Reported diluted earnings per share of $0.23

Reported results included a negative $0.07 impact from certain items on page 2 of the 2Q20 earnings release

Fifth Third Bancorp (FITB):

Key Highlights

Continue to provide support in response to the pandemic

  • Proactive outreach with customers, including those transitioning out of COVID-19 hardship programs
  • Originated $5.5 billion in Paycheck Protection Program (PPP) loans to approximately 38,000 small and mid-sized businesses
  • Taking measures to ensure continued employee & customer safety and remote workforce productivity

Second quarter 2020

  • Pre-provision net revenue(a) up 4% from the prior quarter and up 10% from the year-ago quarter despite continued rate headwinds
  • Record capital markets revenue
  • Significant improvement in reported and adjusted efficiency ratio compared to both the prior and year-ago quarter
  • NCO ratio lower than low end of previous guidance range
  • 9.7% CET1 up 35 bps sequentially; exceeds required minimum (including indicative stress capital buffer) by over 270 bps
  • Record deposit growth exceeding loan growth, resulting in excess liquidity (loan-to-core deposit ratio of 75%)
  • IB core deposit costs down 41 bps, more than previous guidance; NIM primarily impacted by excess liquidity (29 bps of the sequential decline); NIM also impacted by decline in market rates
Key Financial Data $ millions for all balance sheet and income statement items

2Q20

1Q20

2Q19

Income Statement Data Net income available to common shareholders

$163

$29

$427

Net interest income (U.S. GAAP)

1,200

1,229

1,245

Net interest income (FTE)(a)

1,203

1,233

1,250

Noninterest income

650

671

660

Noninterest expense

1,121

1,200

1,243

Per Share Data Earnings per share, basic

$0.23

$0.04

$0.57

Earnings per share, diluted

0.23

0.04

0.57

Book value per share

28.88

28.26

26.17

Tangible book value per share(a)

22.66

22.02

20.03

Balance Sheet & Credit Quality Average portfolio loans and leases

$118,506

$110,779

$110,095

Average deposits

150,598

126,789

124,345

Net charge-off ratio(b)

0.44 

%

0.44 

%

0.29 

%

Nonperforming asset ratio(c)

0.65 

0.60 

0.51 

Financial Ratios Return on average assets

0.40 

%

0.11 

%

1.08 

%

Return on average common equity

3.2 

0.6 

9.1 

Return on average tangible common equity(a)

4.3 

1.0 

12.3 

CET1 capital(d)(e)

9.72 

9.37 

9.57 

Net interest margin(a)

2.75 

3.28 

3.37 

Efficiency(a)

60.5 

63.0 

65.1 

    Other than the Quarterly Financial Review tables beginning on page 14 of the 2Q20 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 second quarter performance once again highlighted the strength of our franchise and our ability to navigate the dynamic environment and mitigate the impact of lower rates through well-diversified fee revenues and continued expense discipline. Our CET1 capital ratio of 9.7% and loan-to-core deposit ratio of 75% are both indicative of our balance sheet strength which will serve us well during this challenging environment.

We have now generated year-over-year adjusted positive operating leverage in seven out of the past eight quarters, and also grew tangible book value per share for five consecutive quarters.

We expect credit quality to remain relatively stable in the near-term, reflecting our disciplined client selection, decade-long focus on improving our credit performance in the event of a downturn, and proactive risk management actions. Additionally, our allowance for credit losses continues to incorporate our expectation of a protracted downturn followed by a prolonged recovery period due to the economic fallout from the pandemic.

We remain intently focused on taking appropriate action for our customers, our employees, and our communities during these uncertain times. I am very proud of the way our employees have responded to support our customers and each other.”

-Greg D. Carmichael, Chairman, President and CEO

 

 

Income Statement Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions, except per share data)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Condensed Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (NII)(a)

$1,203

 

$1,233

 

$1,250

 

(2)%

 

(4)%

 

 

Provision for credit losses

485

 

640

 

85

 

(24)%

 

471%

 

 

Noninterest income

650

 

671

 

660

 

(3)%

 

(2)%

 

 

Noninterest expense

1,121

 

1,200

 

1,243

 

(7)%

 

(10)%

 

 

Income before income taxes(a)

$247

 

$64

 

$582

 

286%

 

(58)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable equivalent adjustment

$3

 

$4

 

$5

 

(25)%

 

(40)%

 

 

Applicable income tax expense

49

 

14

 

124

 

250%

 

(60)%

 

 

Net income

$195

 

$46

 

$453

 

324%

 

(57)%

 

 

Dividends on preferred stock

32

 

17

 

26

 

88%

 

23%

 

 

Net income available to common shareholders

$163

 

$29

 

$427

 

462%

 

(62)%

 

 

Earnings per share, diluted

$0.23

 

$0.04

 

$0.57

 

475%

 

(60)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fifth Third Bancorp (NASDAQ®: FITB) today reported second quarter 2020 net income of $195 million compared to net income of $46 million in the prior quarter and $453 million in the year-ago quarter. Net income available to common shareholders in the current quarter was $163 million, or $0.23 per diluted share, compared to $29 million, or $0.04 per diluted share, in the prior quarter and $427 million, or $0.57 per diluted share, in the year-ago quarter.

 

 

 

 

 

 

 

 

Diluted earnings per share impact of certain items - 2Q20

 

 

 

 

 

 

 

 

 

 

(after-tax impacts(f); $ in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Valuation of Visa total return swap within other noninterest income

$(22)

 

 

 

 

Branch and non-branch real estate charges within other noninterest income

(10)

 

 

 

 

COVID-19-related expenses

(9)

 

 

 

 

Merger-related expenses

(7)

 

 

 

 

FHLB debt extinguishment charge within other noninterest expense

(4)

 

 

 

 

After-tax impact(f) of certain items

$(52)

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share impact of certain items

$(0.07)

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share impact reflect 717.572 million average diluted shares outstanding

 

 

 

 

 

 

 

 

 

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(FTE; $ in millions)(a)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$1,406

 

 

$1,529

 

 

$1,641

 

 

(8)%

 

(14)%

 

 

Interest expense

203

 

 

296

 

 

391

 

 

(31)%

 

(48)%

 

 

Net interest income (NII)

$1,203

 

 

$1,233

 

 

$1,250

 

 

(2)%

 

(4)%

 

 

Adjusted NII(a)

$1,188

 

 

$1,217

 

 

$1,232

 

 

(2)%

 

(4)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Yield/Rate Analysis

 

 

 

 

 

 

 

 

 

bps Change

 

 

Yield on interest-earning assets

3.21

%

 

 

4.07

%

 

 

4.42

%

 

 

(86)

 

(121)

 

 

Rate paid on interest-bearing liabilities

0.66

%

 

 

1.09

%

 

 

1.47

%

 

 

(43)

 

(81)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest rate spread

2.55

%

 

 

2.98

%

 

 

2.95

%

 

 

(43)

 

(40)

 

 

Net interest margin (NIM)

2.75

%

 

 

3.28

%

 

 

3.37

%

 

 

(53)

 

(62)

 

 

Adjusted NIM(a)

2.71

%

 

 

3.24

%

 

 

3.32

%

 

 

(53)

 

(61)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, reported NII decreased $30 million, or 2%. Excluding purchase accounting accretion of $15 million in the current quarter and $16 million in the prior quarter, adjusted NII decreased $29 million, or 2%. The decrease was driven by the impact of lower market rates on commercial loans, decreased mortgage loan balances due to an increase in prepayment activity, as well as a decline in home equity and credit card balances reflecting generally subdued demand. These impacts were partially offset by elevated average commercial revolving line of credit balances and growth from lower yielding PPP loans, as well as continued focus on reducing deposit costs and the favorable impact of previously executed hedges. Compared to the prior quarter, reported and adjusted NIM decreased 53 bps, also driven by lower market rates and the unfavorable impact from elevated cash balances (29 bps), and lower yielding PPP loans (1 bp), partially offset by benefits from lower deposit costs and previously executed hedges.

Compared to the year-ago quarter, reported NII decreased $47 million, or 4%. Excluding purchase accounting accretion, adjusted NII decreased $44 million, or 4%, primarily reflecting lower market rates, partially offset by the impact of elevated average commercial line draws and lower yielding PPP loans, as well as a continued focus on reducing deposit costs and the favorable impact of previously executed hedges. Compared to the year-ago quarter, reported NIM decreased 62 bps. Excluding purchase accounting accretion, adjusted NIM decreased 61 bps, primarily reflecting the impact of lower market rates on commercial loans and significantly elevated cash balances, partially offset by benefits from lower deposit costs and previously executed hedges.

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

$122

 

$148

 

$143

 

(18)%

 

(15)%

 

 

Commercial banking revenue

137

 

124

 

107

 

10%

 

28%

 

 

Mortgage banking net revenue

99

 

120

 

63

 

(18)%

 

57%

 

 

Wealth and asset management revenue

120

 

134

 

122

 

(10)%

 

(2)%

 

 

Card and processing revenue

82

 

86

 

92

 

(5)%

 

(11)%

 

 

Leasing business revenue

57

 

73

 

76

 

(22)%

 

(25)%

 

 

Other noninterest income

12

 

7

 

47

 

71%

 

(74)%

 

 

Securities gains (losses), net

21

 

(24)

 

8

 

NM

 

163%

 

 

Securities gains, net - non-qualifying hedges

 

 

 

 

 

 

 

 

 

 

 

on mortgage servicing rights

 

3

 

2

 

(100)%

 

(100)%

 

 

Total noninterest income

$650

 

$671

 

$660

 

(3)%

 

(2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported noninterest income decreased $21 million, or 3%, from the prior quarter, and decreased $10 million, or 2%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below. Reported noninterest income results include securities gains/losses which were attributable predominantly to mark-to-market impacts related to non-qualified deferred compensation assets, and were offset in noninterest expense, resulting in an immaterial impact to pre-tax income.

 

Noninterest Income excluding certain items

 

($ in millions)

For the Three Months Ended

 

 

 

June

 

March

 

 

June

 

 

 

2020

 

2020

 

 

2019

 

 

Noninterest Income excluding certain items

 

 

 

 

 

 

 

 

 

Noninterest income (U.S. GAAP)

$650

 

 

$671

 

 

$660

 

 

Valuation of Visa total return swap

29

 

 

22

 

 

22

 

 

Branch and non-branch real estate charges

12

 

 

 

 

 

 

Net impairment on private equity investments

 

 

15

 

 

 

 

Securities (gains) losses, net (excluding GreenSky)

(21)

 

 

24

 

 

(8)

 

 

Noninterest income excluding certain items(a)

$670

 

 

$732

 

 

$674

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, noninterest income excluding certain items decreased $62 million, or 8%. Compared to the year-ago quarter, noninterest income excluding certain items decreased $4 million, or 1%.

Compared to the prior quarter, service charges on deposits decreased $26 million, or 18%, reflecting lower consumer and commercial deposit fees which were impacted by the record growth in deposit balances as well as hardship-related fee waivers granted throughout the quarter. Commercial banking revenue increased $13 million, or 10%, reflecting increases in both debt and equity capital markets revenue, as well as increased institutional brokerage revenue. Mortgage banking net revenue decreased $21 million, or 18%, as strong origination fees and gains on loan sales (reflecting improved margins) in the current quarter were more than offset by the MSR net valuation adjustment that returned to normalized levels compared to the prior quarter favorability, as well as lower origination volume and a decrease in gross servicing fee revenue in the current quarter. Current quarter mortgage originations of $3.4 billion decreased 15% compared to the prior quarter and were impacted by the decision to temporarily pause correspondent channel production. Mortgage originations excluding correspondent channel production increased 22% compared to the prior quarter. Wealth and asset management revenue decreased $14 million, or 10%, primarily driven by lower revenue given the equity market performance and seasonally strong tax preparation fees from the prior quarter. Card and processing revenue decreased $4 million, or 5%, resulting from lower credit and debit volumes throughout the quarter reflecting customer behavioral changes in response to the pandemic, partially offset by lower rewards. Leasing business revenue decreased $16 million, or 22%, primarily driven by a decrease in lease syndication revenue.

Compared to the year-ago quarter, service charges on deposits decreased $21 million, or 15%, driven by lower consumer and commercial deposit fees, which were impacted by the record growth in deposit balances as well as hardship-related fee waivers granted throughout the quarter. Commercial banking revenue increased $30 million, or 28%, reflecting increases in both debt and equity capital markets revenue, as well as increased institutional brokerage and financial risk management revenue. Mortgage banking net revenue increased $36 million, or 57% primarily driven by strong origination fees and gains on loan sales reflecting improved margins. Originations excluding the correspondent channel increased 41% compared to the year-ago quarter. Wealth and asset management revenue decreased $2 million, or 2%. Card and processing revenue decreased by $10 million, or 11%, reflecting decreases in debit and credit volumes, partially offset by lower rewards. Leasing business revenue decreased $19 million, or 25% primarily reflecting lower business solutions revenue.

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$627

 

 

$647

 

 

$641

 

 

(3)%

 

(2)%

 

 

Net occupancy expense

82

 

 

82

 

 

88

 

 

-

 

(7)%

 

 

Technology and communications

90

 

 

93

 

 

136

 

 

(3)%

 

(34)%

 

 

Equipment expense

32

 

 

32

 

 

33

 

 

-

 

(3)%

 

 

Card and processing expense

29

 

 

31

 

 

34

 

 

(6)%

 

(15)%

 

 

Leasing business expense

33

 

 

35

 

 

38

 

 

(6)%

 

(13)%

 

 

Marketing expense

20

 

 

31

 

 

41

 

 

(35)%

 

(51)%

 

 

Intangible amortization expense

12

 

 

13

 

 

14

 

 

(8)%

 

(14)%

 

 

Other noninterest expense

196

 

 

236

 

 

218

 

 

(17)%

 

(10)%

 

 

Total noninterest expense

$1,121

 

 

$1,200

 

 

$1,243

 

 

(7)%

 

(10)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impacts of Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

 

 

 

June

 

March

 

 

June

 

 

 

 

 

2020

 

2020

 

 

2019

 

 

 

 

Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$2

 

 

$2

 

 

$41

 

 

 

 

Net occupancy expense

2

 

 

1

 

 

6

 

 

 

 

Technology and communications

4

 

 

3

 

 

49

 

 

 

 

Equipment expense

 

 

 

 

1

 

 

 

 

Card and processing expense

 

 

 

 

1

 

 

 

 

Leasing business expense

 

 

 

 

 

 

 

 

Marketing expense

 

 

 

 

3

 

 

 

 

Intangible amortization expense

 

 

 

 

 

 

 

 

Other noninterest expense

1

 

 

1

 

 

8

 

 

 

 

Total merger-related expenses

$9

 

 

$7

 

 

$109

 

 

 

   

 

Noninterest Expense excluding Merger-Related Expenses(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

 

June

 

 

 

 

 

 

 

 

2020

 

2020

 

 

2019

 

 

Seq

 

Yr/Yr

 

 

Noninterest Expense excluding Merger-Related Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$625

 

 

$645

 

 

$600

 

 

(3)%

 

4%

 

 

Net occupancy expense

80

 

 

81

 

 

82

 

 

(1)%

 

(2)%

 

 

Technology and communications

86

 

 

90

 

 

87

 

 

(4)%

 

(1)%

 

 

Equipment expense

32

 

 

32

 

 

32

 

 

—%

 

—%

 

 

Card and processing expense

29

 

 

31

 

 

33

 

 

(6)%

 

(12)%

 

 

Leasing business expense

33

 

 

35

 

 

38

 

 

(6)%

 

(13)%

 

 

Marketing expense

20

 

 

31

 

 

38

 

 

(35)%

 

(47)%

 

 

Intangible amortization expense

12

 

 

13

 

 

14

 

 

(8)%

 

(14)%

 

 

Other noninterest expense

195

 

 

235

 

 

210

 

 

(17)%

 

(7)%

 

 

Total noninterest expense excluding merger-related expenses

$1,112

 

 

$1,193

 

 

$1,134

 

 

(7)%

 

(2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, reported noninterest expense decreased $79 million, or 7%. Excluding certain noninterest expense items shown on page 2 and in the reconciliation tables of the earnings release (including COVID-19-related expenses), as well as intangible amortization expense, noninterest expense decreased $62 million, or 5%, primarily reflecting lower compensation and benefits (which included $22 million from non-qualified deferred compensation expense in the current quarter compared to an expense benefit of $26 million in the prior quarter), lower other noninterest expense, declines in expenses directly associated with revenue-generating activities, and continued discipline managing expenses throughout the Company. Excluding the impacts of non-qualified deferred compensation expense (offset in noninterest income), expenses decreased $110 million, or 9%, compared to the prior quarter.

Compared to the year-ago quarter, reported noninterest expense decreased $122 million, or 10%. Excluding certain noninterest expenses shown on page 2 and in the reconciliation tables of the earnings release (including COVID-19-related expenses), as well as intangible amortization expense, noninterest expense decreased $38 million, or 3%, primarily reflecting lower marketing expense, lower other noninterest expense, and declines in expenses directly associated with business activities, partially offset by elevated compensation and benefits expenses (which included $22 million from non-qualified deferred compensation expense in the current quarter compared to $7 million in the year-ago quarter). Excluding the impacts of non-qualified deferred compensation expense (offset in noninterest income), expenses decreased $53 million, or 5%, compared to the year-ago quarter.

 

 

Average Interest-Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Average Portfolio Loans and Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

$59,040

 

 

$51,586

 

 

$52,078

 

 

14%

 

13%

 

 

Commercial mortgage loans

11,222

 

 

11,019

 

 

10,632

 

 

2%

 

6%

 

 

Commercial construction loans

5,548

 

 

5,132

 

 

5,248

 

 

8%

 

6%

 

 

Commercial leases

3,056

 

 

3,201

 

 

3,809

 

 

(5)%

 

(20)%

 

 

Total commercial loans and leases

$78,866

 

 

$70,938

 

 

$71,767

 

 

11%

 

10%

 

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage loans

$16,561

 

 

$16,732

 

 

$16,804

 

 

(1)%

 

(1)%

 

 

Home equity

5,820

 

 

6,006

 

 

6,376

 

 

(3)%

 

(9)%

 

 

Indirect secured consumer loans

12,124

 

 

11,809

 

 

10,190

 

 

3%

 

19%

 

 

Credit card

2,248

 

 

2,498

 

 

2,408

 

 

(10)%

 

(7)%

 

 

Other consumer loans

2,887

 

 

2,796

 

 

2,550

 

 

3%

 

13%

 

 

Total consumer loans

$39,640

 

 

$39,841

 

 

$38,328

 

 

(1)%

 

3%

 

 

Total average portfolio loans and leases

$118,506

 

 

$110,779

 

 

$110,095

 

 

7%

 

8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Loans and Leases Held for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans and leases held for sale

$68

 

 

$108

 

 

$113

 

 

(37)%

 

(40)%

 

 

Consumer loans held for sale

844

 

 

1,293

 

 

785

 

 

(35)%

 

8%

 

 

Total average loans and leases held for sale

$912

 

 

$1,401

 

 

$898

 

 

(35)%

 

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities and other short-term investments

$56,806

 

 

$39,033

 

 

$37,797

 

 

46%

 

50%

 

 

Total average interest-earning assets

$176,224

 

 

$151,213

 

 

$148,790

 

 

17%

 

18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, total average portfolio loans and leases increased 7%, reflecting growth in commercial and industrial (C&I) loans, commercial construction and indirect secured consumer loans (predominantly indirect automobile). Average commercial portfolio loans and leases increased 11%, reflecting elevated C&I revolving line of credit utilization and the impact of PPP loans in the current quarter, as well as growth in commercial construction and commercial mortgage loans, partially offset by lower commercial leases. Average consumer portfolio loans decreased 1%, reflecting declines in credit card and home equity loans, partially offset by growth in indirect secured consumer loans.

Compared to the year-ago quarter, total average portfolio loans and leases increased 8%, reflecting growth in C&I loans as well as continued growth in indirect secured consumer loans (predominantly indirect automobile). Average commercial portfolio loans and leases increased 10%, reflecting elevated C&I balances predominantly from elevated corporate banking client line of credit utilization for part of the quarter, PPP loans, and growth in commercial mortgage loans, partially offset by a decline in commercial leases. Average consumer portfolio loans increased 3%, as higher indirect secured consumer loans were partially offset by lower credit card and home equity loans.

Total period-end commercial portfolio loans and leases of $75 billion included $5.2 billion in PPP loan balances and decreased $3 billion, or 3%, from the prior quarter, and increased $5 billion, or 7%, from the year-ago quarter, reflecting a normalization of commercial revolving line utilization throughout the current quarter. Period-end commercial revolving line utilization was 38%, compared to 47% in the prior quarter and 37% in the year-ago quarter.

Average available-for-sale debt and other securities of $36.1 billion increased 3% compared to the prior quarter and increased 4% compared to the year-ago quarter. Average other short-term investments (which includes interest-bearing cash) of $19.8 billion increased $16.9 billion compared to the prior quarter and increased $17.5 billion compared to the year-ago quarter.

 

Average Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Average Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

$45,761

 

 

$35,765

 

 

$35,818

 

 

28%

 

28%

 

 

Interest checking

49,760

 

 

40,298

 

 

36,514

 

 

23%

 

36%

 

 

Savings

16,354

 

 

14,715

 

 

14,418

 

 

11%

 

13%

 

 

Money market

30,022

 

 

27,109

 

 

25,934

 

 

11%

 

16%

 

 

Foreign office(g)

182

 

 

209

 

 

163

 

 

(13)%

 

12%

 

 

Total transaction deposits

$142,079

 

 

$118,096

 

 

$112,847

 

 

20%

 

26%

 

 

Other time

4,421

 

 

5,081

 

 

5,678

 

 

(13)%

 

(22)%

 

 

Total core deposits

$146,500

 

 

$123,177

 

 

$118,525

 

 

19%

 

24%

 

 

Certificates - $100,000 and over

4,067

 

 

3,355

 

 

5,780

 

 

21%

 

(30)%

 

 

Other deposits

31

 

 

257

 

 

40

 

 

(88)%

 

(23)%

 

 

Total average deposits

$150,598

 

 

$126,789

 

 

$124,345

 

 

19%

 

21%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, average core deposits increased 19%, with double-digit growth in all deposit captions except other time and foreign office deposits. Average demand deposits represented 31% of total core deposits in the current quarter compared to 29% in the prior quarter. Average commercial transaction deposits increased 34% and average consumer transaction deposits increased 8%.

Compared to the year-ago quarter, average core deposits increased 24%, reflecting record growth in commercial and consumer balances. Average commercial transaction deposits increased 45% and average consumer transaction deposits increased 10%.

The period end loan-to-core deposit ratio was 75% in the current quarter, compared to 89% in the prior quarter and 91% in the year-ago quarter.

 

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

For the Three Months Ended

 

 

% Change

 

 

 

June

 

March

 

June

 

 

 

 

 

 

 

2020

 

2020

 

2019

 

Seq

 

Yr/Yr

 

 

Average Wholesale Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates - $100,000 and over

$4,067

 

 

$3,355

 

 

$5,780

 

 

21%

 

(30)%

 

 

Other deposits

31

 

 

257

 

 

40

 

 

(88)%

 

(23)%

 

 

Federal funds purchased

309

 

 

654

 

 

1,151

 

 

(53)%

 

(73)%

 

 

Other short-term borrowings

2,377

 

 

1,750

 

 

1,119

 

 

36%

 

112%

 

 

Long-term debt

16,955

 

 

15,816

 

 

15,543

 

 

7%

 

9%

 

 

Total average wholesale funding

$23,739

 

 

$21,832

 

 

$23,633

 

 

9%

 

—%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compared to the prior quarter, average wholesale funding increased 9%, driven primarily by debt issuances of $1.25 billion during the quarter, as well as increases in jumbo CD balances and other short-term borrowings reflecting $3 billion in FHLB advances which were initiated in the first month of the quarter and subsequently extinguished, partially offset by decreased federal funds borrowings and other deposits. Compared to the year-ago quarter, average wholesale funding remained flat as decreases in jumbo CD balances, federal funds borrowings and other deposits were offset by increases in long-term debt and other short-term borrowings.

 

Credit Quality Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

As of and For the Three Months Ended

 

June

 

March

 

December

 

September

 

June

 

2020

 

2020

 

2019

 

2019

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonaccrual portfolio loans and leases (NPLs)

$700

 

 

$647

 

 

$618

 

 

$482

 

 

$521

 

Repossessed property

4

 

 

10

 

 

10

 

 

9

 

 

8

 

OREO

43

 

 

52

 

 

52

 

 

28

 

 

31

 

Total nonperforming portfolio loans and leases and OREO (NPAs)

$747

 

 

$709

 

 

$680

 

 

$519

 

 

$560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NPL ratio(h)

0.61

%

 

 

0.55

%

 

 

0.56

%

 

 

0.44

%

 

 

0.48

%

 

NPA ratio(c)

0.65

%

 

 

0.60

%

 

 

0.62

%

 

 

0.47

%

 

 

0.51

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans and leases 30-89 days past due (accrual)

$381

 

 

$409

 

 

$364

 

 

$402

 

 

$383

 

Total loans and leases 90 days past due (accrual)

136

 

 

151

 

 

130

 

 

132

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses (ALLL), beginning

$2,348

 

 

$1,202

 

 

$1,143

 

 

$1,115

 

 

$1,115

 

Impact of CECL adoption

 

 

643

 

 

 

 

 

 

 

Total net losses charged-off

(130)

 

 

(122)

 

 

(113)

 

 

(99)

 

 

(78)

 

Provision for loan and lease losses

478

 

 

625

 

 

172

 

 

127

 

 

78

 

ALLL, ending

$2,696

 

 

$2,348

 

 

$1,202

 

 

$1,143

 

 

$1,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments, beginning

$169

 

 

$144

 

 

$154

 

 

$147

 

 

$133

 

Impact of CECL adoption

 

 

10

 

 

 

 

 

 

 

Reserve for acquired commitments

 

 

 

 

 

 

 

 

7

 

Provision for (benefit from) the reserve for unfunded commitments

7

 

 

15

 

 

(10)

 

 

7

 

 

7

 

Reserve for unfunded commitments, ending

$176

 

 

$169

 

 

$144

 

 

$154

 

 

$147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total allowance for credit losses (ACL)

$2,872

 

 

$2,517

 

 

$1,346

 

 

$1,297

 

 

$1,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACL ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As a % of portfolio loans and leases

2.50

%

 

 

2.13

%

 

 

1.23

%

 

 

1.19

%

 

 

1.15

%

 

As a % of nonperforming portfolio loans and leases

410

%

 

 

389

%

 

 

218

%

 

 

269

%

 

 

242

%

 

As a % of nonperforming portfolio assets

385

%

 

 

355

%

 

 

198

%

 

 

250

%

 

 

225

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALLL as a % of portfolio loans and leases

2.34

%

 

 

1.99

%

 

 

1.10

%

 

 

1.04

%

 

 

1.02

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total losses charged-off

$(163)

 

 

$(159)

 

 

$(152)

 

 

$(130)

 

 

$(119)

 

Total recoveries of losses previously charged-off

33

 

 

37

 

 

39

 

 

31

 

 

41

 

Total net losses charged-off

$(130)

 

 

$(122)

 

 

$(113)

 

 

$(99)

 

 

$(78)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net charge-off ratio (NCO ratio)(b)

0.44

%

 

 

0.44

%

 

 

0.41

%

 

 

0.36

%

 

 

0.29

%

 

Commercial NCO ratio

0.40

%

 

 

0.32

%

 

 

0.20

%

 

 

0.18

%

 

 

0.13

%

 

Consumer NCO ratio

0.52

%

 

 

0.66

%

 

 

0.78

%

 

 

0.68

%

 

 

0.59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonperforming portfolio loans and leases were $700 million in the current quarter, with the resulting NPL ratio of 0.61%. Compared to the prior quarter, NPLs increased $53 million with the NPL ratio increasing 6 bps. Compared to the year-ago quarter, NPLs increased $179 million with the NPL ratio increasing 13 bps.

Nonperforming portfolio assets were $747 million in the current quarter, with the resulting NPA ratio of 0.65%. Compared to the prior quarter, NPAs increased $38 million with the NPA ratio increasing 5 bps. Compared to the year-ago quarter, NPAs increased $187 million with the NPA ratio increasing 14 bps.

The provision for credit losses totaled $485 million in the current quarter. The allowance for credit loss ratio represented 2.50% of total portfolio loans and leases in the current quarter, compared with 2.13% in the prior quarter and 1.15% in the year-ago quarter (using the incurred loss methodology). In the current quarter, the allowance for credit losses represented 410% of nonperforming portfolio loans and leases and 385% of nonperforming portfolio assets. The allowance for loan and lease losses ratio represented 2.34% of total portfolio loans and leases in the current quarter.

Net charge-offs were $130 million in the current quarter, with the resulting NCO ratio of 0.44%. Compared to the prior quarter, net charge-offs increased $8 million and the NCO ratio remained flat. Compared to the year-ago quarter, net charge-offs increased $52 million and the NCO ratio increased 15 bps.

 

 

Capital Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and For the Three Months Ended

 

 

 

 

June

 

March

 

December

 

September

June

 

 

 

 

2020

 

2020

 

2019

 

2019

 

2019

 

Capital Position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total Bancorp shareholders' equity as a % of average assets

 

11.30

%

 

 

12.63

%

 

 

12.58%

 

12.43%

 

12.02

%

 

 

Tangible equity(a)

 

7.68

%

 

 

8.41

%

 

 

9.52%

 

9.29%

 

9.09

%

 

 

Tangible common equity (excluding AOCI)(a)

 

6.77

%

 

 

7.41

%

 

 

8.44%

 

8.21%

 

8.27

%

 

 

Tangible common equity (including AOCI)(a)

 

8.13

%

 

 

8.65

%

 

 

9.08%

 

9.09%

 

8.91

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory Capital Ratios(e)

 

 

 

 

CET1 capital(d)

 

9.72

%

 

 

9.37

%

 

 

9.75%

 

9.56%

 

9.57

%

 

 

Tier I risk-based capital(d)

 

10.95

%

 

 

10.56

%

 

 

10.99%

 

10.81%

 

10.62

%

 

 

Total risk-based capital(d)

 

14.23

%

 

 

13.59

%

 

 

13.84%

 

13.68%

 

13.53

%

 

 

Tier I leverage

 

8.16

%

 

 

9.37

%

 

 

9.54%

 

9.36%

 

9.24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital ratios remained strong during the quarter. The CET1 capital ratio was 9.72%, the tangible common equity to tangible assets ratio was 6.77% excluding AOCI, and 8.13% including AOCI. The Tier I risk-based capital ratio was 10.95%, the Total risk-based capital ratio was 14.23%, and the Tier I leverage ratio was 8.16%. Certain capital ratios, including the Tier I leverage ratio, were impacted by the significant increase in assets throughout the quarter, predominantly from growth in 0% risk-weighted assets resulting from an increase in interest-bearing cash as well as PPP loans.

On June 30, 2020, Fifth Third released its indicative stress capital buffer requirement resulting from the Federal Reserve Board’s 2020 Comprehensive Capital Analysis and Review results incorporating the supervisory severely adverse scenario published in February 2020. Fifth Third’s indicative stress capital buffer under this scenario is 2.5%, effective October 1, 2020. The stress capital buffer of 2.5% is the floor under the regulatory capital rules. Without the floor, Fifth Third estimates its buffer would have been approximately 2.1%.

Tax Rate

The effective tax rate was 19.9% compared with 22.6% in the prior quarter and 21.5% in the year-ago quarter. The tax rate in the current quarter reflected a one-time $2 million tax benefit primarily due to various state items.

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.

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 June 30, 2020, the Company had $203 billion in assets and operates 1,122 full-service Banking Centers, and 2,456 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 June 30, 2020, had $405 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

  1. Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 27 of the 2Q20 earnings release.
  2. Net losses charged-off as a percent of average portfolio loans and leases.
  3. Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO.
  4. 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.
  5. Current period regulatory capital ratios are estimated.
  6. Assumes a 23% tax rate.
  7. Includes commercial customer Eurodollar sweep balances for which the Bank pays rates comparable to other commercial deposit accounts.
  8. 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.

Investor contact: Chris Doll (513) 534-2345 | Media contact: Ed Loyd (513) 534-6397

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