© Fifth Third Bank | All Rights Reserved 3Q13 Earnings Conference Call October 17, 2013 Please refer to earnings release dated October 17, 2013 for further information. Exhibit 99.2 |
2 © 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 from the separation of or the results of operations of Vantiv, LLC; (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 and deliver products and services 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. |
3 © Fifth Third Bank | All Rights Reserved Net income available to common shareholders of $421MM ($0.47 per diluted share), vs. $582MM ($0.65 per share) in 2Q13 and $354MM ($0.38 per share) in 3Q12 Credit trends remain favorable Strong capital ratios* 3Q13 in review Significant items in 3Q13 results $ in MM, except per share data Net income impact After tax EPS impact Pre-tax After tax Gain on sale of Vantiv shares $85 $55 Mortgage representation & warranty reserve reduction $15 $9 Valuation adjustment on Vantiv warrant $6 $4 Severance expense ($5) ($3) Large bank assessment fee ($5) ($3) Expense to increase litigation reserves ($30) ($19) Total $66 $43 $0.05 — Net charge-offs of $109MM (0.49% of loans and leases) down $3MM (2 bps) vs. 2Q13; lowest net-charge-off ratio since 1Q07 — Provision expense of $51MM, up $13MM vs. 2Q13 — Loan loss allowance down $58MM sequentially; allowance to loan ratio of 1.92% — Total nonperforming assets of $1.0B including loans held-for-sale, down $140MM, or 12%, from 2Q13; NPA ratio of 1.16% down 16 bps from 2Q13, nonperforming loans ratio of 0.88% down 16 bps from 2Q13 — Tier 1 common ratio 9.89%**, up 46 bps sequentially, includes 37 bps benefit from conversion of Series G preferred stock; Basel III pro forma estimate of ~9.5%** — Tier 1 risk-based capital ratio 11.15%, Total risk-based capital ratio 14.36%, Leverage ratio 10.58% — Tangible common equity ratio** of 9.27% excluding unrealized gains/losses; 9.42% including them — Book value per share of $15.84; tangible book value per share** of $13.09 up 3% from 2Q13 and 8% from 3Q12 — Previously announced $539MM common stock repurchase agreement settled on October 1, 2013 with an additional 4.3MM shares repurchased upon completion of the agreement — Return on average assets of 1.35%; return on average common equity of 12.1%; return on average tangible common equity** of 14.7% * Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of recent prospective regulatory capital requirements approved in July 2013. ** Non-GAAP measure; see Reg. G reconciliation in appendix. • • • |
4 © Fifth Third Bank | All Rights Reserved Financial summary • PPNR^ of $655 million, included $91 million in Vantiv-related gains, $30 million in charges to increase litigation reserves, and $15 million reduction in mortgage representation and warranty reserve • ROAA of 1.4% including Vantiv-related gains, 1.2% excluding them; ROATCE^ of 14.7% including Vantiv-related gains, 12.6% excluding them • 11 consecutive quarter of sequential average portfolio loan growth; EOP portfolio loan balances highest in company history Actual ($ in millions) 3Q12 2Q13 3Q13 $ % $ % Average Balances Commercial loans* $46,901 $50,513 $50,771 $258 1% $3,870 8% Consumer loans* 35,987 36,194 36,501 307 1% 514 1% Total loans & leases* $82,888 $86,707 $87,272 $565 1% $4,384 5% Core deposits $81,722 $85,537 $86,921 $1,384 2% $5,199 6% Income Statement Data Net interest income (taxable equivalent) $907 $885 $898 $13 2% ($9) (1%) Provision for loan and lease losses 65 64 51 (13) (20%) (14) (22%) Noninterest income 671 1,060 721 (339) (32%) 50 7% Noninterest expense 1,006 1,035 959 (76) (7%) (47) (5%) Net income attributable to Bancorp $363 $591 $421 ($170) (29%) $58 16% Net income available to common shareholders $354 $582 $421 ($161) (28%) $67 19% Pre-provision net revenue (PPNR)^ $568 $905 $655 ($250) (28%) $87 15% Earnings per share, diluted $0.38 0.65 0.47 ($0.18) (28%) $0.09 24% Net interest margin 3.56% 3.33% 3.31% (2bps) (1%) (25bps) (7%) Return on average assets 1.23% 1.94% 1.35% (59bps) (30%) 12bps 10% Return on average common equity 10.4% 17.3% 12.1% (520bps) (30%) 170bps 15% Return on average tangible common equity^ 12.8% 21.1% 14.7% (640bps) (31%) 190bps 14% * Excluding loans held-for-sale ^ Non-GAAP measure; see Reg. G reconciliation in appendix. Note: Numbers may not sum due to rounding and percentages in all of the tables in this presentation are calculated on actual dollar amounts and not the rounded dollar amounts. Seq. YOY th |
5 © Fifth Third Bank | All Rights Reserved Net interest income NII and NIM (FTE) • Net interest income up $13MM from 2Q13 and down $9MM from 3Q12 – Sequential increase due to higher balances and higher yields in investment securities, lower interest expense, and the benefit of an extra day in the quarter, partially offset by the effects of loan repricing, lower held-for- sale loans, and the 2Q13 maturity of interest rate floors. – Year-over-year decline reflected lower asset yields partially offset by higher average loan balances, lower long- term debt expense, and run-off in higher-priced CDs. • NIM declined 2 bps sequentially due to lower loan yields, the 2Q13 maturity of interest rate floors, and the impact of one extra day in the quarter, partially offset by the effects of lower funding rates and higher securities yields. * Represents purchase accounting adjustments included in net interest income. ($MM) Yield Analysis 3Q12 2Q13 3Q13 Seq. (bps) YoY (bps) Commercial and industrial loans 4.08% 3.58% 3.49% (9) (59) Commercial mortgage loans 3.76% 3.65% 3.60% (5) (16) Commercial construction loans 2.83% 3.41% 3.71% 30 88 Commercial leases 3.62% 3.36% 3.22% (14) (40) Residential mortgage loans 4.03% 3.91% 3.87% (4) (16) Home equity 3.78% 3.76% 3.74% (2) (4) Automobile loans 3.61% 3.16% 3.02% (14) (59) Credit card 9.82% 9.97% 9.93% (4) 11 Other consumer loans and leases 49.00% 39.49% 42.84% 335 (616) Total loans and leases 4.21% 3.89% 3.83% (6) (38) Taxable securities 3.41% 3.09% 3.20% 11 (21) Tax exempt securities 3.29% 5.01% 5.08% 7 179 Other short-term investments 0.25% 0.24% 0.26% 2 1 Total interest-earning assets 4.03% 3.73% 3.68% (5) (35) Total interest-bearing liabilities 0.67% 0.57% 0.54% (3) (13) Net interest spread 3.36% 3.16% 3.14% (2) (22) 3.56% 3.49% 3.42% 3.33% 3.31% $450 $550 $650 $750 $850 $950 2.0% 2.5% 3.0% 3.5% 4.0% 3Q12 4Q12 1Q13 2Q13 3Q13 Net Interest Income (right axis) PAA* NIM $907 $903 $893 $885 $898 |
© Fifth Third Bank | All Rights Reserved Balance sheet • C&I loans up 1% sequentially and 15% from 3Q12 – Commercial line utilization 30%; potential source of future growth • CRE loans down 3% sequentially and 12% from 3Q12 – Commercial construction balances up $100MM+ year-to-date • Consumer loans up 1% sequentially and year-over- year • Lower production reduced average warehoused residential mortgage loans held-for-sale to $1.8B in 3Q13 versus $2.7B in 2Q13 • Core deposit to loan ratio of 100% – DDAs up 3% sequentially and up 13% from 3Q12 – Consumer average transaction deposits down 1% sequentially and up 5% year-over-year – Commercial average transaction deposits up 6% sequentially and up 10% year-over-year Average loan growth ($B)^ Average core deposit growth ($B) 87 86 ^ Excludes loans held-for-sale Note: Numbers may not sum due to rounding 83 82 84 85 86 87 87 47 48 50 51 51 36 36 36 36 37 3Q12 4Q12 1Q13 2Q13 3Q13 Commercial Loans Consumer Loans 84 27 29 29 30 31 49 50 51 51 51 6 5 5 5 5 3Q12 4Q12 1Q13 2Q13 3Q13 Demand IBT/Savings/MMDA Consumer CD/Core foreign 6 • Short-term wholesale borrowings represent only 2% of total funding |
7 © Fifth Third Bank | All Rights Reserved Noninterest income • 3Q13 results included an $85MM gain on the sale of Vantiv shares, a $6MM positive valuation adjustment on the Vantiv warrant, and a $2MM negative valuation on the Visa total return swap. • 2Q13 results included a $242MM gain on the sale of Vantiv shares, a $76MM positive valuation adjustment on the Vantiv warrant, a $10MM benefit from a settlement related to a previously surrendered BOLI policy, and a $5MM negative valuation on the Visa total return swap. • Credit costs recorded in noninterest income: Noninterest income Note: Numbers may not sum due to rounding Actual ($ in millions) 3Q12 2Q13 3Q13 Gain / (loss) on sale of loans $2 ($0) $- Commercial loans HFS FV adjustment (3) (1) 0 Gain / (loss) on sale of OREO properties (11) (5) (5) Mortgage repurchase costs (2) (1) 0 Total credit-related revenue impact ($14) ($6) ($5) Actual Seq. YOY 3Q12 2Q13 3Q13 $ % $ % ($ in millions) Service charges on deposits $128 $136 $140 $4 3% 12 10% Corporate banking revenue 101 106 102 (4) (4%) 1 1% Mortgage banking net revenue 200 233 121 (112) (48%) (79) (40%) Investment advisory revenue 92 98 97 (1) (2%) 5 6% Card and processing revenue 65 67 69 2 2% 4 6% Other noninterest income 78 414 185 (229) (55%) 107 NM Securities gains, net 2 - 2 2 NM - 56% Securities gains, net - 5 6 5 (1) - 5% non-qualifying hedges on MSRs Total noninterest income $671 $1,060 $721 ($339) (32%) $50 7% (12%) |
8 © Fifth Third Bank | All Rights Reserved Noninterest expense Noninterest expense • 3Q13 results included $30MM in charges to increase litigation reserves, $5MM in severance expense, $5MM in large bank assessment fees, and a $4MM seasonal pension settlement charge. Results also included a $15MM reduction in the mortgage representation and warranty reserve. • 2Q13 results included $51MM in charges to increase litigation reserves and $1MM in severance expense. Results also included $9MM of charges to increase the mortgage representation and warranty reserve. • Credit costs recorded in noninterest expense: Note: Numbers may not sum due to rounding Actual Seq. YOY 3Q12 2Q13 3Q13 $ % $ % ($ in millions) Salaries, wages and incentives $399 $404 $389 ($15) (4%) (10) (2%) Employee benefits 79 83 83 - - 4 Net occupancy expense 76 76 75 (1) (2%) (1) (1%) Technology and communications 49 50 52 2 5% 3 6% Equipment expense 28 28 29 1 6% 1 5% Card and processing expense 30 33 33 - (2%) 3 9% Other noninterest expense 345 361 298 (63) (18%) (47) (14%) Total noninterest expense $1,006 $1,035 $959 ($76) (7%) ($47) (5%) Actual ($ in millions) 3Q12 2Q13 3Q13 Mortgage repurchase expense $36 $20 ($4) Provision for unfunded commitments (2) (2) 1 Derivative valuation adjustments (2) 0 - OREO expense 6 3 5 Other problem asset related expenses 21 14 14 Total credit-related operating expenses $59 $35 $16 4% |
9 © Fifth Third Bank | All Rights Reserved ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 Income before income taxes (U.S. GAAP) (a) $503 $540 $591 $841 $605 Add: Provision expense (U.S. GAAP) (b) 65 76 62 64 51 PPNR (a) + (b) $568 $616 $653 $905 $655 Adjustments to remove (benefit) / detriment^: In noninterest income: Gain from sales of Vantiv shares - (157) - (242) (85) Valuation of 2009 Visa total return swap 1 15 7 5 2 Vantiv warrant & puts 16 19 (34) (76) (6) Sale of certain Fifth Third funds (13) - (7) - - BOLI settlement - - - (10) - Securities (gains) / losses (2) (2) (17) - (2) In noninterest expense: Debt extinguishment (gains) / losses 26 134 - - - Severance expense 2 3 3 1 5 Sale of certain Fifth Third funds 2 - - - - Large bank assessment fees - - - - 5 Gain on sale of affordable housing (5) - (9) (2) (1) Litigation reserve additions 5 13 9 51 30 Adjusted PPNR $600 $640 $605 $632 $603 Credit-related items^^: In noninterest income 14 13 10 6 5 In noninterest expense 59 68 24 35 16 Credit-adjusted PPNR** $673 $721 $639 $673 $624 Pre-tax pre-provision earnings* PPNR trend • PPNR of $655MM down 28% from 2Q13 levels and up 15% from prior year • Adjusted PPNR of $603MM, down 5% sequentially and up 1% from prior year PPNR reconciliation Efficiency ratio 64% 53% 59% 60% 60% 61% 3Q12 2Q13 3Q13 Efficiency Ratio Adjusted # 600 640 605 632 603 14 13 10 6 5 59 68 24 35 16 $0 $100 $200 $300 $400 $500 $600 $700 $800 3Q12 4Q12 1Q13 2Q13 3Q13 Noninterest Expense Credit Items Fee Income Credit Items Adjusted PPNR $568 $616 $653 $905 $655 * Non-GAAP measure; see Reg. G reconciliation in appendix. ** 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. ^ Prior quarters include similar adjustments. ^^ See Slide 7 and Slide 8 for detailed breakout of credit-related items. # 3Q13 also included a $15 million reduction in the mortgage representation and warranty reserve; 2Q13, and 3Q12 also included mortgage repurchase reserve builds of $9 million and $24 million, respectively related to additional guidance received from Freddie Mac. These impacts are reflected in “Credit-related items in noninterest expense” listed above. |
10 © Fifth Third Bank | All Rights Reserved Net charge-offs Net charge-offs by loan type Net charge-offs by geography $112 Net charge-offs ($MM) $109 $156 $MM % Commercial $44 41% Consumer $65 59% Total $109 100% $147 Year-over-year charge-offs down significantly due to improving credit trends $MM % Florida $18 17% Michigan 12 11% Subtotal $30 28% Other 79 72% Total $109 100% Actual Seq. YOY ($ in millions) 3Q12 2Q13 3Q13 $ % $ % C&I $29 $33 $44 $11 33% $15 52% Commercial mortgage 28 10 2 (8) (80%) (26) (93%) Commercial construction 4 - (2) (2) NM (6) (150%) Commercial lease 1 2 - (2) (100%) (1) (100%) Commercial $62 $45 $44 ($1) (2%) ($18) (29%) Residential mortgage loans 26 15 12 (3) (14) (54%) Home equity 37 23 19 (4) (17%) (18) (49%) Automobile 7 5 6 1 20% (1) (14%) Credit card 18 19 19 - NM 1 6% Other consumer 6 5 9 4 (80%) 3 50% Consumer $94 $67 $65 ($2) (3%) ($29) (31%) Total net charge-offs $156 $112 $109 ($3) (2%) ($47) (31%) NCO ratio 0.75% 0.70% 0.63% 0.51% 0.49% Note: Numbers may not sum due to rounding. $133 62 56 54 45 44 94 91 79 67 65 $0 $25 $50 $75 $100 $125 $150 $175 3Q12 4Q12 1Q13 2Q13 3Q13 Commercial Consumer C&I / Lease 40% CRE 1% Residential mortgage 11% Home equity 17% Auto 5% Card 18% Other consumer 8% MI 11% OH 21% IN 4% IL 9% KY 5% Other / National 30% TN 2% NC 1% FL 17% (20%) |
11 © Fifth Third Bank | All Rights Reserved Nonperforming assets • NPAs of $1.0B excluding held-for-sale down 30% year-over-year • Commercial NPAs of $680MM, down 33% from the previous year – Homebuilder / developer NPAs of $53MM; represent 8% of total commercial NPAs • Consumer NPAs of $334MM, down 22% from the previous year • NPAs in held-for-sale of $11MM C&I / Lease $322MM, 32% CRE $358MM, 35% Residential Mortgage $292MM, 29% Other Consumer $42MM, 4% ILLINOIS INDIANA FLORIDA TENNESSEE KENTUCKY OHIO MICHIGAN NORTH CAROLINA OTHER / NATIONAL NPAs exclude loans held-for-sale. Nonperforming assets ($MM) $1,210 $1,150 Nonperforming assets continue to improve $1,014 $1,446 $1,286 1,017 883 828 794 680 $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 3Q12 4Q12 1Q13 2Q13 3Q13 Commercial Consumer 7% 11% 2% 25% 14% <1% 34% 7% 24% 20% 5% 8% 6% 3% 4% 2% 28% 12% 18% 4% 14% 5% 3% 8% 36% 16% 29% 9% 9% 9% 3% 20% 5% 429 403 382 356 334 NPA ratio 1.16% 1.32% 1.41% 1.49% 1.73% |
12 © Fifth Third Bank | All Rights Reserved NPL Rollforward Significant improvement in NPL inflows over past year Note: Numbers may not sum due to rounding NPL HFI Rollforward Commercial 3Q12 4Q12 1Q13 2Q13 3Q13 983 806 697 639 623 Transfers to nonperforming 120 68 80 151 71 Transfers to performing (17) (4) (1) (6) (1) Transfers to performing (restructured) (20) (5) (4) (7) (2) Transfers to held-for-sale (7) - (1) (2) - Loans sold from portfolio (18) (6) (3) (2) (14) Loan paydowns/payoffs (159) (89) (53) (80) (101) Transfers to other real estate owned (35) (22) (27) (28) (14) Charge-offs (62) (55) (54) (45) (44) Draws/other extensions of credit 21 4 5 3 3 806 697 639 623 521 Consumer 3Q12 4Q12 1Q13 2Q13 3Q13 359 347 332 314 286 Transfers to nonperforming 161 146 124 116 95 Transfers to performing (29) (28) (26) (31) (30) Transfers to performing (restructured) (37) (34) (29) (28) (24) Transfers to held-for-sale - - - - - Loans sold from portfolio - - - - - Loan paydowns/payoffs (38) (36) (27) (33) (39) Transfers to OREO/other repossessed property (17) (18) (17) (21) (28) Charge-offs (53) (47) (46) (30) (13) Draws/other extensions of credit 1 1 1 (1) 347 332 312 286 248 Total NPL 1,153 1,029 951 909 769 Total new nonaccrual loans - HFI 281 214 204 267 166 Beginning NPL amount Ending Commercial NPL Beginning NPL amount Ending Consumer NPL 1 |
13 © Fifth Third Bank | All Rights Reserved Strong reserve position Peer median includes: BBT, CMA, HBAN, KEY, MTB, PNC, RF,STI, USB, WFC, and ZION 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 3Q13 coverage ratios strong relative to peers (2Q13) Industry leading reserve levels Fifth Third (3Q13) Peer Median (2Q13) $156 $147 $133 $112 $109 ($91) ($71) ($71) ($48) ($58) 2.32% 2.16% 2.08% 1.99% 1.92% ($150) ($100) ($50) $0 $50 $100 $150 $200 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 3Q12 4Q12 1Q13 2Q13 3Q13 Net Charge-offs Change in ALLL Reserves 134% Reserves / NPLs 129% Reserves / NPAs 311% Reserves / Annualized NCOs 218% 165% 389% |
14 © Fifth Third Bank | All Rights Reserved Mortgage repurchase overview 3Q13 balances of outstanding claims decreased 7.5% from 2Q13 Virtually all sold loans and the majority of new claims relate to agencies — 99% of outstanding balance of loans sold — 92% of current quarter outstanding claims Approximately 88% of outstanding balances of the serviced for others portfolio relates to origination activity in 2009 and later Private claims and exposure relate to whole loan sales (no outstanding first mortgage securitizations) — Preponderance of private sales prior to 2006 Repurchase Reserves* ($ in millions) Outstanding Counterparty Claims ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 Beginning balance $75 $99 $131 $133 $139 Net reserve additions 39 47 22 20 (4) Repurchase losses (15) (15) (20) (14) (13) Ending balance $99 $131 $133 $139 $121 * Includes representation and warranty reserve ($103MM) and reserve for loans sold with recourse ($18MM) Note: Numbers may not sum due to rounding % Current 29% 19% 26% 27% 38% Outstanding Balance of Sold Loans ($ in millions) Fannie Freddie GNMA Private Total 2003 and Prior $387 $1,704 $122 $132 $2,345 2004 162 623 23 97 906 2005 148 736 32 98 1,014 2006 198 580 29 158 965 8% 2007 291 962 38 134 1,425 2008 357 707 281 - 1,346 2009 901 4,356 2,273 1 7,529 2010 2,167 4,921 2,189 - 9,278 2011 2,831 5,270 1,777 - 9,878 2012 5,144 9,815 4,261 49 19,269 2013 3,299 6,397 5,049 286 15,031 Grand Total $15,886 $36,072 $16,073 $956 $68,987 1.4% 55 48 42 47 45 19 19 5 6 4 $73 $66 $47 $53 $49 $- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 3Q12 4Q12 1Q13 2Q13 3Q13 Agencies Private Total Claims 2004-2008 vintages account for ~84% of total life to date losses of $440MM from sold portfolio $18MM decrease in repurchase reserves resulting from improvements in the underlying repurchase metrics |
15 © Fifth Third Bank | All Rights Reserved Strong capital position * Non-GAAP measure; See Reg. G reconciliation in appendix. ** Capital ratios estimated; presented under current U.S. capital regulations. The pro forma Basel III Tier I common equity ratio is management’s estimate based upon its current interpretation of recent prospective regulatory capital requirements approved in July 2013. ^ Tangible common equity ratio excluding (dark blue) and including (light blue) unrealized securities gains / losses after-tax Current period regulatory capital data ratios are estimated. Capital ratios remained strong during the quarter Tangible common equity ratio^* Tier I risk-based capital ratio Total risk-based capital ratio Tier 1 common equity* Including securities gains/losses 9.1% 8.8% 9.0% 8.8% 9.3% 9.5% 9.1% 9.3% 8.9% 9.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 3Q12 4Q12 1Q13 2Q13 3Q13 10.9% 10.7% 10.8% 11.1% 11.2% 0% 2% 4% 6% 8% 10% 12% 14% 3Q12 4Q12 1Q13 2Q13 3Q13 14.8% 14.4% 14.4% 14.3% 14.4% 0% 2% 4% 6% 8% 10% 12% 14% 16% 3Q12 4Q12 1Q13 2Q13 3Q13 9.7% 9.5% 9.7% 9.4% 9.9% 0% 2% 4% 6% 8% 10% 3Q12 4Q12 1Q13 2Q13 3Q13 Basel III Est. 9.1%** Basel III Est. 9.5%** |
16 © Fifth Third Bank | All Rights Reserved Balance Sheet: Average loans & leases (excl. HFS) Average transaction deposits Income Statement: Net interest income* Net interest margin* Noninterest income # Noninterest expense # Pre-provision net revenue ** # ROA # Effective tax rate # Asset Quality: Net charge-offs Loan loss allowance ^ Nonperforming assets ^ Category Fifth Third: Outlook 2013 Outlook # $82.7B $78.1B 2012-Adjusted # Outlook as of October 17, 2013; please see cautionary statement on slide 2 for risk factors related to forward-looking statements Mid single digit growth Mid single digit growth Down ~$225MM-250MM (<0.55% ^^ ) Lower vs. 4Q12 Down ~25% vs. 4Q12 $3.6B 3.55% (3.31% 3Q13) $2.7B $3.9B $2.4B ~1.25% ~28.5% 9.51% $704MM (0.85% ^^ ) $1.9B (2.16%) $1.3B (1.49%) Consistent with 4Q12 ~3.33% +/- Consistent with FY2012 Consistent with FY2012 Consistent with FY2012 ~1.25% +/- ~29% Consistent with FY2012 Tier 1 common equity** ^^^ # 2012 results exclude a net $305 million benefit from gains on Vantiv share issuance, Vantiv warrants, and Vantiv debt refinancing costs as well as $169 million in FHLB and TruPS debt extinguishment costs. 2013 outlook does not include Vantiv share sale and warrant gains totaling $443 million or potential but currently unforecasted items, such as any potential additional Vantiv gains, future capital actions, or change in regulatory guidance for treatment of Chapter 7 bankrupt borrowers. . * Presented on a fully-taxable equivalent basis. ** Non-GAAP measure; see Reg. G reconciliation on slides 28-29. ^ Ratio as a percent of loans excluding held-for-sale; allowance expectation assumes current expectation for credit and economic trends and is subject to review in each period. ^^ As a percentage of loans and leases. ^^^ Current period capital ratios estimated. Tier 1 common equity ratio outlook assumes generally stable common equity levels managed through asset growth and share repurchases. Repurchases subject to ongoing evaluation under the Federal Reserve’s CCAR process. |
17 © Fifth Third Bank | All Rights Reserved Appendix |
18 © Fifth Third Bank | All Rights Reserved Mortgage banking results – MSR valuation adjustments of positive $23 million partially offset by lower gains on sale – Gains down 50% due to lower gain on sale margins and lower origination volumes – Gain on sale margins declined significantly due to rising mortgage rates; pressure moderated in second half of the quarter – Impact of higher mortgage rates – Competitive pressure on industry margins – Lower HARP volumes Mortgage originations and gain-on-sale margin* Mortgage Banking Net Revenue ($MM) *Gain-on-sale margin represents gains on all loans originated for sale. Note: numbers may not sum due to rounding $233 $200 $258 $220 $121 • 3Q13 mortgage components • Expect lower mortgage gain on sale revenue on lower volume due to: 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% $0 $1 $2 $3 $4 $5 $6 $7 $8 3Q12 4Q12 1Q13 2Q13 3Q13 Originations for sale Originations HFI Margin* ($B) • Potential for better mortgage servicing results as rates increase 226 239 169 150 74 62 64 61 62 63 (48) (52) (53) (51) (39) (40) 7 42 73 23 3Q12 4Q12 1Q13 2Q13 3Q13 Orig fees and gains on loan sales Gross servicing fees Servicing rights amortization MSR valuation adjustments |
19 © Fifth Third Bank | All Rights Reserved European Exposure Sovereigns Financial Institutions Non-Financial Institutions Total Total Funded Total Funded Total Funded Total Funded ($ in millions) Exposure Exposure Exposure Exposure Exposure Exposure Exposure (a) Exposure Peripheral Europe (b) $ - - 10 - 183 107 193 107 Other Eurozone (c) - - 45 25 1,847 1,107 1,892 1,132 Total Eurozone - - 55 25 2,030 1,214 2,085 1,239 Other Europe (d) - - 118 14 879 522 997 536 Total Europe $ - - 173 39 2,909 1,736 3,082 1,775 European Exposure (a) Total exposure includes funded and unfunded commitments, net of collateral; funded exposure excludes unfunded exposure (b) Peripheral Europe includes Greece, Ireland, Italy, Portugal and Spain (c) Eurozone includes countries participating in the European common currency (Euro) (d) Other Europe includes European countries not part of the Euro (primarily the United Kingdom and Switzerland) Data above includes exposure to U.S. subsidiaries of Europe-domiciled companies z • International exposure primarily related to trade finance and financing activities of U.S. companies with foreign parent or overseas activities of U.S. customers • No European sovereign exposure (total international sovereign exposure $3MM) • Total exposure to European financial institutions <$200MM • Total exposure to five peripheral Europe countries ~$200MM • ~$1.2B in funded exposure to Eurozone-related companies (~1% of total loan portfolio) z |
20 © Fifth Third Bank | All Rights Reserved Available and contingent borrowing capacity (3Q13): – FHLB ~$9B available, ~$11B total – Federal Reserve ~$28B Holding Company cash at 9/30/13: $1.9B Cash currently sufficient to satisfy all fixed obligations in a stressed environment for over 2 years (debt maturities, common and preferred dividends, interest and other expenses) without accessing capital markets; relying on dividends from subsidiaries or any other discretionary actions Holding company unsecured debt maturities ($MM) Bank unsecured debt maturities ($MM – excl. Brokered CDs) Heavily core funded Strong liquidity profile S-T wholesale 9% $1,458 $62 $500 $700 $600 2013 2014 2015 2016 2017 2018 2019 on Demand 24% Interest checking 19% Savings/ MMDA 22% Consumer time 3% Foreign Office 1% Non-Core Deposits 6% S-T borrowings 3% Other liabilities 4% Equity 12% L-T debt 6% $1,250 $500 $500 $2,312 2013 2014 2015 2016 2017 2018 2019 on Fifth Third Bancorp Fifth Third Capital Trust (Bancorp) |
21 © Fifth Third Bank | All Rights Reserved Troubled debt restructurings overview Successive improvement in vintage performance during 2008 and 2009 as volume of modification increased Of $1.8B in consumer TDRs, $1.7B were on accrual status and $138MM were nonaccruals — $1.2B of TDRs are current and have been on the books 6 or more months; within that, ~$1B 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 Source: Fifth Third and OCC/OTS data through 1Q13 * Fifth Third data includes changes made to align with OCC/OTS methodology (i.e. excludes government loans, closed loans and OREO from calculations) $1.4B current consumer TDRs (%) $1.2 billion 10% 10% 12% 9% 59% < 6 months 6-12 months 12-18 months 18-24 months 24+ months TDR performance has improved in newer vintages Mortgage TDRs that are past due 60 days or more trend by vintage* 22% 36% 17% 12% 10% 3% 2008 2009 2010 2011 2012 2013 0% 5% 10% 15% 20% 25% 30% 35% 6 12 18 Months Since Modification 2008 2009 2010 2011 2012 Mortgage TDR Volume by Vintage |
22 © Fifth Third Bank | All Rights Reserved Commercial & industrial Loans by geography Credit trends Loans by industry Comments • Commercial & industrial loans represented 44% of total loans and 40% of net charge-offs • FL represented 6% of loans, 25% of 3Q13 losses * Excludes loans held-for-sale. ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $33,344 $36,038 $36,757 $37,856 $38,253 Avg Loans* $33,111 $34,301 $36,395 $37,630 $38,133 90+ days delinquent $1 $1 $1 - $3 as % of loans NM NM NM NM 0.01% NPAs* $406 $352 $332 $361 $321 as % of loans 1.22% 0.98% 0.90% 0.95% 0.84% Net charge-offs $29 $36 $25 $33 $44 as % of loans 0.36% 0.42% 0.28% 0.35% 0.46% C&I MI 8% OH 14% IN 5% IL 13% KY 3% TN 5% NC 4% Other / National 42% FL 6% Accommodation 3% Auto Manufacturing 1% Construction 3% Finance & Insurance 14% Manufacturing 22% Real Estate 3% Retail Trade 4% Auto Retailers 2% Wholesale Trade 10% Other 38% |
23 © Fifth Third Bank | All Rights Reserved ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $9,348 $9,103 $8,766 $8,443 $8,052 Avg Loans* $9,567 $9,193 $8,965 $8,618 $8,273 90+ days delinquent $22 $22 - - - as % of loans 0.24% 0.24% NM NM NM NPAs* $489 $434 $409 $355 $296 as % of loans 5.15% 4.69% 4.59% 4.15% 3.62% Net charge-offs $28 $17 $26 $10 $2 as % of loans 1.15% 0.70% 1.18% 0.50% 0.14% Commercial mortgage Commercial mortgage Loans by geography Credit trends Loans by industry Comments • Commercial mortgage loans represented 9% of total loans and 2% of net charge-offs • Owner occupied 3Q13 NCO ratio of 0.3%, non-owner occupied 3Q13 NCO ratio of (0.1%) • Loans from FL/MI represented 38% of portfolio loans, 53% of portfolio losses in 3Q13 * Excludes loans held-for-sale. MI 24% OH 27% IN 6% IL 10% KY 3% TN 2% NC 5% Other / National 9% FL 14% Accommodation 6% Auto Manufacturing < 1% Construction 5% Finance & Insurance 3% Manufacturing 8% Real Estate 37% Retail Trade 5% Auto Retailers 4% Wholesale Trade 4% Other 28% |
24 © Fifth Third Bank | All Rights Reserved ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $672 $698 $694 $754 $875 Avg Loans* $742 $686 $695 $713 $793 90+ days delinquent - $1 - - - as % of loans NM 0.14% NM NM NM NPAs* $110 $88 $78 $69 $62 as % of loans 15.77% 12.37% 11.12% 8.88% 6.86% Net charge-offs $4 $4 $3 - ($2) as % of loans 2.29% 1.91% 1.44% (0.04%) (1.16%) Commercial construction Commercial construction Loans by geography Credit trends Loans by industry Comments • Commercial construction loans represented 1% of total loans and increased 16% from 2Q13 • Loans from FL/MI represented 19% of portfolio loans * Excludes loans held-for-sale. |
25 © Fifth Third Bank | All Rights Reserved ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $376 $318 $309 $285 $226 90+ days delinquent - - - - - as % of loans NM NM NM NM NM NPAs* $104 $88 $79 $63 $53 as % of loans 23.96% 24.19% 22.44% 22.00% 20.85% Net charge-offs $3 - $1 ($1) ($1) as % of loans 2.85% 0.28% 1.57% (0.84%) (0.96%) Homebuilders/developers Homebuilders/developers (included in previous slides) Loans by geography Credit trends Loans by industry Comments • Originations of builder/developer loans suspended in 2007 • Remaining portfolio balance of $226MM, down 93% from peak of $3.3B in 2Q08; represents <1% of total loans and <1% of commercial loans • $53MM of NPAs (61% commercial mortgage, 27% commercial construction, 12% C&I) * Excludes loans held-for-sale. |
26 © Fifth Third Bank | All Rights Reserved ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $11,708 $12,017 $12,091 $12,400 $12,534 Avg Loans* $11,578 $11,846 $12,096 $12,260 $12,486 90+ days delinquent $76 $75 $74 $71 $73 as % of loans 0.65% 0.62% 0.61% 0.57% 0.58% NPAs* $317 $290 $275 $255 $229 as % of loans 2.71% 2.41% 2.27% 2.06% 1.83% Net charge-offs $26 $23 $20 $15 $12 as % of loans 0.90% 0.77% 0.69% 0.48% 0.39% Residential mortgage Residential mortgage 1 liens: 100%; weighted average LTV: 72.6% Weighted average origination FICO: 753 Origination FICO distribution: <660 6%; 660-689 5%; 690-719 9%; 720-749 14%; 750+ 57%; Other^ 9% (note: loans <660 includes CRA loans and FHA/VA loans) Origination LTV distribution: <=70 39%; 70.1-80 36%; 80.1-90 7%; 90.1-95 4%; >95 14% Vintage distribution: 2013: 19%; 2012 24%; 2011 16%; 2010 8%; 2009 4%; 2008 4%; 2007 5%; 2006 5%; 2005 7%; 2004 and prior 8% 13% originated through broker; performance similar to direct Loans by geography Credit trends Portfolio details Comments ^ Includes acquired loans where FICO at origination is not available * Excludes loans held-for-sale • Residential mortgage loans represented 14% of total loans and 11% of net charge-offs • FL portfolio 13% of residential mortgage loans and 23% of portfolio losses; MI portfolio 15% of residential mortgage loans and 15% of portfolio losses st |
27 © Fifth Third Bank | All Rights Reserved Home equity loans represented 11% of total loans and 17% of net charge-offs Approximately 13% of portfolio in broker product generated 31% total loss Approximately one third of Fifth Third 2 liens are behind Fifth Third 1 liens 2005/2006 vintages represent approximately 25% of portfolio; account for 45% of losses Home equity 1 liens: 33%; 2nd liens: 67% Weighted average origination FICO: 751 Origination FICO distribution^: <660 3%; 660-689 7%; 690-719 12%; 720-749 17%; 750+ 53%; Other 8% Average CLTV: 73%; Origination CLTV distribution: <=70 40%; 70.1-80 23%; 80.1-90 19%; 90.1-95 6%; >95 12% Vintage distribution: 2013: 5%; 2012 5%; 2011 3%; 2010 3%; 2009 4%; 2008 10%; 2007 10%; 2006 13%; 2005 12%; 2004 and prior 35% % through broker channels: 13% WA FICO: 734 brokered, 754 direct; WA CLTV: 88% brokered; 71% direct Portfolio details Comments Brokered loans by geography Direct loans by geography Credit trends Note: Brokered and direct home equity net charge-off ratios are calculated based on end of period loan balances ^ Includes acquired loans where FICO at origination is not available * Excludes loans held-for-sale ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $1,414 $1,366 $1,321 $1,275 $1,231 90+ days delinquent $16 $14 $13 $11 $11 as % of loans 1.16% 1.05% 1.02% 0.89% 0.88% Net charge-offs $13 $12 $10 $7 $6 as % of loans 3.62% 3.48% 3.08% 2.30% 1.91% Home equity - brokered ($ in millions) 3Q12 4Q12 1Q13 2Q13 3Q13 EOP Balance* $8,824 $8,652 $8,406 $8,256 $8,125 90+ days delinquent $49 $44 $40 $37 $35 as % of loans 0.55% 0.50% 0.47% 0.44% 0.43% Net charge-offs $24 $22 $20 $16 $13 as % of loans 1.09% 1.01% 0.93% 0.76% 0.64% Home equity - direct st st nd |
28 © Fifth Third Bank | All Rights Reserved Regulation G Non-GAAP reconciliation Fifth Third Bancorp and Subsidiaries Regulation G Non-GAAP Reconcilation $ and shares in millions (unaudited) September June March December September 2013 2013 2013 2012 2012 Income before income taxes (U.S. GAAP) $604 $841 $591 $540 $503 Add: Provision expense (U.S. GAAP) 51 64 62 76 65 Pre-provision net revenue (a) 655 905 653 616 568 Net income available to common shareholders (U.S. GAAP) 421 582 413 390 354 Add: Intangible amortization, net of tax 1 1 1 2 2 Tangible net income available to common shareholders 422 583 414 392 356 Tangible net income available to common shareholders (annualized) (b) 1,674 2,338 1,679 1,559 1,416 Average Bancorp shareholders' equity (U.S. GAAP) 14,440 14,221 13,779 13,855 13,887 Less: Average preferred stock (593) (717) (398) (398) (398) Average goodwill (2,416) (2,416) (2,416) (2,417) (2,417) Average intangible assets (22) (24) (26) (28) (31) Average tangible common equity (c) 11,409 11,064 10,939 11,012 11,041 Total Bancorp shareholders' equity (U.S. GAAP) 14,641 14,239 13,882 13,716 13,718 Less: Preferred stock (593) (991) (398) (398) (398) Goodwill (2,416) (2,416) (2,416) (2,416) (2,417) Intangible assets (21) (23) (25) (27) (30) Tangible common equity, including unrealized gains / losses (d) 11,611 10,809 11,043 10,875 10,873 Less: Accumulated other comprehensive income / loss (218) (149) (333) (375) (468) Tangible common equity, excluding unrealized gains / losses (e) 11,393 10,660 10,710 10,500 10,405 Total assets (U.S. GAAP) 125,673 123,360 121,382 121,894 117,483 Less: Goodwill (2,416) (2,416) (2,416) (2,416) (2,417) Intangible assets (21) (23) (25) (27) (30) Tangible assets, including unrealized gains / losses (f) 123,236 120,921 118,941 119,451 115,036 Less: Accumulated other comprehensive income / loss, before tax (335) (229) (512) (577) (720) Tangible assets, excluding unrealized gains / losses (g) 122,901 120,692 118,429 118,874 114,316 Common shares outstanding (h) 887 851 875 882 897 Ratios: Return on average tangible common equity (b) / (c) 14.7% 21.1% 15.4% 14.1% 12.8% Tangible common equity (excluding unrealized gains/losses) (e) / (g) 9.27% 8.83% 9.03% 8.83% 9.10% Tangible common equity (including unrealized gains/losses) (d) / (f) 9.42% 8.94% 9.28% 9.10% 9.45% Tangible book value per share (d) / (h) 13.09 12.69 12.62 12.33 12.12 For the Three Months Ended |
29 © Fifth Third Bank | All Rights Reserved Regulation G Non-GAAP reconciliation Fifth Third Bancorp and Subsidiaries Regulation G Non-GAAP Reconcilation $ and shares in millions (unaudited) September June March December September 2013 2013 2013 2012 2012 Total Bancorp shareholders' equity (U.S. GAAP) $14,641 $14,239 $13,882 $13,716 $13,718 Goodwill and certain other intangibles (2,492) (2,496) (2,504) (2,499) (2,504) Unrealized gains (218) (149) (333) (375) (468) Qualifying trust preferred securities 810 810 810 810 810 Other 21 22 23 33 38 Tier I capital 12,762 12,426 11,878 11,685 11,594 Less: Preferred stock (593) (991) (398) (398) (398) Qualifying trust preferred securities (810) (810) (810) (810) (810) Qualifying noncontrolling interest in consolidated subsidiaries (39) (38) (38) (48) (51) Tier I common equity (a) 11,320 10,587 10,632 10,429 10,335 Risk-weighted assets, determined in accordance with prescribed regulatory requirements (b) 114,472 112,285 109,626 109,699 106,858 Ratio: Tier I common equity (a) / (b) 9.89% 9.43% 9.70% 9.51% 9.67% Basel III - Estimated Tier 1 common equity ratio September June 2013 2013 Tier 1 common equity (Basel I) $11,320 $10,587 Add: Adjustment related to Capital components $88 $86 Estimated Tier 1 common equity under final Basel III rules without AOCI (opt out)(c) $11,408 $10,673 Add: Adjustment related to AOCI $218 $149 Estimated Tier 1 common equity under final Basel III rules with AOCI (non opt out)(d) $11,626 $10,822 Estimated risk-weighted assets under final Basel III rules (e) 120,322 117,366 Estimated Tier 1 common equity ratio under final Basel III rules (opt out) (c) / (e) 9.48% 9.09% Estimated Tier 1 common equity ratio under final Basel III rules (non opt out) (d) / (e) 9.66% 9.22% (c), (d) (e) Under the final Basel III rules, non-advanced approach banks are permitted to make a one-time election to opt out of the requirement to include AOCI in Tier 1 common equity. Other adjustments include mortgage servicing rights and deferred tax assets subject to threshold limitations and deferred tax liabilities related to intangible assets. Key differences under Basel III in the calculation of risk-weighted assets compared to Basel I include: (1) Risk weighting for commitments under 1 year; (2) Higher risk weighting for exposures to securitizations, past due loans, foreign banks and certain commercial real estate; (3) Higher risk weighting for mortgage servicing rights and deferred tax assets that are under certain thresholds as a percent of Tier 1 capial; and (4) Derivatives are differentiated between exchange clearing and over-the-counter and the 50% risk-weight cap is removed. For the Three Months Ended |