Diluted earnings per share of $1.12
Reported results included a positive $0.49
impact from certain items on page 3 of the 1Q19 earnings
release
Fifth Third Bancorp (FITB):
Key Highlights
MB Financial acquisition
- Closed transaction on March 22, 2019
- Expect to convert majority of systems in May 2019
Strong financial and credit performance
- NIM(a) up 10 bps compared to 1Q18
- Adjusted PPNR(a) up 19% compared to 1Q18 (up 17% excluding the
impact of MB)
- Average loans up 6% compared to 1Q18 (4% excluding impact of
MB)
- Average core deposits up 5% compared to 1Q18 (3% excluding
impact of MB)
- NCO ratio(c) of 0.32% (incl. Commercial of 0.11%)
Solid key financial metrics(a)
- ROTCE: 23.9% (adjusted 13.5%)
- ROA: 2.11% (adjusted 1.21%)
- Efficiency ratio: 50.2% (adjusted 61.3%)
Key Financial Data
$
millions for all balance sheet and income statement items
1Q19 4Q18 1Q18 Income
Statement Data Net income available to common shareholders $760
$432 $686 Net interest income (U.S. GAAP) 1,082 1,081 996 Net
interest income (FTE)(a) 1,086 1,085 999 Noninterest income 1,101
575 909 Noninterest expense(b) 1,097 975 1,010
Per Share
Data Earnings per share, basic $1.14 $0.65 $0.98 Earnings per
share, diluted 1.12 0.64 0.96 Book value per share 24.77 23.07
21.44 Tangible book value per share(a) 18.64 19.17 17.80
Balance Sheet & Credit Quality Average portfolio loans
and leases $97,773 $94,757 $92,334 Average deposits 109,591 107,495
103,537 Net charge-off ratio(c) 0.32 % 0.35 % 0.36 % Nonperforming
asset ratio(d) 0.45 0.41 0.55
Financial Ratios Return
on average assets 2.11 % 1.25 % 2.01 % Return on average common
equity 19.6 11.8 18.8 Return on average tangible common equity(a)
23.9 14.3 22.6 CET1 capital(e)(f) 9.65 10.24 10.82 Net interest
margin(a) 3.28 3.29 3.18 Efficiency(a)(b) 50.2 58.7 52.9
Other than the Quarterly Financial Review
tables beginning on page 15 of the 1Q19 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 first quarter performance was strong. Loan growth exceeded
our previous expectations, we continued to manage expenses
diligently, and credit quality metrics were solid.
“Additionally, we achieved a significant milestone on March 22,
2019, with the closing of the MB Financial acquisition. We are
pleased to welcome our new customers and team members. We look
forward to converting substantially all systems and processes in
May and providing our Chicago customers with expanded products and
services.
“With a strong start to the year, we now look forward to
leveraging the enhanced capabilities of our company and expect to
achieve our previously stated financial synergies from the
transaction, which will meaningfully improve our key profitability
metrics.
“With a clearly defined set of strategic priorities, we remain
confident in our ability to generate revenue growth, achieve
positive operating leverage, outperform peers through the cycle,
and create significant value for our shareholders.”
-Greg D. Carmichael, Chairman, President and
CEO
On March 22, 2019, Fifth Third Bancorp closed the previously
announced acquisition of MB Financial, Inc. The acquisition added
approximately $19.8 billion of total assets, $13.5 billion of total
loans and leases, $14.5 billion of total deposits, and 91 locations
(including 86 full-service banking centers). First quarter of 2019
results reflect the impact of MB Financial since March 22,
2019.
Summary MB Financial Balance Sheet at Acquisition
($ in millions) Assets
Liabilities Cash and due from banks $1,686 Transactional
deposits $12,170 Commercial loans and leases 11,068 Other time
546 Consumer loans 2,435 Core deposits 12,716 Total
loans and leases 13,503 Certificates $100,000 and over 1,776
Federal funds sold 35 Total deposits 14,495 Securities and other
short-term investments 940 Other short-term borrowings 348 Goodwill
1,843 Long-term debt 713 Other assets 1,793 Other
liabilities 439 Total assets $19,800 Total liabilities
$15,995
Income Statement Highlights
($ in millions, except per share
data) For the Three Months Ended %
Change March December March
2019 2018 2018
Seq Yr/Yr
Condensed
Statements of Income Net interest income (NII)(a) $1,086 $1,085
$999 - 9% Provision for credit losses(b) 90 97 13 (7%) 592%
Noninterest income 1,101 575 909 91% 21% Noninterest expense(b)
1,097 975 1,010
13% 9% Income before income taxes(a)
$1,000 $588 $885 70%
13% Taxable equivalent adjustment 4 4 3
- 33% Applicable income tax expense 221 129
181 71% 22% Net
income $775 $455 $701 70% 11% Less: Net income attributable to
noncontrolling interests - - -
NM NM Net income attributable to
Bancorp $775 $455 $701 70% 11% Dividends on preferred stock
15 23 15 (35%)
- Net income available to common shareholders
$760 $432 $686 76%
11% Earnings per share, diluted $1.12
$0.64 $0.96 75%
17%
Fifth Third includes the provision for loan and lease losses
and the provision for the reserve for unfunded commitments in a
single measure called provision for credit losses. Fifth Third
previously reported the provision for the reserve for unfunded
commitments within other noninterest expense. All reporting periods
have been adjusted to reflect this reclassification.
Fifth Third Bancorp (Nasdaq: FITB) today reported first quarter
2019 net income of $775 million compared to net income of $701
million in the year-ago quarter. Net income available to common
shareholders was $760 million, or $1.12 per diluted share, compared
to $686 million, or $0.96 per diluted share in the year-ago
quarter. Prior quarter net income was $455 million and net income
available to common shareholders was $432 million, or $0.64 per
diluted share.
Diluted earnings per share impact of certain items
(after-tax impacts(g); $ in
millions, except per share data) Gain on sale of
Worldpay shares $433 Merger-related items: Expenses ($65) Branch
network impairment charge (noninterest income) ($10) Acquisition
impact on state deferred taxes ($9) Valuation of Visa total return
swap ($24) GreenSky equity securities gains $7 After-tax
impact(g) of certain items $332 Average diluted common
shares outstanding (thousands) 670,685 Diluted earnings per
share impact $0.49
Net Interest Income
(FTE; $ in
millions)(a) For the Three Months Ended %
Change March December March 2019 2018
2018 Seq Yr/Yr
Interest Income Interest income $1,437 $1,397 $1,209 3% 19%
Interest expense 351 312 210
13% 67% Net interest
income (NII) $1,086 $1,085 $999
- 9%
Average
Yield/Rate Analysis bps Change Yield on interest-earning assets
4.33% 4.23% 3.85% 10 48 Rate paid on interest-bearing liabilities
1.46% 1.33% 0.97% 13 49
Ratios Net interest rate
spread 2.87% 2.90% 2.88% (3) (1) Net interest margin 3.28%
3.29% 3.18% (1)
10
Compared to the year-ago quarter, NII increased $87 million, or
9 percent, driven by higher short-term market rates, as well as
growth in both the commercial loan portfolio and the securities
portfolio. NIM increased 10 bps, driven by higher short-term market
rates and growth in higher-yielding consumer loans, partially
offset by higher funding costs and a continued migration from
demand deposits into interest-bearing deposits.
Compared to the prior quarter, NII increased $1 million,
reflecting the impact of both the acquired earning assets of MB
Financial and Fifth Third loan growth throughout the quarter,
partially offset by a lower day count. NIM decreased 1 bp,
primarily driven by seasonally lower commercial demand deposits and
higher wholesale funding costs resulting from $1.8 billion in
long-term funding issued during the quarter, partially offset by a
lower day count and higher short-term market rates. Due to the
timing of the close of the MB Financial acquisition, purchase
accounting accretion was negligible in the first quarter of 2019.
Including purchase accounting accretion, first quarter of 2019 NII
performance included the impact from 6 business days of MB
Financial, or approximately $16 million, and increased NIM 1
bp.
Noninterest Income
($ in millions) For the Three Months
Ended % Change March December March 2019
2018 2018 Seq
Yr/Yr
Noninterest Income Service
charges on deposits $131 $135 $137 (3%) (4%) Corporate banking
revenue 112 130 88 (14%) 27% Mortgage banking net revenue 56 54 56
4% - Wealth and asset management revenue 112 109 113 3% (1%) Card
and processing revenue 79 84 79 (6%) - Other noninterest income 592
93 460 537% 29% Securities gains (losses), net 16 (32) (11) NM NM
Securities gains (losses), net - non-qualifying hedges on mortgage
servicing rights 3 2 (13)
50% NM Total noninterest income
$1,101 $575 $909
91% 21%
Reported noninterest income increased $192 million, or 21
percent, from the year-ago quarter, and increased $526 million, or
91 percent, from the prior quarter. The comparisons reflect the
impact of certain significant items in the table on below.
Compared to the year-ago quarter, service charges on deposits
decreased $6 million, or 4 percent, primarily driven by lower
commercial deposit fees resulting from increased business earnings
credits. Corporate banking revenue increased $24 million, or 27
percent, primarily driven by strong capital markets revenue as well
as increased business lending fees. Mortgage banking net revenue
was flat, and mortgage originations of $1.6 billion increased 4
percent. Wealth and asset management revenue decreased $1 million,
or 1 percent, as higher personal asset management revenue was
offset by lower institutional trust and brokerage fees. Card and
processing revenue was flat, reflecting increases in credit and
debit transaction volumes offset by higher rewards.
Compared to the prior quarter, service charges on deposits
decreased $4 million, or 3 percent, primarily driven by seasonally
lower consumer deposit fees. Corporate banking revenue decreased
$18 million, or 14 percent, primarily driven by a decrease in
M&A advisory and loan syndication revenues compared to the
record revenues in the fourth quarter of 2018. Mortgage banking net
revenue increased $2 million, or 4 percent, primarily driven by
higher origination revenues as a result of a 5 percent increase in
originations. Wealth and asset management revenue increased $3
million, or 3 percent, reflecting seasonally strong tax-related
private client service revenue. Card and processing revenue
decreased $5 million, or 6 percent, reflecting seasonal decreases
in credit and debit transaction volumes, partially offset by lower
rewards.
Noninterest Income excluding certain items ($ in
millions) For the Three Months Ended March
December March 2019 2018
2018
Noninterest Income excluding certain
items Noninterest income (U.S. GAAP) $1,101 $575 $909 Valuation
of Visa total return swap 31 (7) 39 Merger-related branch network
impairment charge 13 - - Gain on sale of Worldpay shares (562) - -
Branch network impairment charge - - 8 Worldpay step-up gain - -
(414) GreenSky equity securities (gains) / losses (9) 21 -
Securities (gains) / losses, net (excluding GreenSky) (7)
11 11 Noninterest income
excluding certain items(a) $567 $600
$553
Compared to the year-ago quarter, noninterest income excluding
the items in the table above increased $14 million, or 3 percent.
Compared to the prior quarter, noninterest income excluding these
items decreased $33 million, or 6 percent. First quarter of 2019
noninterest income performance included the impact from 6 business
days of MB Financial, or approximately $12 million.
Other noninterest income on a reported basis in the current and
previous quarters was impacted by the Visa total return swap
valuation adjustments, branch network impairment charges, and
Worldpay related gains. Excluding these items, other noninterest
income of $74 million decreased $19 million, or 20 percent,
compared to the year-ago quarter, primarily driven by lower private
equity investment income. Compared to the prior quarter, other
noninterest income excluding the items decreased $12 million, or 14
percent, impacted by the revenue recognized from Worldpay related
to the tax receivable agreement in the fourth quarter of 2018.
Noninterest Expense
($ in millions) For the Three Months Ended
% Change March December March 2019 2018
2018 Seq
Yr/Yr
Noninterest Expense Compensation and benefits $610
$506 $557 21% 10% Net occupancy expense 75 73 75 3% - Technology
and communications 83 79 68 5% 22% Equipment expense 30 31 31 (3%)
(3%) Card and processing expense 31 33 29 (6%) 7% Other noninterest
expense(b) 268 253 250
6% 7% Total noninterest expense(b)
$1,097 $975 $1,010
13% 9%
Impacts of Merger-Related Expenses
($ in millions) For the Three Months Ended March
December March 2019 2018
2018
Merger-Related Expenses Compensation and benefits $35
$1 $- Net occupancy expense - - - Technology and communications 11
6 - Equipment expense - - - Card and processing expense - 1 - Other
noninterest expense 30 19
- Total merger-related expenses $76
$27 $-
Noninterest
Expense excluding Merger-Related Expenses(a) ($ in
millions) For the Three Months Ended
% Change March December March
2019 2018
2018 Seq Yr/Yr
Noninterest Expense excluding Merger-Related Expenses
Compensation and benefits $575 $505 $557 14% 3% Net occupancy
expense 75 73 75 3% 0% Technology and communications 72 73 68 (1%)
6% Equipment expense 30 31 31 (3%) (3%) Card and processing expense
31 32 29 (3%) 7% Other noninterest expense 238 234
250 2% (5%)
Total noninterest expense excluding Merger-Related Expenses
$1,021 $948 $1,010 8%
1%
Compared to the year-ago quarter, reported noninterest expense
increased $87 million, or 9 percent, primarily due to
merger-related expenses in the current quarter. Excluding the
merger-related expenses, noninterest expense increased $11 million,
or 1 percent, reflecting higher compensation and benefits driven by
acquisitions over the past year (including the impact from 6
business days of MB Financial, or approximately $20 million) and
increased deferred compensation, as well as continued technology
investments. The growth was partially offset by the elimination of
the FDIC surcharge.
Compared to the prior quarter, reported noninterest expense
increased $122 million, or 13 percent, also impacted by
merger-related expenses. Excluding the merger-related expenses in
the current and prior quarter, noninterest expense increased $73
million, or 8 percent, reflecting seasonally higher compensation
and benefits and increased deferred compensation, as well as
elevated expenses due to the post-close impact of MB Financial.
First quarter of 2019 noninterest expense performance included the
impact from 6 business days of MB Financial, or approximately $20
million.
Average
Interest-Earning Assets
($ in
millions) For the Three Months Ended % Change
March December March 2019 2018 2018 Seq
Yr/Yr
Average Portfolio Loans and Leases
Commercial loans and leases: Commercial and industrial loans
$46,011 $43,829 $41,782 5% 10% Commercial mortgage loans 7,414
6,864 6,582 8% 13% Commercial construction loans 4,838 4,885 4,671
(1%) 4% Commercial leases 3,555 3,632 3,960
(2%) (10%) Total commercial loans and
leases $61,818 $59,210 $56,995 4% 8% Consumer loans: Residential
mortgage loans $15,624 $15,520 $15,575 1% - Home equity 6,355 6,438
6,889 (1%) (8%) Indirect secured consumer loans(h) 9,176 8,970
9,064 2% 1% Credit card 2,396 2,373 2,224 1% 8% Other consumer
loans 2,404 2,246 1,587 7%
51% Total consumer loans $35,955 $35,547 $35,339 1%
2% Portfolio loans and leases $97,773 $94,757 $92,334 3% 6%
Loans held for sale 589 641 535 (8%) 10% Securities and other
short-term investments 36,101 35,674 34,677
1% 4% Total average interest-earning
assets $134,463 $131,072 $127,546
3% 5%
(The Bancorp acquired indirect motorcycle,
powersports, recreational vehicles and marine loans in the
acquisition of MB Financial. These loans are included in addition
to automobile loans in the line item “indirect secured consumer
loans”. Point-of-sale unsecured loans continue to be recorded in
other consumer loans.)
Compared to the year-ago quarter, average portfolio loans and
leases increased 6 percent, primarily driven by higher commercial
and industrial (C&I) and other consumer loans, partially offset
by declines in home equity loans and commercial leases. Period end
portfolio loans and leases increased 19 percent year-over-year,
reflecting the impact of MB Financial. Compared to the prior
quarter, average portfolio loans and leases increased 3 percent,
primarily driven by higher C&I and commercial mortgage loans,
partially offset by declines in home equity loans and commercial
leases. Period end portfolio loans and leases increased 15 percent
from the prior quarter, reflecting the impact of MB Financial.
Compared to the year-ago quarter, average commercial portfolio
loans and leases increased 8 percent, primarily driven by higher
C&I and commercial mortgage loans. Compared to the prior
quarter, average commercial portfolio loans and leases increased 4
percent, primarily driven by growth in C&I and commercial
mortgage loans. Period end commercial line utilization was 38
percent, compared to 35 percent in the year-ago quarter and 36
percent in the prior quarter. The increased utilization rate
primarily reflects a greater percentage of middle market clients
resulting from the MB Financial acquisition.
Compared to the year-ago quarter, average consumer portfolio
loans increased 2 percent, primarily driven by higher other
consumer loans and growth in credit card loans, partially offset by
declines in home equity loans. Compared to the prior quarter,
average consumer portfolio loans increased 1 percent, as higher
indirect secured consumer loans and other consumer loans partially
were offset by declines in home equity loans.
Average securities and other short-term investments were $36.1
billion compared to $34.7 billion in the year-ago quarter and $35.7
billion in the prior quarter. Average available-for-sale debt and
other securities of $33.6 billion were up 4 percent compared to the
year-ago quarter and up 1 percent compared to the prior
quarter.
Average
Deposits
($ in millions) For the
Three Months Ended % Change March December March 2019
2018 2018 Seq Yr/Yr
Average Deposits Demand $30,557 $31,571 $33,825 (3%) (10%)
Interest checking 33,697 32,428 28,403 4% 19% Savings 13,052 12,933
13,546 1% (4%) Money market 23,133 22,517 20,750 3% 11% Foreign
office(i) 208 272 494 (24%)
(58%) Total transaction deposits $100,647 $99,721
$97,018 1% 4% Other time 4,860 4,366 3,856
11% 26% Total core deposits $105,507
$104,087 $100,874 1% 5% Certificates - $100,000 and over 3,358
2,662 2,284 26% 47% Other deposits 726 746 379
(3%) 92% Total average deposits
$109,591 $107,495 $103,537 2%
6%
Compared to the year-ago quarter, average core deposits
increased 5 percent, primarily driven by higher commercial interest
checking deposits, consumer money market deposits, and other time
deposits. The increases were partially offset by lower commercial
demand deposits reflecting continued migration from demand deposits
to interest-bearing accounts. Average commercial transaction
deposits increased 4 percent and average consumer transaction
deposits increased 4 percent. Period end core deposits increased 14
percent, primarily reflecting the impact of MB Financial.
Compared to the prior quarter, average core deposits increased 1
percent, reflecting the continued migration from demand deposits to
interest-bearing accounts, higher consumer transaction deposits,
and higher other time deposits. Average commercial transaction
deposits decreased 1 percent, and average consumer transaction
deposits increased 3 percent. Period end core deposits increased 11
percent, primarily reflecting the impact of MB Financial.
Average
Wholesale Funding
($ in
millions) For the Three Months Ended % Change
March December March 2019 2018 2018
Seq Yr/Yr
Average Wholesale Funding
Certificates - $100,000 and over $3,358 $2,662 $2,284 26% 47% Other
deposits 726 746 379 (3%) 92% Federal funds purchased 2,019 2,254
692 (10%) 192% Other short-term borrowings 646 578 2,423 12% (73%)
Long-term debt 15,438 14,420 14,780
7% 4% Total average wholesale funding
$22,187 $20,660 $20,558
7% 8%
Compared to the year-ago quarter, average wholesale funding
increased 8 percent driven by increases in federal funds borrowings
and jumbo CD balances, resulting from interest-earning asset growth
over the past year, partially offset by a decrease in other
short-term borrowings. Compared to the prior quarter, average
wholesale funding increased 7 percent reflecting an increase in
long-term debt balances resulting from debt issuances exceeding
maturities during the quarter and higher jumbo CD balances, offset
by a decline in federal funds borrowings.
Credit Quality Summary
($ in millions) For the Three Months Ended March December
September June March 2019 2018 2018
2018 2018 Total nonaccrual
portfolio loans and leases (NPLs) $449 $348 $403 $437 $452
Repossessed property 11 10 8 7 9 OREO 37 37 37
36 43 Total nonperforming
portfolio assets (NPAs) $497 $395 $448 $480 $504 NPL
ratio(j) 0.41% 0.37% 0.43% 0.47% 0.49% NPA ratio(d) 0.45% 0.41%
0.48% 0.52% 0.55% Total loans and leases 30-89 days past due
(accrual) 324 297 270 217 299 Total loans and leases 90 days past
due (accrual) 136 93 87 89 107 Allowance for loan and lease
losses, beginning $1,103 $1,091 $1,077 $1,138 $1,196 Total net
losses charged-off (77) (83) (72) (94) (81) Provision for loan and
lease losses 89 95 86 33
23 Allowance for loan and lease losses, ending
$1,115 $1,103 $1,091 $1,077 $1,138 Reserve for unfunded
commitments, beginning $131 $129 $131 $151 $161 Reserve for
acquired commitments 1 - - - - Provision for (benefit from) the
reserve for unfunded commitments 1 2 (2)
(20) (10) Reserve for
unfunded commitments, ending $133 $131 $129 $131 $151
Total allowance for credit losses
$1,248 $1,234 $1,220 $1,208 $1,289 Allowance for loan and
lease losses ratios As a percent of portfolio loans and leases
1.02% 1.16% 1.17% 1.17% 1.24% As a percent of nonperforming
portfolio loans and leases 249% 317% 270% 247% 252% As a percent of
nonperforming portfolio assets 225% 279% 243% 224% 226%
Total losses charged-off $(108) $(116) $(112) $(118) $(103) Total
recoveries of losses previously charged-off 31 33
40 24 22 Total net
losses charged-off $(77) $(83) $(72) $(94) $(81) Net
charge-off ratio (NCO ratio)(c) 0.32% 0.35% 0.30% 0.41% 0.36%
Commercial NCO ratio 0.11% 0.19% 0.19% 0.34% 0.21% Consumer NCO
ratio 0.68% 0.61% 0.50%
0.52% 0.60%
Compared to the year-ago quarter, NPLs decreased $3 million, or
1 percent, with the resulting NPL ratio of 0.41 percent decreasing
8 bps. NPAs decreased $7 million, or 1 percent, with the resulting
NPA ratio of 0.45 percent decreasing 10 bps. Compared to the prior
quarter, NPLs increased $101 million, or 29 percent, with the
resulting NPL ratio increasing 4 bps. NPAs increased $102 million,
or 26 percent, with the resulting NPA ratio increasing 4 bps.
The provision for loan and lease losses totaled $89 million in
the current quarter compared to $23 million in the year-ago quarter
and $95 million in the prior quarter. The resulting allowance for
loan and lease losses ratio represented 1.02 percent of total
portfolio loans and leases outstanding in the current quarter,
compared with 1.24 percent in the year-ago quarter and 1.16 in the
prior quarter. Excluding the impact of MB Financial, the current
quarter allowance for loan and lease losses ratio was flat from the
prior quarter. The allowance for loan and lease losses represented
249 percent of nonperforming portfolio loans and leases and 225
percent of nonperforming portfolio assets in the current
quarter.
Net charge-offs totaled $77 million in the current quarter
compared to $81 million in the year-ago quarter and $83 million in
the prior quarter. The resulting NCO ratio of 0.32 percent in the
current quarter decreased 4 bps compared to the year-ago quarter
and decreased 3 bps compared to the prior quarter.
Capital and Liquidity Position
For the Three Months Ended March December September June
March 2019 2018 2018 2018
2018
Capital Position Average total Bancorp
shareholders' equity as a percent of average assets 11.43% 10.95%
11.29% 11.28% 11.41% Tangible equity(a) 9.03% 9.63% 9.97% 10.19%
9.98% Tangible common equity (excluding unrealized gains/losses)(a)
8.21% 8.71% 9.02% 9.23% 9.03% Tangible common equity (including
unrealized gains/losses)(a) 8.44% 8.64% 8.53% 8.88% 8.78%
Regulatory Capital and Liquidity Ratios(f) CET1 capital(e)
9.65% 10.24% 10.67% 10.91% 10.82% Tier I risk-based capital(e)
10.72% 11.32% 11.78% 12.02% 11.95% Total risk-based capital(e)
13.72% 14.48% 14.94% 15.21% 15.25% Tier I leverage 9.94% 9.72%
10.10% 10.24% 10.11% Modified liquidity coverage ratio (LCR)
113% 128% 119% 116%
113%
Capital ratios remained strong during the quarter. The CET1
capital ratio was 9.65 percent, the tangible common equity to
tangible assets ratio was 8.21 percent (excluding unrealized
gains/losses), and 8.44 percent (including unrealized
gains/losses). The Tier I risk-based capital ratio was 10.72
percent, the Total risk-based capital ratio was 13.72 percent, and
the Tier I leverage ratio was 9.94 percent.
On March 27, 2019, Fifth Third initially settled a repurchase
agreement whereby Fifth Third would purchase $913 million of its
outstanding stock. The initial settlement reduced first quarter
common shares outstanding by 31.8 million shares. Settlement of the
forward contract related to this agreement is expected to occur on
or before June 28, 2019. Fifth Third has now executed share
repurchases totaling $1.81 billion under the 2018 CCAR capital
plan, and continues to have the option to repurchase common shares
in any amount up to the $433 million after-tax gain generated from
the final Worldpay equity sale.
Tax Rate
The effective tax rate was 22.2 percent compared with 20.5
percent in the year-ago quarter and 22.4 percent in the prior
quarter.
Other
Fifth Third has exited its entire stake in all publicly traded
companies. On March 14, 2019, Fifth Third exchanged its remaining
shares of Worldpay Holdings, LLC for shares of Worldpay, Inc., and
subsequently sold its shares, recognizing a gain of $562 million.
During March and April 2019, Fifth Third exchanged its Class B
units of GreenSky Holdings, LLC for Class A common stock of
GreenSky, Inc., and subsequently sold all of the stock. Fifth Third
expects to recognize a minimal pre-tax gain in the second quarter
of 2019, resulting from the portion of shares sold in April
2019.
The Bancorp adopted ASU 2016-02, Leases, on January 1, 2019. The
amended guidance requires lessees to record lease liabilities on
the lessees’ balance sheets along with corresponding right-of-use
assets for all leases with terms longer than twelve months. Leases
are classified as either finance or operating, with classification
affecting the pattern of expense recognition in the lessee’s
statements of income. From a lessor perspective, the accounting
model is largely unchanged. Upon adoption, the Bancorp recognized
right-of-use assets and lease liabilities of $509 million related
to its operating lease commitments based on the present value of
unpaid lease payments as of the date of adoption and also recorded
a cumulative-effect adjustment to retained earnings of $10 million
for the remaining deferred gains on sale-leaseback transactions
that occurred prior to January 1, 2019.
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 7, 2019 by dialing 800-585-8367 for domestic
access or 404-537-3406 for international access (passcode
6679198#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of March 31, 2019, the
Company had $168 billion in assets and operates 1,207 full-service
Banking Centers, and 2,559 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 52,000 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, 2019, had $394
billion in assets under care, of which it managed $44 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 1Q19
earnings release.
(b)
Fifth Third includes the provision for
loan and lease losses and the provision for the reserve for
unfunded commitments in a single measure called provision for
credit losses. Fifth Third previously reported the provision for
the reserve for unfunded commitments within other noninterest
expense. All reporting periods have been adjusted to reflect this
reclassification.
(c)
Net losses charged-off as a percent of
average portfolio loans and leases.
(d)
Nonperforming portfolio assets as a
percent of portfolio loans and leases and OREO.
(e)
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.
(f)
Current period regulatory capital and
liquidity ratios are estimated.
(g)
Assumes a 23% tax rate, except for
merger-related expenses which were impacted by certain
non-deductible items.
(h)
The Bancorp acquired indirect motorcycle,
powersports, recreational vehicles and marine loans in the
acquisition of MB Financial. These loans are included in addition
to automobile loans in the line item “indirect secured consumer
loans”. Point-of-sale unsecured loans continue to be recorded in
other consumer loans.
(i)
Includes commercial customer Eurodollar
sweep balances for which the Bank pays rates comparable to other
commercial deposit accounts.
(j)
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. 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 the merger with MB Financial, Inc. and Fifth Third’s ability to
realize anticipated benefits of the merger; (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/20190423005304/en/
Investors:Chris Doll (513) 534–2345
Media:Gary Rhodes (513) 534–4225
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