3Q14 Earnings Conference Call October 16, 2014 Refer to earnings release dated October 16, 2014 for further information. Exhibit 99.2 © Fifth Third Bank | All Rights Reserved |
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 Fifth Third’s investment in, relationship with, and nature of the 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 3Q14 in review Balancing current earnings growth with prudent decisions to increase long-term shareholder value ($ in millions) 3Q14 Seq. YOY Average Balances Total loans & leases 1 $90,799 $250 $3,527 Core deposits $93,160 $319 $6,239 Income Statement Data Net interest income (taxable equivalent) $908 - 1% Provision for loan and lease losses 71 (7%) 40% Noninterest income 520 (29%) (28%) Noninterest expense 888 (7%) (7%) Net income attributable to Bancorp $340 (22%) (19%) Net income available to common shareholders $328 (21%) (22%) Financial Ratios Earnings per share, diluted $0.39 (20%) (17%) Net interest margin 3.10% (5bps) (21bps) Efficiency ratio 62.1% 390bps 290bps Return on average assets 1.02% (32bps) (33bps) Return on avg common equity 9.2% (270bps) (290bps) 11.1% (330bps) (360bps) Note: The percentages in all of the tables in this presentation are calculated on actual dollar amounts and not the rounded dollar amounts. 1 Excludes loans held-for-sale 2 Non-GAAP measure; see Reg. G reconciliation in appendix 3 Adjusted efficiency ratio excludes items reflected on page 8 as adjustments to remove (benefit) / detriment in noninterest income and noninterest expense in 3Q14. Significant pre-tax items in 3Q14 results (~$0.04 negative after-tax EPS impact): — ($53MM) valuation adjustment on Vantiv warrant - Reflects sequential decline in Vantiv’s stock price - $181MM net positive valuation adjustments recorded 1Q13- 3Q14 3Q14 operating results stable with balance sheet growth and well- controlled expenses — Adjusted efficiency ratio of 59.5% Issued $850MM of fixed-rate long-term debt Credit trends at low levels, with NCOs of 0.50% and NPAs of 0.88%; strong reserve coverage of 1.56% of loans and leases Strong capital ratios with tangible book value per share up 7% from 3Q13 3 © Fifth Third Bank | All Rights Reserved Return on avg tangible common equity 2 |
4 Balance sheet Loan balances ($B) • Average commercial loans flat sequentially and up 7% year-over-year • Targeting prudent risk/reward profile in lending • Commercial loan growth driven primarily by C&I, partially offset by lower commercial mortgage • Consumer loan growth driven by residential mortgage and bankcard • End of period commercial line utilization 32%; flat sequentially • Continued deposit growth with increases in money market and demand deposit balances – Consumer average transaction deposits flat sequentially and up 5% year-over-year – Commercial average transaction deposits up 1% sequentially and up 10% year-over-year • Core deposit to loan ratio of 103% Average core deposit balances ($B) $93.2 $86.9 Average securities and short-term investments ($B) • $6.0 billion added to the average securities portfolio in last 12 months • Securities portfolio / total assets of 17.5% in 3Q14, up from 14.8% a year ago • End of period short-term investments increased $1.3B sequentially, reflecting higher cash balances held at the Federal Reserve $18.5 $23.0 $22.9 $23.9 $24.9 $87.2 $90.6 $87.3 $87.9 $89.5 $90.5 $90.8 3Q13 4Q13 1Q14 2Q14 3Q14 EOP loans HFI Avg loans HFI $16.6 $18.4 $20.4 $21.8 $22.6 3Q13 4Q13 1Q14 2Q14 3Q14 Average securities Short- term investments $83.2 $85.7 $87.9 $89.1 $89.4 3Q13 4Q13 1Q14 2Q14 3Q14 Transaction deposits Other time deposits © Fifth Third Bank | All Rights Reserved • 33% of consumer deposit transactions now digital; 31% in 2Q14 and 27% in 3Q13 |
5 Net interest income NII and NIM (FTE) • Net interest income up $3MM from 2Q14 – Increase driven by higher average investment securities balances, an additional day in the third quarter, and loan growth, partially offset by the effects of loan repricing and debt issuances • NIM decreased 5 bps sequentially primarily due to the effects of loan repricing, debt issuances, and day count • Year-over-year NII increased $10MM and NIM decreased 21 bps – NII increase driven by higher balances and yields in investment securities, as well as higher loan balances, partially offset by the effect of loan repricing – NIM decrease due to the impact of loan repricing Yield Analysis 3Q13 2Q14 3Q14 Seq. (bps) YoY (bps) Commercial and industrial loans 3.49% 3.27% 3.25% (2) (24) Commercial mortgage loans 3.60% 3.39% 3.34% (5) (26) Commercial construction loans 3.71% 3.54% 3.49% (5) (22) Commercial leases 3.22% 3.04% 2.96% (8) (26) Residential mortgage loans 3.87% 3.93% 3.84% (9) (3) Home equity 3.74% 3.71% 3.69% (2) (5) Automobile loans 3.02% 2.77% 2.72% (5) (30) Credit card 9.93% 10.06% 9.87% (19) (6) Other consumer loans and leases 42.84% 35.63% 36.98% 135 (586) Total loans and leases 3.83% 3.65% 3.61% (4) (22) Taxable securities 3.20% 3.34% 3.32% (2) 12 Tax exempt securities 5.08% 4.69% 5.34% 65 26 Other short-term investments 0.26% 0.28% 0.26% (2) - Total interest-earning assets 3.68% 3.53% 3.49% (4) (19) Total interest-bearing liabilities 0.54% 0.54% 0.56% 2 2 Net interest rate spread 3.14% 2.99% 2.93% (6) (21) $908 $898 $905 $898 $905 3.31% 3.21% 3.22% 3.15% 3.10% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 3Q13 4Q13 1Q14 2Q14 3Q14 Net Interest Income ($MM) NIM © Fifth Third Bank | All Rights Reserved |
6 3Q14 Seq. YOY ($ in millions) Service charges on deposits $145 4% 4% Corporate banking revenue 100 (7%) (2%) Mortgage banking net revenue 61 (21%) (49%) Investment advisory revenue 103 1% 6% Card and processing revenue 75 (1%) 9% Other noninterest income 1 33 (86%) (82%) Securities gains, net 3 (57%) 40% Securities gains (losses), net - - - (100%) non-qualifying hedges on MSRs Total noninterest income $520 (29%) (28%) Noninterest income 1 Net credit-related costs recognized in other noninterest income were immaterial in 3Q14. This compares with net credit-related costs of $4MM in 2Q14, $10MM in 1Q14, $5MM in 4Q13, and $5MM in 3Q13. Compared with 2Q14 • Retail service charges on deposits up 9% sequentially; commercial up 2% • Mortgage banking results reflected lower gain on sale revenue, due to retaining more production on balance sheet and lower gain on sale margins, and MSR valuation • Corporate banking results driven by lower syndication and business lending fees Compared with 3Q13 • Record investment advisory fees with increases in personal AUM, securities and brokerage fees, and market values • Card and processing revenue reflects greater card utilization and higher consumer purchase volume 3Q13 4Q13 1Q14 2Q14 3Q14 Reported noninterest income $721 $703 $564 $736 $520 Gain on sale of Vantiv shares (85) - - (125) - Vantiv warrant valuation (6) (91) 36 (63) 53 Other Vantiv-related items - (9) - 12 - Valuation of Visa total return swap 2 18 (1) 16 3 Land valuation adjustments - - - 17 - Securities (gains) / losses (2) (2) (7) (8) (3) Adjusted noninterest income $630 $619 $592 $585 $573 Components of noninterest income 5 quarter trend ($MM) Adjustments to remove (benefit) / detriment $630 $619 $592 $585 $573 $- $200 $400 $600 $800 3Q13 4Q13 1Q14 2Q14 3Q14 Adjusted noninterest income Mortgage banking net revenue Reported noninterest income © Fifth Third Bank | All Rights Reserved |
7 Noninterest expense • Expenses declined 7% both sequentially and year- over-year • Improvement in employee-related costs largely driven by changes in retail and mortgage staffing — Retail FTE down 9% from 3Q13 as branch roles are consolidated and redefined • 12% year-over-year increase in card and processing expense commensurate with higher revenue in that business ($ in millions) Salaries, wages and incentives $357 (3%) (8%) Employee benefits 75 (5%) (9%) Net occupancy expense 78 (1%) 4% Technology and communications 53 3% 2% Equipment expense 30 1% 4% Card and processing expense 37 - 12% 258 (17%) (13%) Total noninterest expense $888 (7%) (7%) 3Q13 4Q13 1Q14 2Q14 3Q14 Reported noninterest expense $959 $989 $950 $954 $888 Litigation reserve charges (30) (69) (51) (61) (4) Severance expense (5) (8) (4) (1) (2) Debt extinguishment costs - (8) - - - Sale of LIH tax credits 1 - - - - Fed assessment (5) - - - - Foundation - (8) - - - Adjusted noninterest expense $920 $896 $895 $892 $882 5 quarter trend ($MM) Components of noninterest expense Adjustments to remove benefit / (detriment) $920 $896 $895 $892 $882 $- $200 $400 $600 $800 $1,000 3Q13 4Q13 1Q14 2Q14 3Q14 Adjusted noninterest expense Reported noninterest expense 1 3Q14 Seq. YOY Net credit-related costs recognized in other noninterest expense were $13MM in 3Q14. This compares with net credit-related costs of $6MM in 2Q14, $9MM in 1Q14, ($12MM) in 4Q13, and $16MM in 3Q13. Other noninterest expense 1 © Fifth Third Bank | All Rights Reserved |
8 Pre-tax pre-provision earnings 1 PPNR trend PPNR decreased 22% sequentially, reflecting impact of $59MM in net detriment in 3Q14 and $89MM in net benefit in 2Q14 from significant items. Excluding those items, adjusted PPNR increased $1MM sequentially. PPNR reconciliation Efficiency ratio ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 Income before income taxes (U.S. GAAP) (a) $604 $561 $438 $606 $464 Add: Provision expense (U.S. GAAP) (b) 51 53 69 76 71 PPNR (a) + (b) $655 $614 $507 $682 $535 Adjustments to remove (benefit) / detriment²: In noninterest income: Gain from sales of Vantiv shares (85) - - (125) - Vantiv warrant valuation (6) (91) 36 (63) 53 Reduction in equity method income from interest in Vantiv - - - 12 - Land valuation adjusments - - - 17 - Other Vantiv-related income - (9) - - - Valuation of 2009 Visa total return swap 2 18 (1) 16 3 Securities (gains) / losses (2) (2) (7) (8) (3) In noninterest expense: Debt extinguishment (gains) / losses - 8 - - - Severance expense 5 8 4 1 2 Large bank assessment fees 5 - - - - Gain on sale of affordable housing investments (1) - - - - Donation to Fifth Third Foundation - 8 - - - Litigation reserve charges 30 69 51 61 4 Adjusted PPNR $603 $623 $590 $593 $594 Credit-related items: In noninterest income 5 5 10 4 (0) In noninterest expense 16 (12) 9 6 13 Credit-adjusted PPNR 3 $624 $616 $609 $603 $607 $603 $623 $590 $593 $594 $0 $100 $200 $300 $400 $500 $600 $700 3Q13 4Q13 1Q14 2Q14 3Q14 Adjusted PPNR Reported PPNR 59.2% 61.5% 64.9% 58.2% 62.1% 60.2% 58.8% 60.1% 59.8% 59.5% 3Q13 4Q13 1Q14 2Q14 3Q14 Efficiency Ratio Adjusted Efficiency Ratio © Fifth Third Bank | All Rights Reserved 1 Non-GAAP measure; see Reg. G reconciliation in appendix. 2 Prior quarters include similar adjustments. 3 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. Note: 3Q14, 2Q14, and 1Q14 included the impact of $3MM, $1MM, and $3MM, respectively in mortgage repurchase provision. 4Q13 and 3Q13 included benefits to the mortgage repurchase provision of $26MM and $4MM, respectively. These impacts are reflected in “Credit-related items” and “Adjusted Efficiency Ratio” listed above. |
9 Credit quality overview $109 Net charge-offs ($MM) $148 $101 NCO ratio 0.49% 0.67% 0.76% 0.45% 0.50% $168 HFI Nonperforming assets ($MM) $796 $1,014 $832 $946 NPAs down 21% from 3Q13; lowest level since 2007 Reserve Coverage Accruing Past Due ($MM) $414 $379 $337 $337 Includes 3Q14 provision expense of $71MM; reserve coverage levels remain solid Total delinquencies declined 12% from 3Q13; sequential change due to seasonality Net charge-offs within range of expected variability $115 $366 258 276 243 243 279 156 103 94 94 87 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 3Q13 4Q13 1Q14 2Q14 3Q14 89 Days Past Due 90+ Days Past Due 680 607 595 512 487 334 373 351 320 309 $0 $250 $500 $750 $1,000 $1,250 3Q13 4Q13 1Q14 2Q14 3Q14 44 78 105 48 55 65 70 63 53 60 $0 $25 $50 $75 $100 $125 $150 $175 3Q13 4Q13 1Q14 2Q14 3Q14 $1,677 $1,582 $1,483 $1,458 $1,414 1.92% 1.79% 1.65% 1.61% 1.56% $0 $500 $1,000 $1,500 $2,000 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 3Q13 4Q13 1Q14 2Q14 3Q14 Allowance for Loan & Lease Losses (ALLL) ($MM) ALLL / Loans and Leases $980 Commercial Consumer Commercial Consumer © Fifth Third Bank | All Rights Reserved NPA ratio 1.16% 1.10% 1.05% 0.92% 0.88% |
10 © Fifth Third Bank | All Rights Reserved Strong capital position Avg. Diluted Shares Outstanding (MM) and Tangible Book Value per share • 2014 CCAR plan included the potential repurchase of common shares in an amount up to $669MM – Announced $225MM of share repurchases in 3Q14 – Also have the ability to repurchase shares in the amount of any after-tax gains from the sale of Vantiv Inc. stock EOP share impact (MM) Average share impact (MM) 2Q14 3Q14 4Q14 2Q14 3Q14 4Q14 $200MM ASR - - - 0.8 - - $456MM ASR - - - 2.1 - - $99MM ASR - - - 1.8 - - $150MM ASR 6.2 - - 4.2 2.8 0.2 $225MM ASR 3 - 10.4 1.9 - 7.0 4.0 6.2 10.4 1.9 8.9 9.8 4.2 Capital Actions Impact of Share Repurchases 888 878 858 848 838 $13.09 $13.00 $13.40 $13.86 $13.95 660 710 760 810 860 910 $11.00 $11.50 $12.00 $12.50 $13.00 $13.50 $14.00 3Q13 4Q13 1Q14 2Q14 3Q14 Tier 1 common equity 1 1 Non-GAAP measure; See Reg. G reconciliation in appendix. 2 3 Common Shares O/S TBV per share 4Q14 end of period and average share impacts reflect settlement of the $225MM share repurchase transaction as described in the Form 8-K filed on October 14, 2014. 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 the Basel III Final Rule approved in July 2013. |
11 © Fifth Third Bank | All Rights Reserved Balance Sheet: Average loans & leases (excl. HFS) Average transaction deposits Income Statement: Net interest income 2 Net interest margin 2 Noninterest income 1 Noninterest expense Pre-provision net revenue 1,2 ROA 1 Effective tax rate 1,2 Asset Quality: Net charge-offs Loan loss allowance 4 Nonperforming assets 4 Tier 1 common equity 3,6 Category Fifth Third: Outlook 2014 Outlook 1 $87.0B $82.9B 1 2013 results exclude a net $534MM benefit from gains on Vantiv share sales and valuation adjustments on the Vantiv warrant. 2014 outlook excludes a net realized $99MM benefit from gains on Vantiv share sales and valuation adjustments on the Vantiv warrant. 2014 outlook also does not include potential, but currently unforecasted, items, such as any potential additional Vantiv gains or losses, future capital actions, or changes in regulatory or accounting guidance. 2 Presented on a fully-taxable equivalent basis. 3 Non-GAAP measure; see Reg. G reconciliation in appendix. 4 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. 5 As a percentage of loans and leases 6 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. 7 2013-Adjusted 1 Outlook as of October 16, 2014; please see cautionary statement on slide 2 for risk factors related to forward-looking statements Mid-single digit growth Mid-to-high single digit growth Down ~$15MM (~mid-50 bps 5 ) Lower vs. 4Q13 Down ~20% vs. 4Q13 $3.58B 3.32% (3.21% 4Q13) $2.70B $3.95B $2.31B ~1.2% ~28.4% 9.45% $501MM (0.58% 5 ) $1.6B (1.79%) $980MM (1.10%) ~Consistent with 4Q13 Stable to Modest growth ~3.13% Down low double digits (up low-to-mid-single digits ex-mortgage) Down mid-single digits Modest decline ~1.15% 7 ~27.0% Also excludes items reflected on page 8 as adjustments to remove (benefit) / detriment in noninterest income and noninterest expense for 1Q14, 2Q14, 3Q14. |
12 © Fifth Third Bank | All Rights Reserved Appendix |
13 © Fifth Third Bank | All Rights Reserved Mortgage originations ($B) and gain on sale margin 1 Mortgage banking results • $2.1B in originations; 70% purchase volume • 3Q14 mortgage drivers: – Gain on sale margin down 14 bps sequentially – Retaining conforming ARMs and shorter-term fixed-rate production on balance sheet Mortgage Banking Net Revenue ($MM) Note: Numbers may not sum due to rounding. 1 Gain on sale margin represents gains on all loans originated for sale. $121 $78 $126 $109 $61 – Discontinued broker channel originations in 1Q14 – Origination fees and gain on sale revenue down $8MM – MSR valuation adjustments of negative $1MM; servicing rights amortization of negative $33MM – $61MM in gross servicing fees 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% $0 $1 $2 $3 $4 $5 3Q13 4Q13 1Q14 2Q14 3Q14 Originations for sale Originations HFI 74 60 41 42 34 63 64 62 62 61 (39) (23) (22) (32) (33) 23 26 28 6 (1) 3Q13 4Q13 1Q14 2Q14 3Q14 Orig fees and gains on loan sales Gross servicing fees Servicing rights amortization MSR valuation adjustments Margin 1 |
14 © Fifth Third Bank | All Rights Reserved Available and contingent borrowing capacity (3Q14): – FHLB ~$11.9B available – Federal Reserve ~$27.2B Holding Company cash at 9/30/14: $2.4B Cash currently sufficient to satisfy all fixed obligations in a stressed environment for over 23 months (debt maturities, common and preferred dividends, interest and other expenses) without accessing capital markets, relying on future dividends from subsidiaries or any other discretionary actions Holding company unsecured debt maturities ($MM) Bank unsecured debt maturities ($MM – excl. Brokered CDs) Heavily core funded Strong liquidity profile S-T wholesale 4% $1,250 $500 $500 $500 $2,312 2014 2015 2016 2017 2018 2019 2020 on Fifth Third Bancorp Fifth Third Capital Trust (Bancorp) Demand 24% Interest checking 19% Savings/ MMDA 23% Consumer time 3% Foreign Office 1% Non-Core Deposits 2% S-T borrowings 2% Other liabilities 3% Equity 12% L-T debt 11% $10 $875 $2,450 $650 $600 $850 $850 2014 2015 2016 2017 2018 2019 2020 On 14 |
15 © Fifth Third Bank | All Rights Reserved Interest rate risk management 1 2 Strategically positioned balance sheet to limit risk to downside rate scenarios • Balance sheet is well positioned for a rising rate environment — 62% of total loans are floating rate (80% of commercial and 35% of consumer) — Investment portfolio duration of approximately 5 years — Short-term wholesale funding represents only 4% of total funding — $14.1B in funding will reprice beyond 1 year • Forecasted balances represent our current expectations regarding balance sheet trends • Static balances assume current composition of balance sheet remains constant • In ramp scenarios, rate changes occur evenly over the first four quarters • In shock scenarios, rate changes are instantaneous +100 bps +200 bps +100 bps +200 bps Forecast Balances Static Balances Year 1 0.9% 1.7% 0.9% 1.7% Year 2 4.0% 6.7% 4.5% 7.6% Year 1 2.1% 4.0% 2.1% 3.8% Year 2 4.9% 8.4% 5.5% 9.3% +100 bps +200 bps (2.0%) (4.4%) EVE at Risk — Weighted-average deposit beta of 70% (2004 – 2006 cycle betas ~50%) 1 — No modeled lag in deposit repricing — Modeled DDA runoff of approximately $2.5B (approximately 8%) for each 100 bps increase in rates — For every $1B of incremental DDA runoff beyond what is modeled, asset sensitivity decreases: - 15 bps in year 1 and 28 bps in year 2 in a 100 bps ramp - 35 bps in both year 1 and year 2 in a 100 bps shock • Interest rate sensitivities are based on conservative deposit assumptions Repricing percentage or “beta” is the estimated change in yield over 12 months as a result of a shock or ramp 100 bps parallel shift in the yield curve. Actual results may vary from these simulated results due to timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies. NII – Asset Sensitivity 2 |
16 NPL rollforward © Fifth Third Bank | All Rights Reserved NPL HFI Rollforward Commercial 3Q13 4Q13 1Q14 2Q14 3Q14 623 521 458 464 396 Transfers to nonperforming 71 107 164 141 116 Transfers to performing (1) (1) (2) (20) - Transfers to performing (restructured) (2) (2) (1) (47) - Transfers from held for sale - - - - - Transfers to held for sale - - - (1) (3) Loans sold from portfolio (14) (19) (2) (24) (12) Loan paydowns/payoffs (101) (61) (43) (54) (39) Transfers to other real estate owned (14) (12) (7) (18) (9) Charge-offs (44) (78) (105) (46) (66) Draws/other extensions of credit 3 3 2 1 2 521 458 464 396 385 Consumer 3Q13 4Q13 1Q14 2Q14 3Q14 286 248 293 269 244 Transfers to nonperforming 95 165 93 85 90 Transfers to performing (30) (25) (28) (24) (15) Transfers to performing (restructured) (24) (22) (22) (20) (25) Transfers to held for sale - - - - - Loans sold from portfolio - - - - - Loan paydowns/payoffs (39) (24) (29) (11) (5) Transfers to OREO/other repossessed property (28) (20) (24) (24) (21) Charge-offs (13) (30) (15) (30) (33) Draws/other extensions of credit 1 1 1 (1) 248 293 269 244 235 Total NPL 769 751 733 640 620 Total new nonaccrual loans - HFI 166 272 257 226 206 Beginning NPL amount Ending Commercial NPL Beginning NPL amount Ending Consumer NPL - |
17 © Fifth Third Bank | All Rights Reserved Troubled debt restructurings overview Of $1.7B in consumer TDRs, $1.6B were on accrual status and $114MM were nonaccruals — $1.2B of TDRs are current and have been on the books 6 or more months; within that, $1.1B 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 TDR performance has improved in newer vintages Data through 1Q14 $1.3B current consumer TDRs (%) $1.2 billion 7% 5% 6% 9% 73% < 6 months 6-12 months 12-18 months 18-24 months 24+ months 0% 5% 10% 15% 20% 25% 30% 35% 6 12 18 Months Since Modification 2008 2009 2010 2011 2012 2013 2014 21% 35% 16% 11% 10% 5% 2% Mortgage TDR Volume by Vintage 2008 2009 2010 2011 2012 2013 2014 1 Fifth Third data includes changes made to align with OCC/OTS methodology (i.e. excludes government loans, closed loans and OREO from calculations) Mortgage TDRs that are past due 60 days or more trend by vintage 1 |
18 Commercial & industrial Loans by geography Credit trends Loans by industry Comments • Commercial & industrial loans represented 45% of total loans and 43% of net charge-offs • C&I loans were down 1% sequentially and increased 7% since 3Q13 • Leveraged loans of $5.2B in 3Q14 — Regulatory definitions regarding purpose, senior debt/ EBITDA >3x, total debt/EBITDA >4x * Excludes loans held-for-sale. ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $38,253 $39,316 $40,591 $41,299 $41,072 Avg Loans* $38,133 $38,835 $40,377 $41,374 $41,477 90+ days delinquent $3 - $1 - - as % of loans 0.01% NM NM NM NM NPAs* $321 $290 $304 $265 $278 as % of loans 0.84% 0.74% 0.75% 0.64% 0.68% Net charge-offs $44 $66 $97 $31 $50 as % of loans 0.46% 0.67% 0.97% 0.30% 0.48% C&I MI 8% OH 13% IN 5% IL 11% KY 2% TN 5% NC Other / National 44% FL 7% Accommodation 3% Auto Manufacturing 1% Construction 3% Finance & Insurance 14% Manufacturing 22% Real Estate 3% Retail Trade 4% Auto Retailers 2% Wholesale Trade 10% Other 38% 5% © Fifth Third Bank | All Rights Reserved |
19 © Fifth Third Bank | All Rights Reserved Commercial real estate Loans by geography Credit trends Loans by industry Comments • Commercial mortgage loans represented 8% of total loans and 4% of net charge-offs — Owner occupied 3Q14 NCO ratio of 0.4%, non-owner occupied 3Q14 NCO ratio of 0.1% — Loans from FL/MI represented 33% of portfolio loans and 29% of portfolio losses in 3Q14 • Commercial construction loans represented 2% of total loans and 0% of net charge-offs — Loans from FL/MI represented 17% of portfolio loans * Excludes loans held-for-sale. ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $8,052 $8,066 $7,958 $7,805 $7,564 Avg Loans* $8,273 $8,047 $7,981 $7,885 $7,633 NPAs* $296 $252 $240 $212 $186 as % of loans 3.62% 3.09% 2.98% 2.69% 2.43% Net charge-offs $2 $8 $3 $9 $5 as % of loans 0.14% 0.40% 0.16% 0.44% 0.24% Commercial mortgage ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $875 $1,039 $1,218 $1,424 $1,702 Avg Loans* $793 $952 $1,116 $1,362 $1,563 NPAs* $62 $59 $46 $31 $19 as % of loans 6.86% 5.53% 3.68% 2.17% 1.09% Net charge-offs ($2) $4 $5 $8 - as % of loans (1.16%) 1.65% 1.66% 2.26% (0.11%) Commercial construction Accommodation 7% Construction 6% Finance & insurance 3% Auto Manufacturing 0% Manufacturing 6% Real Estate 43% Retail Trade 4% Auto Retailers 3% Wholesale Trade 4% Other 24% MI 18% OH 26% IN 6% IL 9% KY 3% TN 3% NC 6% Other / National 17% FL 12% |
20 Residential mortgage 1 st liens: 100%; weighted average LTV: 73.4% Weighted average origination FICO: 754 Origination FICO distribution: <660 6%; 660-689 5%; 690-719 9%; 720-749 14%; 750+ 58%; Other^ 8% (note: loans <660 includes CRA loans and FHA/VA loans) Origination LTV distribution: <=70 37%; 70.1-80 36%; 80.1-90 7%; 90.1-95 5%; >95 15% Vintage distribution: 2014: 12%, 2013: 21%; 2012 21%; 2011 13%; 2010 7%; 2009 4%; 2008 3%; 2007 4%; 2006 4%; 2005 6%; 2004 and prior 5% 15% originated through 3 rd party; 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 8% of net charge-offs • Net charge-offs increased by $1MM in 3Q14 — MI, IL, and OH account for 26%, 26%, and 17% of residential mortgage net charge-offs, respectively ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $12,534 $12,680 $12,626 $12,652 $12,941 Avg Loans* $12,486 $12,609 $12,659 $12,611 $12,785 90+ days delinquent $73 $66 $56 $60 $57 as % of loans 0.58% 0.52% 0.44% 0.47% 0.44% NPAs* $229 $223 $201 $172 $164 as % of loans 1.82% 1.76% 1.59% 1.36% 1.27% Net charge-offs $12 $13 $15 $8 $9 as % of loans 0.39% 0.39% 0.49% 0.24% 0.28% Residential mortgage MI 15% OH 24% IN 8% IL 13% KY 6% TN 2% NC 5% Other / National 15% FL 12% © Fifth Third Bank | All Rights Reserved |
21 © Fifth Third Bank | All Rights Reserved Home equity loans represented 10% of total loans and 12% of net charge-offs Approximately 12% of portfolio in broker product generated 28% total loss 37% of Fifth Third 2 nd liens are behind Fifth Third 1 st liens 2005/2006 vintages represent approximately 24% of portfolio; account for 50% of losses Home equity 1 st liens: 34%; 2 nd liens: 66% Weighted average origination FICO: 752 Origination FICO distribution^: <660 3%; 660-689 7%; 690-719 12%; 720-749 16%; 750+ 54%; Other 8% Average CLTV: 73%; Origination CLTV distribution: <=70 41%; 70.1- 80 24%; 80.1-90 18%; 90.1-95 6%; >95 11% Vintage distribution: 2014: 6%, 2013: 6%; 2012 4%; 2011 3%; 2010 2%; 2009 3%; 2008 9%; 2007 9%; 2006 12%; 2005 11%; 2004 and prior 35% % through broker channels: 12% WA FICO: 734 brokered, 755 direct; WA CLTV: 88% brokered; 70% direct Portfolio details Comments Brokered loans by geography Direct loans by geography Credit trends Note: Brokered and direct home equity net charge-off ratios are calculated based on end of period loan balances ^ Includes acquired loans where FICO at origination is not available * Excludes loans held-for-sale ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $1,231 $1,190 $1,155 $1,131 $1,094 90+ days delinquent $11 - - - - as % of loans 0.88% NM NM NM NM Net charge-offs $6 $8 $5 $7 $4 as % of loans 1.91% 2.81% 1.85% 2.35% 1.42% Home equity - brokered ($ in millions) 3Q13 4Q13 1Q14 2Q14 3Q14 EOP Balance* $8,125 $8,056 $7,970 $7,925 $7,893 90+ days delinquent $35 - - - - as % of loans 0.43% NM NM NM NM Net charge-offs $13 $18 $11 $11 $10 as % of loans 0.64% 0.87% 0.55% 0.58% 0.51% Home equity - direct MI 22% OH 25% IN 10% IL 13% KY 7% TN 2% NC 1% Other 17% FL 3% MI 18% OH 38% IN 8% IL 13% KY 7% TN 1% NC 5% Other 2% FL 8% |
22 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 2014 2014 2014 2013 2013 Income before income taxes (U.S. GAAP) 464 606 438 561 604 Add: Provision expense (U.S. GAAP) 71 76 69 53 51 Pre-provision net revenue 535 682 507 614 655 Net income available to common shareholders (U.S. GAAP) 328 416 309 383 421 Add: Intangible amortization, net of tax 1 1 1 1 1 Tangible net income available to common shareholders 329 417 310 384 422 Tangible net income available to common shareholders (annualized) (a) 1,305 1,673 1,257 1,523 1,674 Average Bancorp shareholders' equity (U.S. GAAP) 15,486 15,157 14,862 14,757 14,440 Less: Average preferred stock (1,331) (1,119) (1,034) (703) (593) Average goodwill (2,416) (2,416) (2,416) (2,416) (2,416) Average intangible assets (16) (17) (19) (20) (22) Average tangible common equity (b) 11,723 11,605 11,393 11,618 11,409 Total Bancorp shareholders' equity (U.S. GAAP) 15,404 15,469 14,826 14,589 14,641 Less: Preferred stock (1,331) (1,331) (1,034) (1,034) (593) Goodwill (2,416) (2,416) (2,416) (2,416) (2,416) Intangible assets (16) (17) (18) (19) (21) Tangible common equity, including unrealized gains / losses (c) 11,641 11,705 11,358 11,120 11,611 Less: Accumulated other comprehensive income (301) (382) (196) (82) (218) Tangible common equity, excluding unrealized gains / losses (d) 11,340 11,323 11,162 11,038 11,393 Total assets (U.S. GAAP) 134,188 132,562 129,654 130,443 125,673 Less: Goodwill (2,416) (2,416) (2,416) (2,416) (2,416) Intangible assets (16) (17) (18) (19) (21) Tangible assets, including unrealized gains / losses (e) 131,756 130,129�� 127,220 128,008 123,236 Less: Accumulated other comprehensive income / loss, before tax (463) (588) (302) (126) (335) Tangible assets, excluding unrealized gains / losses (f) 131,293 129,541 126,918 127,882 122,901 Common shares outstanding (g) 834 844 848 855 887 Ratios: Return on average tangible common equity (a) / (b) 11.1% 14.4% 11.0% 13.1% 14.7% Tangible common equity (excluding unrealized gains/losses) (d) / (f) 8.64% 8.74% 8.79% 8.63% 9.27% Tangible common equity (including unrealized gains/losses) (c) / (e) 8.84% 9.00% 8.93% 8.69% 9.42% Tangible book value per share (c) / (g) $13.95 $13.86 $13.40 $13.00 $13.09 For the Three Months Ended © Fifth Third Bank | All Rights Reserved |
23 © 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 2014 2014 2014 2013 2013 Total Bancorp shareholders' equity (U.S. GAAP) 15,404 15,469 14,826 14,589 14,641 Goodwill and certain other intangibles (2,484) (2,484) (2,490) (2,492) (2,492) Unrealized gains (301) (382) (196) (82) (218) Qualifying trust preferred securities 60 60 60 60 810 Other (18) (19) (18) 19 21 Tier I capital 12,661 12,644 12,182 12,094 12,762 Less: Preferred stock (1,331) (1,331) (1,034) (1,034) (593) Qualifying trust preferred securities (60) (60) (60) (60) (810) Qualifying noncontrolling interest in consolidated subsidiaries (1) (1) (1) (37) (39) Tier I common equity (a) 11,269 11,252 11,087 10,963 11,320 Risk-weighted assets, determined in accordance with prescribed regulatory requirements (b) 116,920 117,117 116,622 115,969 113,801 Ratio: Tier I common equity (a) / (b) 9.64% 9.61% 9.51% 9.45% 9.95% Basel III - Estimated Tier 1 common equity ratio September June March December September 2014 2014 2014 2013 2013 Tier 1 common equity (Basel I) 11,269 11,252 11,087 10,963 11,320 Add: Adjustment related to capital components 99 96 99 82 88 Estimated Tier 1 common equity under final Basel III rules without AOCI (opt out)(c) 11,368 11,348 11,186 11,045 11,408 Add: Adjustment related to AOCI 301 382 196 82 218 Estimated Tier 1 common equity under final Basel III rules with AOCI (non opt out)(d) 11,669 11,730 11,382 11,127 11,626 Estimated risk-weighted assets under final Basel III rules (e) 121,068 122,465 122,659 122,074 120,447 Estimated Tier 1 common equity ratio under final Basel III rules (opt out) (c) / (e) 9.39% 9.27% 9.12% 9.05% 9.47% Estimated Tier 1 common equity ratio under final Basel III rules (non opt out) (d) / (e) 9.64% 9.58% 9.28% 9.12% 9.65% (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 capital; 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 |