© Fifth Third Bank | All Rights Reserved Exhibit 99.1 Goldman Sachs U.S. Financial Services Conference Kevin T. Kabat President & Chief Executive Officer December 7, 2011 Please refer to earnings release dated October 20, 2011 and 10-Q dated November 9, 2011 for further information |
2 © Fifth Third Bank | All Rights Reserved Strong levels of profitability Broad-based credit improvements Exceed fully phased-in Basel III capital standards today All crisis-era government support programs exited; no TLGP No significant business at Fifth Third impaired by crisis Continued investments to maintain and enhance revenue- generation Disciplined expense control Traditional banking focus consistent with direction of financial reform Well-positioned for success and leadership in new banking landscape Key themes |
3 © Fifth Third Bank | All Rights Reserved Strong levels of profitability Diluted Earnings Per Share Return on Average Assets * Non-GAAP measure. See Reg. G reconciliation on pages 28-30. ^ Reflects $0.17 per diluted share impact of discount accretion on TARP preferred stock Tangible Book Value Per Share* Continued strong operating results Return on Average Tangible Common Equity* |
4 © Fifth Third Bank | All Rights Reserved Strong pre-provision net revenue* PPNR* trend • PPNR* of $617mm flat from 2Q11 reflecting strong mortgage banking results • PPNR* down 19% from 3Q10 driven by lower mortgage banking revenue, the 3Q10 net benefit from the settlement of BOLI-related litigation, and improved credit costs • Adjusted PPNR* of $633mm, including positive adjustments totaling $16mm, up 9% sequentially and flat year-over-year Adjusted PPNR / Risk-weighted assets* Adjusted PPNR / Total assets* Robust pre-provision profitability = strong capacity to absorb losses and generate capital PPNR (19%); Adjusted PPNR 0%; Credit-adjusted PPNR** (6%) PPNR $760 $583 $545 $619 $617 3Q10 4Q10 1Q11 2Q11 3Q11 Significant purchase accounting benefit Peer avg.: 1.9% 3.4% 3.0% 2.9% 2.7% 2.5% 2.4% 2.3% 2.0% 1.8% 1.8% 1.5% 1.3% USB WFC BBT CMA PNC FITB RF HBAN STI MTB KEY ZION 634 581 545 582 633 67 53 32 36 45 44 34 3 28 25 Adjusted PPNR Fee Income Credit Items Noninterest Expense Credit Items Peer avg.: 1.9% Significant purchase accounting benefit (ex-FITB) 2.7% 2.7% 2.2% 2.2% 2.1% 2.0% 1.7% 1.7% 1.6% 1.4% 1.3% 1.3% USB CMA WFC FITB PNC BBT MTB RF HBAN STI ZION KEY Source: SNL Financial and company reports. Data as of 3Q11. * Non-GAAP measure. See Reg. G reconciliation on pages 28-30. ** There are limitations on the usefulness of credit-adjusted PPNR, including the significant degree to which changes in credit and fair value are integral, recurring components of the Bancorp’s core operations as a financial institution. This measure has been included herein to facilitate a greater understanding of the Bancorp’s financial condition. |
5 © Fifth Third Bank | All Rights Reserved Diverse revenue stream • — Current NII lower than normalized levels due to impact of low rate environment (e.g. low cost deposits including DDAs providing little NII benefit) • Added clarity regarding effect of reform on deposit and interchange fees — Service charge impact from Reg E in run-rates — Initial $30 million per quarter impact of Durbin amendment expected to be mitigated over time (~2/3 by mid-2012); will implement carefully and deliberately 20% Deposit fees 13% Corporate banking 14% Investment advisors 14% Other 27% Mortgage 12% 42% Fee income 58% NII Fee income as % of 3Q11 revenue 3Q11 Fee income distribution Revenue results remain solid, profitability strong despite sluggish economy Business mix provides higher than average diversity among spread and fee revenues Card & Processing |
6 © Fifth Third Bank | All Rights Reserved Customer oriented solutions Providing customers with products and services they find valuable • Reduce the cost associated with debit card offering • Changes and eliminations of reward programs • Selected fees • Incorporation of debit usage into bundled deposit product offerings • Implementation of new products Multi-pronged mitigation approach • Conducted market research to determine what matters most to our customers • Received feedback from customer base and prospective customers • Listening to our customers • Broad suite of product offerings with distinct value propositions to appeal to various customer segments • Implementation of new products, like DUO Card – DUO Card introduced in 3Q11 – Customer chooses to pay debit or credit at the point of sale • Letting customers choose how to pay for products and services they use Working carefully to ensure we align value to the customer with value to us |
7 © Fifth Third Bank | All Rights Reserved Disciplined expense control Efficiency ratio* Peer average: 65% Sales / support ratio** Efficient business model: • Efficiency ratio better than most peers through weak economic environment – Reflects below-capacity balance sheet and lower revenue than we expect and can support longer term – Current impact of credit costs on revenue and expenses • Expenses being managed carefully in response to revenue environment – No net growth over past few years – Continuous process of expense evaluation at Fifth Third Investment for the future: • Sales to support ratio has increased through careful management of back office and front office staff Managing expenses for current revenue environment and long-term franchise value Noninterest expense trend ($mm) (1%) Significant purchase accounting benefit * Source: Company reports. Data as of 3Q11. Efficiency ratio calculated as reported noninterest expense / (net interest income (fully taxable equivalent)+ noninterest income) ** Sales / support ratio calculated as Sales Headcount (full-time equivalent) / Support Headcount (full-time equivalent) 52% 59% 60% 60% 66% 66% 66% 67% 67% 69% 71% 74% USB WFC PNC FITB HBAN BBT RF KEY MTB ZION STI CMA $956 $935 $979 $987 $918 $901 $946 $500 $700 $900 $1,100 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 100% 110% 120% 130% 140% 4Q08 4Q09 4Q10 3Q11 $1,000 $800 $600 Disciplined expense management |
8 © Fifth Third Bank | All Rights Reserved Broad-based credit improvements FITB credit metrics are in line with or better than peers NPA ratio vs. peers Net charge-off ratio vs. peers Loans 90+ days delinquent % vs. peers Loans 30-89 days delinquent % vs. peers (7.5%)* (HFS transfer) 3.8% Before credit actions 5.0%* 2.3% Before credit actions Peer average includes: BBT, CMA, HBAN, KEY, MTB, PNC, RF, STI, USB, WFC, and ZION Source: SNL Financial and company filings. All 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 |
9 © Fifth Third Bank | All Rights Reserved Strong credit coverage levels Source: SNL Financial and company reports. Data as of 3Q11. HFI NPAs and NPLs exclude loans held-for-sale and also exclude covered assets for BBT, USB, and ZION * Non-GAAP measure. See Reg. G reconciliation on pages 28-30. Reserves and capital levels significant in relation to problem assets Adjusted PPNR (Annualized) / Average Assets* Peer average: 1.9% Reserves / NPLs Peer average: 119% “Texas Ratio” (HFI NPAs + Over 90s) / (Reserves + TCE)* Peer average: 20% Reserves / Loans Peer average: 2.5% Significant purchase accounting benefit (ex-FITB) |
10 © Fifth Third Bank | All Rights Reserved Expect ROAA upside longer-term Third quarter ROA of 1.34% included — Provision expense / average loans of 44 bps — $70mm of credit-related costs in revenue and expense Elevated credit costs should decline as conditions normalize — Credit-related costs historically of ~$25mm (pre-credit crisis) — 1997-2006 Average Provision / Loans of ~50 bps (45 bps average net charge-off ratio) — 3Q11 results and historical average credit results would produce an ROAA of approximately 1.4% Long-term target of 1.3 – 1.5% return on assets Earning asset growth Mid-50% efficiency ratio long-term NIM of 3.5-4.0% Provision of 40-60 bps Fees / Revenue ~40% Mitigation of financial reform 3Q11 Actual 3Q11 Illustrative* PPNR ex-credit costs**^ $687 $687 Credit costs (70) (25) PPNR** 617 662 Provision*** (87) (99) Pre-tax income 530 563 Taxes*** (149) (169) Net Income 381 394 ROAA 1.34% 1.38% Illustrative ROA calculation using historical NCO and credit-related costs* * Not a projection ** Non-GAAP measure. See Reg. G reconciliation on pages 28-30. *** Illustrative provision calculated using 50 bps historical average provision / loan ratio; Illustrative taxes assumed effective tax rate of ~30% ^There are limitations on the usefulness of PPNR excluding credit costs, including the significant degree to which changes in credit and fair value are integral, recurring components of the Bancorp’s core operations as a financial institution. This measure has been included herein to facilitate a greater understanding of the Bancorp’s financial condition Upper end of ROA target range assumes balance sheet growth and normalized rate environment |
11 © Fifth Third Bank | All Rights Reserved Exceed fully phased-in Basel III capital standards today Source: SNL Financial, company filings, and third-party estimates. Regulatory financial data as of 3Q11. * Peers include BAC, BBT, C, CMA, COF, HBAN, JPM, KEY, MTB, PNC, RF, STI, USB, WFC, ZION ** Non-GAAP measure. See Reg. G reconciliation on pages 28-30. Fifth Third’s capital position already well in excess of established standards, likely standards, and most peers Tier 1 common (peers) Tier 1 common (FITB) Reserves (Tier 1 common + reserves) / RWA** (not adjusted for Basel III) 12.8% 11.8% 12.5% 11.8% 12.2% 12.5% 11.7% 11.3% 10.4% 11.4% 8.2% 11.4% Peers* not in order of graph at left; estimated (Tier 1 common + reserves) / RWA** (adjusted for Basel III) Note: Estimates based on current Basel III rules released by the Basel Committee; actual rules subject to U.S. banking regulation. Assumes unrealized securities gains included in Tier 1 common. Not adjusted for potential mitigation efforts. Four large peers include estimated Basel III RWA impact based on BIS proposals. Reserves Tier 1 common (peers) Tier 1 common (FITB) 9.8% 12.1% 11.3% 10.6% 10.5% 10.2% 9.8% 9.5% 9.4% 9.3% 9.3% 8.5% 8.2% 6.9% |
12 © Fifth Third Bank | All Rights Reserved Capital management philosophy Organic growth opportunities • Support growth of core banking franchise • Continued loan growth despite sluggish economy Return to more normal dividend policy * • Strong levels of profitability would support significantly higher dividend than current level • Incorporated higher dividends in 1Q11 CCAR** submission Strategic opportunities * • Prudently expand franchise via disciplined acquisitions or de novos, increasing density in core markets • Expect future acquisition activity although less likely in near-term • Attain top 3 market position in 65% of markets or more longer term Repurchases / Redemptions * • Common shares: — Manage excess capital in light of regulatory environment, other deployment alternatives, maintenance of buffers over targeted / required capital levels, and stock price — Not included in 1Q11 CCAR** submission • Trust preferred shares (TruPS): — Potential redemption of certain TruPS included in 1Q11 CCAR ** submission — Have called $517mm due to regulatory capital treatment event or on normal call dates — Will evaluate remaining TruPS in context of regulatory developments and desired capital structure given continued changes in regulations Strong internal capital generation; current long-term Tier 1 common equity target of ~8% * Subject to Board of Directors and regulatory approval ** Comprehensive Capital Analysis and Review by Federal Reserve; proposed future capital actions confidentially submitted |
13 © Fifth Third Bank | All Rights Reserved As a $50B+ asset Bank Holding Company, Fifth Third is required to submit an annual capital plan to the Federal Reserve Capital plans and potential distributions evaluated in the context of: – Current, expected, and stressed capital levels – Under current U.S. rules under Basel III framework – Earnings power and other resources to absorb losses (i.e. reserves) 2012 Annual capital plan 2012 required capital plan submission timeline – Instructions and guidance from Federal Reserve received November 22, 2011 – FR Y-14Q schedules required by December 15, 2011 – Comprehensive capital plan submission required by January 9, 2012 – Federal Reserve response by March 15, 2012 Fifth Third believes it is well-positioned from a capital standpoint – Have managed capital using multi-scenario stress testing since early-mid 2008 – Current capital levels under Basel III rules exceed all requirements as if rules through 2019 fully phased-in today – Expect continued normalization of dividend payout ratio as well as initiation of share repurchases to be included in 2012 plan submission in order to prudently manage growth of excess capital levels – Do not currently expect significant changes in common equity ratios in CCAR plan for 2012 • • • • |
14 © Fifth Third Bank | All Rights Reserved Strong returns drive capital generation # Non-GAAP measure. See Reg. G reconciliation on pages 28-30. * 3Q11 annualized Price as of 12/02/11 Well above average profitability and capital generation, well below average valuation Price / Tangible Book Value Peer average: 122% Peer average: 11.4% Significant purchase accounting benefit (ex-FITB) Peer average: 1.0% Price / Earnings* Peer average: 10.7 Significant purchase accounting benefit (ex-FITB) Return on Average Tangible Common Equity *# Return on Average Assets * |
15 © Fifth Third Bank | All Rights Reserved Well-positioned for the future • Holding company cash currently sufficient for more than 2 years of obligations; minimal holding company or Bank debt maturities until 2013 • Fifth Third has completely exited all crisis-era government support programs Superior capital and liquidity position • NCOs of 1.3%; 2.4x 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 (235% PPNR / NCOs^ in 3Q11) • 1.3% ROAA; 15% return on average tangible common equity^ Industry leader in earnings power ^ Non-GAAP measure. See Reg. G reconciliation on pages 28-30. – Fifth Third is one of the few large banks that have no TLGP-guaranteed debt to refinance in 2012 |
16 © 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 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 Vantiv, LLC, formerly 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. |
17 © Fifth Third Bank | All Rights Reserved Appendix |
18 © Fifth Third Bank | All Rights Reserved A foundation of continued robust results Capital – exceeds required and targeted levels — Tier 1 common* capital up ~500bps or $4.6bn from 4Q08 — Capital base transformed through series of capital actions – ~9.8% pro forma Tier 1 common ratio* on a fully-phased in Basel III-adjusted basis — Capital levels supplemented by strong reserve levels – Loan loss reserves 3.08% of loans and 158% of NPLs Credit – ongoing steady improvement — Broad-based improvements in problem loans – 72% reduction in 90+ day delinquent loans since 3Q09 – NCO ratio of 1.32%, lowest level since 1Q08 – 235% PPNR / NCOs* — Balance sheet risk lowered through asset sales, resolutions – $1.4bn (48%) decline in NPLs since 4Q09 Profitability – strong relative and absolute results — PPNR* remained stable throughout cycle — 6 consecutive profitable quarters — Return on assets 1.3% — Return on average tangible common equity * 15% * Non-GAAP measure; see Reg. G reconciliation on pages 28-30. 1 Current estimate (non-GAAP), subject to final rule-making and clarification by U.S. banking regulators; currently assumes unrealized securities gains are included in common equity for purposes of this calculation 2 Nonperforming loans and leases as a percent of portfolio loans, leases and other assets, including other real estate owned (does not include nonaccrual loans held-for-sale) 3 Excluding $510mm net charge-offs attributable to credit actions 3 1 |
19 © Fifth Third Bank | All Rights Reserved Environment characterized by low growth expectations and low interest rates Potential lower growth and prolonged low- rate environment Lower securities reinvestment yields on portfolio cash flows Strong deposit flows Competitive dynamics Elevated mortgage refinance activity Firms facing significant litigation related to: — Mortgage securitizations — GSE repurchases — Private label mortgage repurchases Concerns about European banks and sovereign debt Higher capital standards and limitations on distributions Continued strong loan production — Rates on loan originations have remained relatively stable Careful management of liability costs — Disciplined pricing on deposits — Continued evaluation of term liabilities including CDs and TruPS Strong mortgage banking results Mortgage risks manageable — Quarterly mortgage repurchase costs ~$20-25mm and claims inventory declining — Total mortgage securitizations outstanding $28mm (2003 HELOC) and performing well No direct European sovereign exposure — Total exposure to European peripheral* borrowers less than $0.2 billion — Gross exposure to European banks less than $0.3 billion Strong profitability and capital in excess of fully phased-in Basel III standards today * Greece, Ireland, Italy, Portugal, Spain Fifth Third is well-positioned to deal with current environmental challenges Characteristics of current environment Fifth Third’s response / position |
20 © Fifth Third Bank | All Rights Reserved Traditional banking focus consistent with direction of financial reform Fifth Third’s business model is driven by traditional banking activities, consistent with direction of financial reform — Dodd-Frank / Basel III do not require substantial changes to Fifth Third’s business model or asset mix with attendant execution risk — Low level of financial system “interconnectedness” – International activity primarily related to trade finance and lending to U.S. subsidiaries of foreign companies – (e.g.) Fifth Third loss in Lehman bankruptcy expected to be less than $2mm — Little to no impact from Volcker rule (de minimis market maker in derivatives, proprietary trading) – Daily VaR ~$1mm or less – Small private equity portfolio ~$100mm — No originations of CDOs, securitizations on behalf of others — Didn’t originate or sell subprime mortgages or Option ARMs — No mortgage securitizations outstanding (except ~$28mm HELOC from 2003) Business profile positions Fifth Third well – today and in the future • No significant business at Fifth Third impaired during crisis • |
21 © Fifth Third Bank | All Rights Reserved Net interest income NII and NIM (FTE) • Sequential net interest income trends reflect: – Growth in C&I, residential mortgage, auto, and bankcard loan balances – Higher securities balances – Partially offset by lower yields on loans and securities • NII up $33mm from 2Q11, down $14mm from 3Q10; NIM +3 bps from 2Q11, -5 bps from 3Q10 • Yield on interest-earning assets declined 9 bps sequentially and 29 bps year-over-year – Effect offset by lower liability costs, down 14 bps from 2Q11 and down 27 bps from 3Q10 – Expect less asset yield compression and less liability rate improvement over next year * Represents purchase accounting adjustments included in net interest income. Selected Yield Analysis 3Q10 2Q11 3Q11 Seq. (bps) YoY (bps) Commercial and industrial loans 4.81% 4.35% 4.29% (6) (52) Commercial mortgage loans 3.97% 4.00% 3.94% (6) (3) Commercial construction loans 3.06% 3.01% 3.02% 1 (4) Residential mortgage loans 4.81% 4.54% 4.47% (7) (34) Home equity 3.99% 3.91% 3.89% (2) (10) Automobile loans 5.71% 4.81% 4.52% (29) (119) Credit card 10.70% 9.91% 9.49% (42) (121) Total loans and leases 4.85% 4.54% 4.48% (6) (37) Taxable securities 4.06% 3.97% 3.88% (9) (18) Tax exempt securities 4.05% 6.41% 5.84% (57) 179 Other short-term investments 0.36% 0.25% 0.25% - (11) Total interest-earning assets 4.57% 4.37% 4.28% (9) (29) Total interest-bearing liabilities 1.13% 1.00% 0.86% (14) (27) Net interest rate spread (FTE) 3.44% 3.37% 3.42% 5 (2) |
22and interest-bearing liabilities © Fifth Third Bank | All Rights Reserved Core funded balance sheet and pricing discipline • Strong, deposit-rich core funding mix supports relatively low cost of funds – Low reliance on wholesale funding • Run-off of high cost CDs (particularly from 2H08) will benefit NII in 4Q11 – Incremental $15mm in 4Q11 versus 3Q11 • Pricing discipline on commercial loans – Spreads have narrowed from post-crisis levels but remain attractive – Loan origination rates have stabilized the past several months SOURCE: SNL Financial and company reports. Data as of 3Q11 End of period transaction deposits defined as DDA, NOW and Savings/MMDA accounts; Cost of Funds defined as interest incurred on interest-bearing liabilities as a percentage of average noninterest-bearing deposits Transaction Deposits / Total Deposits C&I Spread to 1-month LIBOR Peer average 82% Cost of Funds Peer average 0.72% |
© Fifth Third Bank | All Rights Reserved Liquidity levels elevated in 3Q11 As of 3Q11, readily available borrowing capacity at FHLB: $6.3B; contingent borrowing capacity at the Fed: $21.2B — Executed $2.5B in three-month FHLB borrowings in July as a precaution to supplement liquidity through the discussion and resolution of the U.S. debt ceiling limit Holding Company cash at 9/30/11: $2.1B Cash currently sufficient to satisfy all fixed obligations for more than 2 years (debt maturities, common and preferred dividends, interest and other expenses) without accessing capital markets; relying on dividends from subsidiaries; proceeds from asset sales Expected cash obligations over the next 12 months — $25mm debt maturities — ~$300mm common dividends — ~$35mm Series G preferred dividends — ~$459mm interest and other expenses Holding company unsecured debt maturities ($mm) Bank unsecured debt maturities ($mm – excl. Brokered CDs) Heavily core funded Strong liquidity profile S-T wholesale 7% 23 Demand 21% Interest checking 16% Savings/ MMDA 24% Foreign office 3% Consumer time 5% Non-core deposits 3% S -T borrowings 4% Other liabilities 4% Equity 11% L-T debt 9% 2011 2012 2013 2014 2015 2016 2017 2018 on Fifth Third Bancorp Fifth Third Capital Trust (Bancorp) $500 $500 2011 2012 2013 2014 2015 2016 2017 2018 on |
24 © Fifth Third Bank | All Rights Reserved Mortgage repurchase overview 33% drop in 3Q11 outstanding claims balance driven by high number of resolutions in quarter Virtually all sold loans and the majority of new claims relate to agencies — 98% of outstanding balance of loans sold — Three-quarters of current quarter outstanding claims Majority of outstanding balances of the serviced for others portfolio relates to origination activity in 2009 and later Private claims and exposure relate to whole loan sales (no outstanding first mortgage securitizations) — Preponderance of private sales prior to 2006 Repurchase Reserves* ($ in millions) Outstanding Counterparty Claims ($ in millions) Outstanding Balance of Sold Loans ($ in millions) 3Q10 4Q10 1Q11 2Q11 3Q11 Beginning balance 85 103 101 87 80 Net reserve additions 47 21 10 15 20 Repurchase losses (29) (23) (23) (22) (31) Ending balance 103 101 87 80 69 2005 and prior GSE GNMA Private Total $7,838 $301 $578 $8,717 2006 1,791 64 277 2,132 2007 2,911 95 239 3,244 2008 2,975 729 0.3 3,704 2009 and later 29,971 8,718 1 38,690 Total $45,485 $9,907 $1,096 $56,488 * $184 $161 $145 $127 $85 $40 $60 $80 $100 $120 $140 $160 $180 $200 3Q10 4Q10 1Q11 2Q11 3Q11 Agencies Private Claims 172 150 135 110 64 Includes reps and warranty reserve ($52mm) and reserve for loans sold with recourse ($17mm) |
25 © Fifth Third Bank | All Rights Reserved Troubled debt restructurings overview Successive improvement in vintage performance during 2008 and 2009 as volume of modification increased Fifth Third’s mortgage portfolio TDRs have redefaulted at a lower rate than GSE composites Of $1.8B in consumer TDRs, $1.6B were on accrual status and $215mm were nonaccruals — $1.1B of TDRs are current and have been on the books 6 or more months; within that, nearly $940mm of TDRs are current and have been on the books for more than a year As current TDRs season, their default propensity declines significantly — We see much lower defaults on current loans after a vintage approaches 12 months since modification TDR performance has improved in newer vintages Outperforming redefault benchmarks Source: Fifth Third and OCC/OTS data through 1Q11 Mortgage TDR 60+ redefault trend by vintage* Months since modification Mortgage TDR 60+ redefault rate: Fifth Third comparison (January 1, 2008 through June 2011)* Fannie Mae Industry portfolio loans Fifth Third Volume by vintage Freddie Mac $1.3B current consumer TDRs (%) * Fifth Third data includes changes made to align with OCC/OTS methodology (i.e. excludes government loans, closed loans and OREO from calculations) 2008 2009 2010 3 4 5 6 7 8 9 10 11 12 50% 0% 10% 40% 30% 20% 15% 15% 14% 17% 39% < 6 months 6 -12 months 12-18 months 18-24 months 24+ months $1.1 billion 0% 10% 20% 30% 40% 3 months 6 months 9 months 12 months |
26 © Fifth Third Bank | All Rights Reserved Non-performing loans * 3Q10 inflows into NPLs HFS were $217mm, reflecting performing loans moved to held-for-sale in 3Q10 that were deemed impaired as a result of the decision to sell these loans. Prior period NPL inflows restated to reflect additional detail and with transfers to nonaccrual status presented to reflect gross inflows and charge-offs. See slide 27 for more information. Non-performing loans ($mm) Non-performing loans improving with lower severity mix; benefit of sales/transfers Fifth Third’s non-performing loan inflows (relative to loans) have been proportionally lower than peers FITB NPL inflows (relative to loans) vs. peers Source: SNL Financial and company filings. Peers include: BAC, BBT, C, CMA, HBAN, JPM, KEY, MTB, PNC, RF, STI, USB, and WFC New HFI non-performing loan flows ($mm) NPL inflows down significantly FITB FITB ex-HFS |
27 © Fifth Third Bank | All Rights Reserved NPL HFI Rollforward Commercial 3Q10 4Q10 1Q11 2Q11 3Q11 Beginning NPL Amount 1,980 1,261 1,214 1,211 1,253 Transfers to nonperforming 522 269 329 340 217 Transfers to performing (21) (2) (2) (10) (11) Transfers to performing (restructured) (10) - - - (1) Transfers to held for sale (342) - (16) (15) (58) Loans sold from portfolio (5) (9) (12) (7) (17) Loan paydowns/payoffs (153) (111) (108) (91) (77) Transfer to other real estate owned (92) (48) (37) (39) (20) Charge-offs (627) (170) (164) (141) (136) Draws/other extensions of credit 9 24 7 5 5 Ending Commercial NPL 1,261 1,214 1,211 1,253 1,155 Consumer 3Q10 4Q10 1Q11 2Q11 3Q11 Beginning NPL Amount 549 323 466 434 386 Transfers to nonperforming 256 365 232 214 201 Transfers to performing (45) (36) (35) (34) (33) Transfers to performing (restructured) (29) (25) (50) (41) (39) Transfers to held for sale (205) - - - - Loans sold from portfolio - - (1) (21) - Loan paydowns/payoffs (37) (17) (18) (27) (27) Transfer to other real estate owned (50) (20) (18) (15) (16) Charge-offs (118) (130) (144) (126) (91) Draws/other extensions of credit 2 4 2 2 2 Ending Consumer NPL 323 466 434 386 383 Total NPL 1,584 1,680 1,645 1,639 1,538 Total new nonaccrual loans - HFI 778 634 561 554 418 NPL rollforward Significant improvement in NPL inflows over past year Prior period NPL inflows restated to reflect additional detail and with transfers to nonaccrual status presented to reflect gross inflows and charge-offs. |
28 © Fifth Third Bank | All Rights Reserved Regulation G Non-GAAP reconciliation $ in millions (unaudited) For the Three Months Ended September June March December September June March December 2011 2011 2011 2010 2010 2010 2010 2009 Pre-tax Pre-provision Net Revenue: Income before income taxes (a) $ 530 $ 506 $ 377 $ 417 $ 303 $ 242 $ (22) $ (214) Provision expense (b) 87 113 168 166 457 325 590 776 Pre-tax, pre-provision net revenue (PPNR) (a) + (b) 617 619 545 583 760 567 568 562 Annualized PPNR (c) 2,448 2,483 2,210 2,313 3,015 2,274 2,304 2,230 Adjustments remove (benefit) / detriment Securities (gains) / losses (26) (6) (8) (21) (4) (8) (14) (2) Gain on BOLI settlement - - - - (127) - - - Valuation of 2009 Visa total return swap 17 4 9 5 - - 9 - Vantiv, LLC warrants & puts (3) (29) 2 (3) 5 (10) 2 (20) Termination of certain borrowings & hedging transactions 28 - - - - - - - Other litigation reserve expense - - - - - 3 4 22 Extinguishment (gains) / losses - (6) (3) 17 - - - - Adjusted PPNR (k) 633 582 545 581 634 552 569 562 Annualized Adjusted PPNR (d) 2,511 2,334 2,210 2,305 2,515 2,214 2,308 2,230 Credit-related items in noninterest income Gain / (loss) on sale of loans 3 8 17 21 (1) 25 8 8 Commercial loans HFS FV adjustment (6) (9) (16) (35) (9) (9) (17) (30) Gain / (loss) on sale of OREO properties (21) (26) (2) (19) (29) (16) (21) (22) Mortgage repurchase costs (2) (0) (2) (1) (4) - (2) - Total credit-related revenue impact (i) 25 28 3 34 44 1 31 45 Credit-related items in noninterest expense Mortgage repurchase expense 19 14 8 20 45 39 17 11 Provision for unfunded commitments (10) (14) (16) (4) (23) 9 11 44 Derivative valuation adjustments 4 1 (0) (1) 8 8 (2) 21 OREO expense 7 6 13 11 9 6 9 6 Other problem asset related expenses 25 30 28 27 28 29 37 29 Total credit-related operating expenses (j) 45 36 32 53 67 91 73 111 Credit-adjusted PPNR (k) + (i) + (j) 703 646 580 668 745 643 673 717 PPNR excluding credit costs (a) + (b) + (i) + (j) 687 683 580 670 871 658 672 717 Financial & Asset Quality Metrics: Risk-weighted assets (e) $ 102,562 $ 100,320 $ 99,392 $ 100,561 $ 98,904 $ 97,888 $ 99,220 $ 100,862 Net charge-offs 262 304 367 356 956 434 582 708 Annualized net charge-offs (f) 1,039 1,219 1,488 1,412 3,793 1,741 2,360 2,809 Total assets (g) 114,905 110,805 110,485 111,007 112,322 112,025 112,651 113,380 Average assets (h) 113,295 111,200 110,844 111,858 111,854 112,613 113,433 111,505 Ratios: PPNR / RWA (c) / (e) 2.4% 2.5% 2.2% 2.3% 3.0% 2.3% 2.3% 2.2% PPNR / NCO (c) / (f) 235% 204% 149% 164% 79% 131% 98% 79% PPNR / Total assets (c) / (g) 2.1% 2.2% 2.0% 2.1% 2.7% 2.0% 2.0% 2.0% PPNR / Average assets (c) / (h) 2.2% 2.2% 2.0% 2.1% 2.7% 2.0% 2.0% 2.0% Adjusted PPNR / RWA (d) / (e) 2.4% 2.3% 2.2% 2.3% 2.5% 2.3% 2.3% 2.2% Adjusted PPNR / NCO (d) / (f) 242% 191% 149% 163% 66% 127% 98% 79% Adjusted PPNR / Total assets (d) / (g) 2.2% 2.1% 2.0% 2.1% 2.2% 2.0% 2.0% 2.0% Adjusted PPNR / Average assets (d) / (h) 2.2% 2.1% 2.0% 2.1% 2.2% 2.0% 2.0% 2.0% |
29 © Fifth Third Bank | All Rights Reserved Regulation G Non-GAAP reconciliation $ and shares in millions (unaudited) For the Three Months Ended September June March December September 2011 2011 2011 2010 2010 Net income available to common shareholders (U.S. GAAP) $ 373 $ 328 $ 88 $ 270 $ 175 Add: Intangible amortization, net of tax 3 4 5 7 7 Tangible net income available to common shareholders 376 332 93 277 182 Tangible net income available to common shareholders (annualized) (a) 1,492 1,332 377 1,099 722 Average Bancorp shareholders' equity (U.S. GAAP) 12,841 12,365 13,052 14,007 13,852 Less: Average preferred stock 398 398 1,557 3,648 3,637 Average goodwill 2,417 2,417 2,417 2,417 2,417 Average intangible assets 47 52 59 67 78 Average tangible common equity (b) 9,979 9,498 9,019 7,875 7,720 Total Bancorp shareholders' equity (U.S. GAAP) 13,029 12,572 12,163 14,051 13,884 Less: Preferred stock (398) (398) (398) (3,654) (3,642) Goodwill (2,417) (2,417) (2,417) (2,417) (2,417) Intangible assets (45) (49) (55) (62) (72) Tangible common equity, including unrealized gains / losses (c) 10,169 9,708 9,293 7,918 7,753 Less: Accumulated other comprehensive income / loss (542) (396) (263) (314) (432) Tangible common equity, excluding unrealized gains / losses (d) 9,627 9,312 9,030 7,604 7,321 Total assets (U.S. GAAP) 114,905 110,805 110,485 111,007 112,322 Less: Goodwill (2,417) (2,417) (2,417) (2,417) (2,417) Intangible assets (45) (49) (55) (62) (72) Tangible assets, including unrealized gains / losses (e) 112,443 108,339 108,013 108,528 109,833 Less: Accumulated other comprehensive income / loss, before tax (834) (609) (405) (483) (665) Tangible assets, excluding unrealized gains / losses (f) 111,609 107,730 107,608 108,045 109,168 Common shares outstanding (g) 920 920 919 796 796 Total nonperforming assets, excluding held-for-sale (h) 1,944 Total ninety days past due loans and leases (i) 274 Allowance for loan and lease losses (j) 2,439 Ratios: Return on average tangible common equity (a) / (b) 14.9% 14.0% 4.2% 13.9% 9.4% Tangible common equity (excluding unrealized gains/losses) (d) / (f) 8.63% 8.64% 8.39% 7.04% 6.70% Tangible common equity (including unrealized gains/losses) (c) / (e) 9.04% 8.96% 8.60% 7.30% 7.06% Tangible book value per share (c) / (g) 11.05 10.55 10.11 9.94 9.74 "Texas Ratio" (HFI NPAs + Over 90s) / (Reserves + TCE) ((h) + (i)) / ((c) + (j)) 18% |
30 © Fifth Third Bank | All Rights Reserved Regulation G Non-GAAP reconciliation $ in millions (unaudited) For the Three Months Ended September June March December September 2011 2011 2011 2010 2010 Total Bancorp shareholders' equity (U.S. GAAP) $ 13,029 $ 12,572 $ 12,163 $ 14,051 $ 13,884 Goodwill and certain other intangibles (2,514) (2,536) (2,546) (2,546) (2,525) Unrealized gains (542) (396) (263) (314) (432) Qualifying trust preferred securities 2,273 2,312 2,763 2,763 2,763 Other 20 20 12 11 8 Tier I capital 12,266 11,972 12,129 13,965 13,698 Less: Preferred stock (398) (398) (398) (3,654) (3,642) Qualifying trust preferred securities (2,273) (2,312) (2,763) (2,763) (2,763) Qualifying noncontrolling interest in consolidated subsidiaries (30) (30) (30) (30) (30) Tier I common equity (a) 9,565 9,232 8,938 7,518 7,263 Unrealized gains 542 Disallowed deferred tax assets - Disallowed MSRs 64 Other 10 Less: 10% of individual deferred tax assets, MSRs, investment in financial entities - 15% of aggregate deferred tax assets, MSRs, investment in financial entities - Tier 1 common equity, Basel III pro forma (b) 10,181 Risk-weighted assets, determined in accordance with prescribed regulatory requirements (c) $ 102,562 $ 100,320 $ 99,392 $ 100,561 $ 98,904 Add: Regulatory deductions not deducted from Tier 1 common equity, risk-weighted at 250% 1,377 Risk-weighted assets, Basel III proforma (d) 103,939 Allowance for loan and lease losses (e) $ 2,439 Ratios: Tier I common equity (a) / (c) 9.33% 9.20% 8.99% 7.48% 7.34% Tier I common equity, Basel III proforma (b) / (d) 9.80% Tier I common + reserves / RWA ((a) + (e)) / (c) 11.70% Tier I common + reserves / RWA, Basel III pro forma ((b) + (e)) / (d) 12.14% |