2006 Citigroup Financial Services Conference
“Business Momentum & Remaining Challenges”
George |
| A. Schaefer, Jr. President & CEO Executive Vice President |
Kevin |
| T. Kabat |
February 1, 2006
I Affiliates & Markets
Affiliate Operating Model
II. |
| Markets |
2 |
|
Affiliate Bank Operating Model
19 Affiliates in 7 States
FITB |
| Affiliates State Deposits % of 5/3 Assets Bkg Ctrs President Years @ 5/3 Years in Banking |
Cincinnati |
| OH $ 12.3 18% $ 17.4 106 R. Sullivan 5 30 |
Chicago |
| IL 8.9 13% 10.0 140 T. Zink 1 17 |
Western |
| Michigan MI 7.3 11% 9.6 135 M. VanDyke 4 20 |
Detroit |
| MI 4.4 7% 7.1 83 G. Kosch 22 22 |
Columbus |
| OH 3.7 5% 5.1 65 R. Eversole 21 21 |
Cleveland |
| OH 3.6 5% 5.6 86 T. Clossin 4 22 |
South |
| Florida FL 3.6 5% 6.8 45 T. Quinn 1 13 |
Dayton |
| OH 3.3 5% 3.8 62 R. Webb 5 19 |
Toledo |
| OH 3.2 5% 4.6 50 R. LaClair 14 23 |
Indianapolis |
| IN 3.3 5% 5.4 81 M. Spagnoletti 5 31 |
Southern |
| Indiana IN 2.4 4% 3.4 52 J. Daniel 6 36 |
Louisville |
| KY 1.8 3% 2.2 46 P. McHugh 19 19 |
Northern |
| Michigan MI 1.4 2% 2.1 25 J. Pelizzari 4 27 |
Northern |
| Kentucky KY 1.3 2% 1.7 34 T. Rawe 19 31 |
Nashville |
| TN 1.1 2% 2.1 20 D. Hogan 1 20 |
Lexington |
| KY 1.1 2% 1.8 21 S. Barnes 13 34 |
Ohio |
| Valley OH 0.9 1% 1.6 27 D. Call 3 18 |
Tampa |
| FL 0.9 1% 1.4 26 B. Keenan 1 19 |
Orlando |
| FL 0.7 1% 1.3 15 G. Howlett 8 30 |
$ in billions
3 |
|
Metropolitan Market Focus
10 of the 14 Largest Markets Have Significant Deposit Opportunity
Fifth |
| Third MSA Markets |
MSA |
| Population Rank Deposits Share % |
Chicago, |
| IL 9.5 5 $ 8,052 3.4 |
Detroit, |
| MI 4.6 7 3,403 4.4 |
Tampa, |
| FL 2.6 11 746 1.8 |
Cleveland-Elyria, |
| OH 2.2 5 2,707 4.2 |
Cincinnati, |
| OH-KY-IN 2.1 1 13,057 35.2 |
Orlando, |
| FL 2.0 9 529 1.8 |
Columbus, |
| OH 1.8 3 3,441 12.2 |
Indianapolis, |
| IN 1.7 4 2,032 8.2 |
Nashville, |
| TN 1.4 7 908 3.6 |
Louisville, |
| KY-IN 1.2 4 1,461 7.6 |
Naples/Sarasota, |
| FL 1.0 4 2,212 8.6 |
Grand |
| Rapids, MI 0.8 1 3,597 31.2 |
Dayton, |
| OH 0.9 1 2,574 26.1 |
Toledo, |
| OH 0.7 1 1,991 23.1 |
Source: SNL Branch Migration Database and U.S. Census Bureau including completed acquisitions
4 |
|
Deposits, |
| Loans & Fees |
I. |
| Deposit Performance |
II. |
| Loan Performance |
III. |
| Noninterest Income Performance |
IV. |
| Business Mix |
V. |
| The Challenge |
5 |
|
Transaction Deposit Performance
Five-year average annualized transaction deposit growth of 16%
Three-year average annualized transaction deposit growth of 10%
2005 average transaction deposit growth of 11%
Average Transaction Deposits
45,000
40,000
35,000
Millions |
| 30,000 |
25,000
$ |
|
20,000
15,000
10,000
22,526
26,363
35,819
40,370
43,175
47,929
2000 2001 2002 2003 2004 2005
Core Deposit Performance
5-year |
| CAGR 3-year CAGR 2005 Growth |
Demand |
| 17% 16% 13% |
SAV |
| & MM 18% 13% 33% |
NOW |
| 15% 5% -3% |
CD’s |
| -9% -1% 37% |
Core |
| Deposits 9% 8% 14% |
60,000
50,000
40,000 Millions 30,000
$ 20,000
10,000
0
2000 |
| 2001 2002 2003 2004 2005 |
CD’s NOW Demand SAV & MM
Recent core deposit trends consistent with Fifth Third’s historical performance
7 |
|
Loan Growth Performance
Five-year average annualized loan growth of 10%
Three-year average annualized loan growth of 14%
2005 average loan growth of 19%
Average Loans & Leases
70,000
60,000
Millions
50,000
$
40,000
30,000
2000 2001 2002 2003 2004 2005
42,690
44,888
45,539
52,414
57,042
67,737
8 |
|
Loan Mix Improvement
Strong loan performance is highlighted by continued mix improvement
2000 |
| 2001 2002 2003 2004 2005 |
Home |
| Equity / Total Consumer 31% 38% 35% 34% 36% 37% |
C&I |
| / Total Commercial 48% 48% 52% 51% 51% 50% |
Other Consumer Home Equity Other Commercial C&I
75,000 60,000 Millions 45,000
30,000 $
15,000
0
2000 |
| 2001 2002 2003 2004 2005 |
9
Noninterest Income Performance
Core Noninterest Income
2,500 2,250
Millions 2,000 1,750 1,500 $
1,250 1,000
1,470
1,717
2,036
2,256
2,189
2,406
2000 2001 2002 2003 2004 2005
Five |
| Year CAGR 10% |
Three |
| Year CAGR 6% |
2005 |
| Growth 10% |
2,500 2,250
Millions 2,000 1,750 1,500 $
1,250 1,000
Core Noninterest Income
Excluding All Mortgage Related Revenues
2000 2001 2002 2003 2004 2005
1,214
1,511
1,815
1,951
2,011
2,232
Five |
| Year CAGR 13% |
Three |
| Year CAGR 7% |
2005 |
| Growth 11% |
Noninterest Revenues
(Excluding securities gains & operating lease revenue)
($ in millions) 2005 2004 2003 2002 2001 2000 Electronic payment processing revenue $ 735 622 575 512 347 252 Service charges on deposits 522 515 485 431 367 298 Mortgage banking net revenue 174 178 302 188 63 256 Investment advisory revenue 355 360 332 325 298 275 Other noninterest income 620 671 581 580 542 389 Securities gains, non-qualifying hedges on MSR—- 3 33 143 -Total noninterest income 2,406 2,346 2,278 2,069 1,760 1,470 Less certain gains on sales—(157) (22) (33) (43) -Adjusted Core $ 2,406 2,189 2,256 2,036 1,717 1,470
FTPS – A Growth Driver
Compound Annual Growth Rate 5-year = 24%
800 700 600
Millions |
| 500 |
400
$
300 200 100
252
347
512
575
622*
735
2000 2001 2002 2003 2004 2005
Fin. |
| Inst. & Card Merchant |
* |
| In 2004 certain merchant processing contracts were sold (annual revenue loss of approx $93 million) |
Revenue Diversity
2005 Noninterest Revenues
Processing Solutions 29%
Investment Advisors 14%
Other 20%
Mortgage 7%
Commercial Banking 9%
Deposit Revenues 21%
2005 Total Revenues by Segment
Investment Advisors 9%
Processing Solutions 10%
Retail 50%
Commercial 31%
The Challenge…
Earnings contribution in prior years from larger securities portfolio and wider spreads can not be repeated.
Comparisons are more favorable beginning in second half of 2006
Average Securities and Spreads
Avg. |
| Securities ($ Billions) |
20 |
| 22 24 26 28 30 32 |
2002 |
| 2003 2004 2005 2006* |
0 |
| 50 100 150 200 250 300 350 Yield Spread Securities to Funding (bps) |
Avg. |
| Securities Spread |
* |
| projected |
The Deposit Opportunity
Fifth Third has only a 5% market share in the core seven-state footprint
Fifth Third has a 7% market share on a combined basis in MSA’s greater than 1 million in population
FITB State Market Share
Michigan Ohio Kentucky Indiana Illinois Florida Tennessee 7 State Total
9%
8%
7%
6%
3%
1%
1%
5%
0% |
| 5% 10% 15% 20% |
Affiliate Results
I Loan Performance
II Deposit Performance
III. Noninterest Income Performance
Continued Strong Affiliate Loan Results
Nine of 17 Affiliates grew average loans by more than 10% in 2005
Loan Growth Scorecard
Florida
23%
Chicago
20%
Nashville
20%
Cleveland
17%
Detroit
15%
North Mich
13%
OH Valley
13%
S. Indiana
12%
Cincinnati
10%
25% 20% 15% 10% 5% 0%
Florida*
Chicago
Nashville
Cleveland
Detroit
North Mich
OH |
| Valley |
S. Indiana
Cincinnati
North Ky
Lexington
Toledo
Columbus
W. Mich Louisville
Indianapolis
Dayton
2005 Average Loan Growth
* |
| Florida includes the Orlando, Tampa and South Florida affiliates |
Affiliate Deposit Performance
11 of 17 affiliates grew average deposits by more than 8% in 2005
Deposit Growth Scorecard
Lexington
30%
Detroit
21%
Nashville
18%
OH Valley
16%
Indianapolis
10%
Columbus
9%
Toledo
9%
Chicago
8%
North Mich
8%
Cleveland
8%
Louisville
8%
30%
25%
20%
15%
10%
5%
0%
Lexington
Detroit
Nashville
OH Valley
Indianapolis
Columbus
Toledo
Chicago
North Mich Cleveland
Louisville
W. Mich S.
Indiana Florida*
Cincinnati
North Ky Dayton
2005 Average Deposit Growth
* |
| Florida includes the Orlando, Tampa and South Florida affiliates |
Affiliate Noninterest Income Performance
Nine of 17 affiliates grew noninterest income by more than 9% in 2005
Noninterest Income
Growth Scorecard
Nashville
48%
Florida
33%
Indianapolis
13%
Lexington
12%
Louisville
11%
Detroit
10%
Toledo
10%
Chicago
9%
Columbus
9%
50%
40%
30%
20%
10%
0%
Nashville
Florida*
Indianapolis
Lexington
Louisville
Detroit Toledo
Chicago
Columbus
S. Indiana
North Ky Cleveland
Cincinnati
OH Valley
North Mich
W. Mich Dayton
2005 Noninterest Income Growth
* |
| Florida includes the Orlando, Tampa and South Florida affiliates |
2006 Initiatives
I. |
| Core Funding |
II. |
| Deposit Growth |
III. Customer Service
IV. |
| Continued Loan Performance |
V. |
| Improve Balance Sheet Mix |
Funding Balance Sheet Growth
Focused on growing core deposits to reduce reliance on wholesale funding and fund future loan growth
8 |
| of 17 affiliates grew loans faster than deposits in 2005 |
30%
25%
20%
15%
10%
5%
0%
Lexington
Detroit
Nashville
OH Valley
Indianapolis
Columbus
Toledo
Chicago
North Mich
Cleveland
Louisville
W. Mich
S. Indiana
Florida*
Cincinnati
North Ky
Dayton
2005 Average Loan & Deposit Growth
Deposits
Loans
* |
| Florida includes the Orlando, Tampa and South Florida affiliates |
Driving Core Deposit Growth
Deposit balance and account production growth
Bundled product sales and pricing – loyalty rewards
Enhanced product offerings
Competitive everyday rates
Quarterly deposit campaigns
Improved distribution through de-novo expansion
2006 Planned De-novo Banking Centers by Market (75 Total)
18
11
7 |
|
6 |
|
5 |
|
5 |
|
5 |
|
4 |
|
3 |
|
3 |
|
2 |
|
1 |
|
1 |
|
1 |
|
1 |
|
1 |
|
1 |
|
N. Mich
Columbus
OH Valley
Toledo
W. Mich
Dayton
Cincinnati
Indianapolis
Pittsburgh
Cleveland
Detroit
St. Louis
Tampa
S Florida
Nashville
Orlando
Chicago
Meeting De-novo Performance Expectations
De-novo Loan & Deposit Targets
40
30
Millions 20
$
10
0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Total Loans Total Deposits
De-novo Site Selection
Daytime employment
Business market density
Residential household demographics
Competitive demographics
Performance Expectations
Year 1: $11 million in deposits, $5 million in loans & modest net loss
Year 6 (mature): $35 million in deposits, $18 million in loans & more than $1 million in annual net income
IRR Target of 18%
1,200
1,000
800
$(000’s) |
| 600 |
400
200
0
-200
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
De-novo Net Income Targets
Increased Retention and Service Focus
Right price & right product
Automation at customer touch points
Improving call center service levels
Standardized and automated account opening procedures with preset follow-up points
Listen to the customer
Customer surveys – “Voice of the Customer”
14% improvement in “highly satisfied” customer responses in 2005
Maintain Loan Growth Momentum
5-year CAGR
Loans |
| & Leases 10% Earning Assets 9% |
95,000
85,000
75,000
Millions |
|
65,000
55,000
$ |
|
45,000
35,000
25,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Avg Loans & Leases
Avg Earning Assets
Improving Balance Sheet Risk Profile
Continued cash flow reductions in the securities portfolio through through the first half of the year
Depending on other balance sheet trends, targeting securities at 15-20% of total assets
Avg. Securities as % of Avg.
Earning Assets
100
90 |
|
80 |
|
70 |
|
Billions |
| 60 |
50 |
|
40 |
|
$ |
|
30 |
|
20 |
|
10 |
|
0
2000 |
| 2001 2002 2003 2004 2005 2006* |
22%
27% |
|
35% |
|
36% |
|
34% |
|
31% |
|
31% |
|
Avg |
| Loans Avg Securities |
Average Securities
35
30
25 Billions 20 15 $
10 5 0
2000 2001 2002 2003 2004 2005 2006*
* |
| projected |
In 2006…
Fifth Third is targeting:
10-12% loan growth
10-12% core deposit growth
Double-digit core noninterest income growth
Low to mid single digit expense growth
Continued balance sheet mix improvement
Improving margin trends in the second half of 2006
Sequential quarter EPS growth throughout the year
Questions
This presentation may contain forward-looking statements about Fifth Third Bancorp and/or the company as combined with acquired entities within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. This presentation may contain certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Fifth Third Bancorp and/or the combined company including statements preceded by, followed by or that include the words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trend,” “objective,” “continue,” “remain” or similar expressions or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions. 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) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest margins; (3) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national or in the states in which Fifth Third and/or combined entities do business, are less favorable than expected; (5) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (6) changes and trends in the securities markets; (7) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third and/or acquired entities or the businesses in which Fifth Third and/or combined entities are engaged; (8) difficulties in combining the operations of acquired entities and (9) the impact of reputational risk created by the developments discussed above on such matters as business generation and retention, funding and liquidity. We undertake no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. Further information on other factors which could affect the financial results of Fifth Third are included in Fifth Third’s and/or the acquired entity’s filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from Fifth Third.
The financial information for affiliate operating segments in this presentation is reported on the basis used internally by the Bancorp’s management to evaluate performance and allocate resources. Allocations have been consistently applied for all periods presented. The performance measurement of the operating segments is based on the management structure of the Bancorp and is not necessarily comparable with similar information for any other financial institution. The information presented is also not necessarily indicative of the segments’ financial condition and results of operations if they were independent entities.
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