Fifth Third Bank | All Rights Reserved Barclays Capital 2011 Americas Select Conference Daniel T. Poston Executive Vice President & Chief Financial Officer May 24, 2011 Please refer to earnings release dated April 21, 2011 and 10-Q dated May 9, 2011 for further information Exhibit 99.1 |
2 Fifth Third Bank | All Rights Reserved A foundation of continued growth Capital – foundation for continued growth — Tier 1 common capital has increased 464bps or $4.0bn¹ — 9.0% Tier 1 common ratio is $1.0bn in excess of internal ~8.0% target — Capital base transformed through series of capital actions – $1.7bn common equity offering; $1.0bn senior notes issued; $3.408bn TARP redemption; $280mm warrant repurchase — Capital levels supplemented by strong reserve levels – Loan loss reserves 3.62% of loans and 170% of NPLs Credit – ongoing discipline driving steady improvement — Broad-based improvements in problem loans – 73% reduction in 90+ day delinquent loans since 3Q09 – NCO ratio of 1.92%, down 51% (-191 bps) since 3Q09 – 149% PPNR² / NCOs in 1Q11 — Balance sheet risk lowered through asset sales, resolutions – $1.3bn (44%) decline in NPLs since 4Q09 Profitability – recent results support positive momentum — PPNR² remained stable throughout cycle — Profitability metrics have improved significantly from crisis-era levels, with 4 consecutive profitable quarters — Return on assets at or above 1.0% for last two quarters and exceeds most peers 1 Since December 31, 2008 2 Pre-provision net revenue (PPNR): net interest income plus noninterest income minus noninterest expense 3 Nonperforming loans and leases as a percent of portfolio loans, leases and other assets, including other real estate owned (excludes nonaccrual loans held-for-sale) 4 Excluding $510mm net charge-offs attributable to credit actions and $127mm in net BOLI settlement gains |
3 Fifth Third Bank | All Rights Reserved Fifth Third franchise $110 billion assets $84 billion deposits $13 billion market cap 15 affiliates in 12 states 1,310 banking centers 2,453 ATMs Leading market share in mature Midwest market Built strong presence in higher growth Southeastern markets over past 5 years |
4 Fifth Third Bank | All Rights Reserved 1Q11 in review Credit continuing to improve • Net charge-offs of $367mm (1.92% of loans and leases) vs. 4Q10 NCOs of $356mm (1.86% of loans and leases) • Total NPAs of $2.3B including held-for-sale declined $126mm or 5% sequentially to lowest level since 2Q08 – Total delinquencies down 12% sequentially (lowest level since 2006) • Provision expense of $168mm, reduction in allowance of $199mm • Loan loss allowance of 3.62%; coverage 132% of NPAs and 170% of NPLs and 1.9x annualized first quarter net charge-offs Actions driving progress • Focusing on credit quality, portfolio management, and loss mitigation strategies • Executing on customer experience and employee engagement initiatives • Enhancing breadth and profitability of offerings and relationships • Exit from all crisis-era government programs Continued strong operating results • Net income available to common shareholders of $88mm, or $0.10 per diluted share – Net income reduced by $153mm of discount accretion recorded in preferred dividends accelerated by February repurchase of $3.4B in TARP CPP Preferred Stock; $0.17 per share impact • Average loan and lease balances excluding held-for-sale up 2% sequentially; period end loans and leases flat sequentially • Return on average assets of 1.0% • Strong capital ratios: Tier 1 common 9.0%, Tier 1 capital ratio 12.2%, Total capital ratio 16.3% |
5 Fifth Third Bank | All Rights Reserved Balance sheet • C&I loans up 4% sequentially and 4% from the previous year • CRE loans down 3% sequentially and 17% from the previous year • Consumer loans up 2% sequentially and 3% from the previous year • Warehoused residential mortgage loans held-for-sale were $1.5B at quarter end versus $2.3B at year-end • Core deposit to loan ratio of 100%, up from 97% in 1Q10 • DDAs up 2% sequentially and 15% year-over-year • Retail average transaction deposits up 3% sequentially and 14% from the previous year, driven by growth in demand deposit, savings, and interest checking account balances • Commercial average transaction deposits up 3% sequentially, driven by growth in demand deposit and interest checking account balances – Excluding public funds balances, commercial average transaction deposits increased 1% sequentially and 17% over prior year • Reduced wholesale funding by $3.8 billion from the first quarter of 2010 – Non-core deposits down 13% sequentially and 40% from the previous year – Short term borrowings down 8% sequentially and up 16% from the previous year – Long-term debt flat sequentially and down 11% from the previous year ^ Excludes loans held-for-sale Note: Numbers may not sum due to rounding |
6 Fifth Third Bank | All Rights Reserved Net interest income • Sequential net interest income and net interest margin (FTE) performance driven by lower daycount, debt issuance for TARP repayment, lower mortgage warehouse HFS balances, 4Q10 FTPS, LLC loan refinancing, and lower yields, partially offset by deposit mix shift and pricing as well as higher average total loan balances – NII down $35mm, or 4%, sequentially and down $17mm, or 2%, year-over-year – NIM down 4 bps sequentially and up 8 bps year-over-year • 4Q10 FTPS, LLC loan refinancing represented nearly half of decline in C&I loan yields * Represents purchase accounting adjustments included in net interest income. Yield Analysis Interest-earning assets 1Q10 4Q10 1Q11 Seq. (bps) YoY (bps) Commercial and industrial loans 4.61% 4.64% 4.45% (19) (16) Commercial mortgage loans 4.20% 4.17% 4.11% (6) (9) Commercial construction loans 2.92% 2.90% 3.15% 25 23 Commercial leases 4.54% 4.21% 4.17% (4) (37) Residential mortgage loans 5.18% 4.64% 4.67% 3 (51) Home equity 4.02% 3.98% 3.96% (2) (6) Automobile loans 6.24% 5.41% 5.10% (31) (114) Credit card 10.76% 10.55% 10.43% (12) (33) Other consumer loans and leases 11.87% 18.68% 18.54% (14) 667 Total loans and leases 4.87% 4.78% 4.67% (11) (20) Taxable securities 4.28% 3.88% 3.96% 8 (32) Tax exempt securities 3.65% 4.27% 4.77% 50 112 Other short-term investments 0.18% 0.25% 0.25% - 7 Total interest-earning assets 4.62% 4.52% 4.47% (5) (15) • Yield on interest-earning assets declined 5 bps sequentially and 15 bps year-over-year Net Interest Income Reconciliation ($ in millions) 4Q10 NII (FTE) $919 Daycount (12) FTPS loan restructuring (8) Lower mortgage warehouse (8) $1B debt issuance (7) 1Q11 NII (FTE) $884 |
7 Fifth Third Bank | All Rights Reserved Diverse revenue stream • Improving economy supportive of underlying revenue growth from loan growth and business fee income – Higher market interest rates in future should add further benefit • Negative impact of Reg E fully absorbed into results in 4Q10 • Timing and initial impact of debit interchange legislation currently unknown – Legislative changes possible – Timing of implementation 2H11, unless timeline altered – ~3% of revenue at risk from initial impact before mitigating actions – Valuable product and service; expect to mitigate through adjustments to product and service offerings Economic trends should support long-term improvement in results through balance sheet growth and higher business activity |
8 Fifth Third Bank | All Rights Reserved Strong relative credit trends Peer average includes: BBT, CMA, HBAN, KEY, MTB, MI, PNC, RF,STI, USB, WFC, and ZION Source: SNL Financial and company filings. NPA and NCO ratios exclude loans held-for-sale and covered assets for peers where appropriate. * 4Q08 NCOs included $800mm in NCOs related to commercial loans moved to held-for-sale; 3Q10 NCOs included $510mm in NCOs related to loans sold or moved to held-for-sale FITB credit metrics are now generally better than peers |
9 Fifth Third Bank | All Rights Reserved Industry leading reserve levels Source: SNL and company reports. NPAs/NPLs exclude held-for-sale portion for all banks as well as covered assets for BBT, USB, and ZION. |
10 Fifth Third Bank | All Rights Reserved Strong capital position Source: SNL Financial and Company reports. HFI NPAs exclude loans held-for-sale and also exclude covered assets for BBT, USB, and ZION Capital ratios strong and reflect TARP CPP redemption |
Capital management philosophy 11 FifthThird Bank | All Rights Reserved |
12 Fifth Third Bank | All Rights Reserved Customer-centric traditional banking model: well-positioned for changed financial landscape Fifth Third’s business model is driven by traditional banking activities — Largest bank headquartered within Fifth Third’s core Midwest footprint — Focus on expansion and development of businesses where regional leadership matters – Retail, small business, and mid-market commercial – Select national lines where the bank has a distinctive element (i.e., Fifth Third Processing Solutions, Indirect Auto, Healthcare) No significant business at Fifth Third impaired during crisis; traditional banking focus consistent with direction of financial reform — Didn’t / don’t originate or sell CDOs or securitize loans on behalf of others; no mortgage securitizations outstanding (except ~$100mm HELOC from 2003) — Didn’t / don’t originate or sell subprime mortgages or Option ARMs — Low level of financial system “interconnectedness” (e.g., Fifth Third loss in Lehman bankruptcy should be less than $2mm) — Little to no impact from Volcker rule (de minimis market maker in derivatives, proprietary trading); – Daily VaR less than $500 thousand – Small private equity portfolio ~$100mm (holding company subsidiary) Fifth Third’s businesses have performed well through the crisis - expect reintermediation and the landscape to evolve further toward our traditional strengths |
13 Fifth Third Bank | All Rights Reserved Well-positioned for the future • Holding company cash currently sufficient for approximately 2 years of obligations; no holding company or Bank debt maturities until 2013 • Fifth Third has completely exited all crisis-era government support programs – Fifth Third is one of the few large banks that have no TLGP-guaranteed debt Superior capital and liquidity position • NCOs below 2%; 1.9x reserves / annualized NCOs • $1.2B problem assets addressed through loan sales and transfer to HFS in 3Q10 • Substantial reduction in exposure to CRE since 1Q09; relatively low CRE exposure versus peers Proactive approach to risk management • Traditional commercial banking franchise built on customer-oriented localized operating model • Strong market share in key markets with focus on further improving density • Fee income ~40% of total revenues Diversified traditional banking platform • PPNR has remained strong throughout the credit cycle • PPNR substantially exceeds annual net charge-offs (149% PPNR / NCOs in 1Q11) • 1.0% ROAA in 1Q11 Strong industry leader in earnings power |
14 Fifth Third Bank | All Rights Reserved Cautionary statement This report 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,” “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. 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) general economic conditions and weakening in the economy, specifically the real estate market, either nationally or in the states in which Fifth Third, one or more acquired entities and/or the combined company do business, are less favorable than expected; (2) deteriorating credit quality; (3) political developments, wars or other hostilities may disrupt or increase volatility in securities markets or other economic conditions; (4) changes in the interest rate environment reduce interest margins; (5) prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; (6) Fifth Third’s ability to maintain required capital levels and adequate sources of funding and liquidity; (7) maintaining capital requirements may limit Fifth Third’s operations and potential growth; (8) changes and trends in capital markets; (9) problems encountered by larger or similar financial institutions may adversely affect the banking industry and/or Fifth Third (10) competitive pressures among depository institutions increase significantly; (11) effects of critical accounting policies and judgments; (12) changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies; (13) legislative or regulatory changes or actions, or significant litigation, adversely affect Fifth Third, one or more acquired entities and/or the combined company or the businesses in which Fifth Third, one or more acquired entities and/or the combined company are engaged, including the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act; (14) ability to maintain favorable ratings from rating agencies; (15) fluctuation of Fifth Third’s stock price; (16) ability to attract and retain key personnel; (17) ability to receive dividends from its subsidiaries; (18) potentially dilutive effect of future acquisitions on current shareholders’ ownership of Fifth Third; (19) effects of accounting or financial results of one or more acquired entities; (20) difficulties in separating Fifth Third Processing Solutions from Fifth Third; (21) loss of income from any sale or potential sale of businesses that could have an adverse effect on Fifth Third’s earnings and future growth;(22) ability to secure confidential information through the use of computer systems and telecommunications networks; and (23) the impact of reputational risk created by these 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. |