance for loan and lease losses,
ending
$2,348
$1,202
$1,143
$1,115
$1,115
Reserve for unfunded commitments,
beginning
$144
$154
$147
$133
$131
Impact of CECL adoption
10
-
-
-
-
Reserve for acquired commitments
-
-
-
7
1
Provision for (benefit from) the reserve
for unfunded commitments
15
(10
)
7
7
1
Reserve for unfunded commitments,
ending
$169
$144
$154
$147
$133
Total allowance for credit losses
$2,517
$1,346
$1,297
$1,262
$1,248
Allowance for loan and lease losses
ratios:
As a percent of portfolio loans and
leases
1.99
%
1.10
%
1.04
%
1.02
%
1.02
%
As a percent of nonperforming portfolio
loans and leases
363
%
194
%
237
%
214
%
248
%
As a percent of nonperforming portfolio
assets
331
%
177
%
221
%
199
%
224
%
Allowance for credit losses as a percent
of portfolio loans and leases
2.13
%
1.23
%
1.19
%
1.15
%
1.14
%
Total losses charged-off
$(159
)
$(152
)
$(130
)
$(119
)
$(108
)
Total recoveries of losses previously
charged-off
37
39
31
41
31
Total net losses charged-off
$(122
)
$(113
)
$(99
)
$(78
)
$(77
)
Net charge-off ratio (NCO ratio)(b)
0.44
%
0.41
%
0.36
%
0.29
%
0.32
%
Commercial NCO ratio
0.32
%
0.20
%
0.18
%
0.13
%
0.11
%
Consumer NCO ratio
0.66
%
0.78
%
0.68
%
0.59
%
0.68
%
Nonperforming portfolio loans and leases were $647 million in
the current quarter, with the resulting NPL ratio of 0.55%.
Compared to the year-ago quarter, NPLs increased $197 million with
the NPL ratio increasing 14 bps. Compared to the prior quarter,
NPLs increased $29 million with the NPL ratio decreasing 1 bp.
Nonperforming portfolio assets were $709 million in the current
quarter, with the resulting NPA ratio of 0.60%. Compared to the
year-ago quarter, NPAs increased $211 million with the NPA ratio
increasing 15 bps. Compared to the prior quarter, NPAs increased
$29 million with the NPA ratio decreasing 2 bps.
The provision for loan and lease losses totaled $625 million in
the current quarter. The allowance for loan and lease losses ratio
represented 1.99% of total portfolio loans and leases in the
current quarter, compared with 1.02% in the year-ago quarter and
1.10% in the prior quarter. In the current quarter, the allowance
for loan and lease losses represented 363% of nonperforming
portfolio loans and leases and 331% of nonperforming portfolio
assets. The allowance for credit losses ratio represented 2.13% of
total portfolio loans and leases in the current quarter, reflecting
the impacts of the CECL adoption and COVID-19.
Net charge-offs were $122 million in the current quarter, with
the resulting NCO ratio of 0.44%. Compared to the year-ago quarter,
net charge-offs increased $45 million and the NCO ratio increased
12 bps. Compared to the prior quarter, net charge-offs increased $9
million and the NCO ratio increased 3 bps.
In response to the COVID-19 pandemic, beginning in March 2020
Fifth Third began providing financial hardship relief in the form
of payment deferrals and forbearances to consumer and business
customers across a wide array of lending products, as well as the
suspension of vehicle repossessions and home foreclosures. The
payment deferrals and forbearances are currently expected to cover
periods of three to six months. In most cases, these offers are not
classified as troubled debt restructurings (TDRs) and do not result
in loans being placed on nonaccrual status. However, for the
residential mortgage loan portfolio, the forbearance program is
expected to result in increases in loans reported as past due.
Capital Position
For the Three Months Ended
March
December
September
June
March
2020
2019
2019
2019
2019
Capital Position
Average total Bancorp shareholders' equity
as a percent of average assets
12.63
%
12.58
%
12.43
%
12.02
%
11.43
%
Tangible equity(a)
8.41
%
9.52
%
9.29
%
9.09
%
9.03
%
Tangible common equity (excluding
AOCI)(a)
7.41
%
8.44
%
8.21
%
8.27
%
8.21
%
Tangible common equity (including
AOCI)(a)
8.65
%
9.08
%
9.09
%
8.91
%
8.44
%
Regulatory Capital Ratios(e)
CET1 capital(d)
9.36
%
9.75
%
9.56
%
9.57
%
9.60
%
Tier I risk-based capital(d)
10.56
%
10.99
%
10.81
%
10.62
%
10.67
%
Total risk-based capital(d)
13.59
%
13.84
%
13.68
%
13.53
%
13.57
%
Tier I leverage
9.37
%
9.54
%
9.36
%
9.24
%
10.32
%
Capital ratios remained strong during the quarter. The CET1
capital ratio was 9.36%, the tangible common equity to tangible
assets ratio was 7.41% excluding AOCI, and 8.65% including AOCI.
The Tier I risk-based capital ratio was 10.56%, the Total
risk-based capital ratio was 13.59%, and the Tier I leverage ratio
was 9.37%.
Fifth Third’s regulatory capital ratio estimates for the first
quarter of 2020 reflect the ‘five-year transition’ from the banking
agencies’ interim final rule announced on March 27, 2020. This
five-year transition election allows banking organizations to defer
certain effects of the CECL accounting standard on their regulatory
capital. Specifically, this interim final rule allows for 25% of
the cumulative increase in allowance since the adoption of CECL and
100% of the day-one impact of CECL adoption to be deferred for a
two-year period. This two-year period will be followed by a
three-year transition period to phase-in the impact of the deferred
amounts on regulatory capital. As a result of the transition
election, the increase in credit reserves negatively impacted the
current quarter CET1 capital ratio approximately 18 bps.
Tax Rate The effective tax rate was 22.6% compared with
22.2% in the year-ago quarter and 22.0% in the prior quarter.
Other The Bancorp adopted ASU 2016-13, Measurement of
Credit Losses on Financial Instruments (commonly referred to as
Current Expected Credit Losses, or CECL), on January 1, 2020. Upon
adoption, the Bancorp recorded an increase to reserves of $653
million. The impact of the cumulative effect of the change was a
$472 million decrease to equity.
Conference Call Fifth Third will host a conference call
to discuss these financial results at 9:00 a.m. (Eastern Time)
today. This conference call will be webcast live and may be
accessed through the Fifth Third Investor Relations website at
www.53.com (click on “About Us” then “Investor Relations”).
Those unable to listen to the live webcast may access a webcast
replay through the Fifth Third Investor Relations website at the
same web address. Additionally, a telephone replay of the
conference call will be available after the conference call until
approximately May 4, 2020, by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
4109509#).
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 March 31,
2020, the Company had $185 billion in assets and operates 1,123
full-service Banking Centers, and 2,464 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 March 31, 2020, had $374
billion in assets under care, of which it managed $42 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 1Q20 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 filings with the U.S. Securities and
Exchange Commission (“SEC”). 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) effects of the
global COVID-19 pandemic; (2) deteriorating credit quality; (3)
loan concentration by location or industry of borrowers or
collateral; (4) problems encountered by other financial
institutions; (5) inadequate sources of funding or liquidity; (6)
unfavorable actions of rating agencies; (7) inability to maintain
or grow deposits; (8) limitations on the ability to receive
dividends from subsidiaries; (9) cyber-security risks; (10) Fifth
Third’s ability to secure confidential information and deliver
products and services through the use of computer systems and
telecommunications networks; (11) failures by third-party service
providers; (12) inability to manage strategic initiatives and/or
organizational changes; (13) inability to implement technology
system enhancements; (14) failure of internal controls and other
risk management systems; (15) losses related to fraud, theft or
violence; (16) inability to attract and retain skilled personnel;
(17) adverse impacts of government regulation; (18) governmental or
regulatory changes or other actions; (19) failures to meet
applicable capital requirements; (20) regulatory objections to
Fifth Third’s capital plan; (21) regulation of Fifth Third’s
derivatives activities; (22) deposit insurance premiums; (23)
assessments for the orderly liquidation fund; (24) replacement of
LIBOR; (25) weakness in the national or local economies; (26)
global political and economic uncertainty or negative actions; (27)
changes in interest rates; (28) changes and trends in capital
markets; (29) fluctuation of Fifth Third’s stock price; (30)
volatility in mortgage banking revenue; (31) litigation,
investigations, and enforcement proceedings by governmental
authorities; (32) breaches of contractual covenants,
representations and warranties; (33) competition and changes in the
financial services industry; (34) changing retail distribution
strategies, customer preferences and behavior; (35) risks relating
to Fifth Third’s ability to realize the anticipated benefits of the
merger with MB Financial, Inc.; (36) difficulties in identifying,
acquiring or integrating suitable strategic partnerships,
investments or acquisitions; (37) potential dilution from future
acquisitions; (38) loss of income and/or difficulties encountered
in the sale and separation of businesses, investments or other
assets; (39) results of investments or acquired entities; (40)
changes in accounting standards or interpretation or declines in
the value of Fifth Third’s goodwill or other intangible assets;
(41) inaccuracies or other failures from the use of models; (42)
effects of critical accounting policies and judgments or the use of
inaccurate estimates; (43) weather-related events, other natural
disasters, or health emergencies; and (44) 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/20200421005220/en/
Investor contact: Chris Doll (513) 534-2345 | Media contact: Ed
Loyd (513) 534-6397
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