Exhibit 99.1
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Fifth Third Bancorp has developed the document attached as Exhibit 99.1
containing a general trend overview of Fifth Third's objectives, financial
condition and results of operations for the fourth quarter of 2001.
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Management Discussion of Trends
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Service Income
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In general, management expects growth trends in service income to continue at
very strong levels. Specifically, by major category:
Data Processing
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Fifth Third believes that recent year-over-year growth rates in excess of 25
percent, exclusive of the impact of the acquisition of Universal Companies
(USB), are sustainable in the fourth quarter of 2001 and early 2002 despite a
slowdown in consumer spending. Potential continued economic softening is not
expected to alter recent historical growth rates in the near term, given revenue
growth potential from new products and continued momentum in attracting new
significant customer relationships.
On October 31, 2001, Fifth Third announced the purchase of the remaining 51
percent of Universal Companies, a merchant processor headquartered in Milwaukee
with approximately 55,000 merchants. The acquisition of USB would add
approximately $85 million in revenues and $80 million in expenses, including $12
million of amortization expense relating to acquired intangibles and various
other integration related expenses, on an annualized proforma basis to Fifth
Third's 2001 operating results. Fourth quarter Data Processing revenue will
include November and December results.
Investment Advisory
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Management expects fourth quarter year-over-year growth rates in this business
to be essentially flat to third quarter. Trends will continue to be affected to
some degree by financial market performance, but sales results in non-market
sensitive businesses continue to exhibit solid growth as Fifth Third remains
committed to building its sales force in affiliate markets.
Other Services
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. Retail and Commercial deposit account service revenues are expected to
continue at recent growth rates as deposit account sales campaigns have
continued to generate significant numbers of new accounts in new and existing
markets.
. Commercial treasury management service revenues are expected to continue at
recent accelerated growth rates fueled by Fifth Third's emphasis on deposit
accounts as the core commercial relationship product, and the success of new
comprehensive cash management products.
. Mortgage banking revenues in the fourth quarter are expected to remain at
levels substantially below prior periods due to the third quarter divestiture
of out-of-market mortgage origination capacity and continued valuation
adjustments on mortgage servicing rights.
Expenses
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. Fourth quarter operating expenses are expected to exhibit significant
sequential improvement and remain essentially flat year-over-year on the
strength of headcount reductions in redundant back office operations and
divested businesses contributing to significant operating flexibility in
certain accrued expenses. Expense savings are partially mitigated by the
addition of sales officers in the Investment Advisory division and
incremental expenses associated with the acquisition of USB and traditionally
higher fourth quarter MPS volume.
. Consistent with prior guidance, management currently expects a return to more
normalized Fifth Third expense levels, relative to revenues, by the first
quarter of 2002.
Balance Sheet Trends and Net Interest Income
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Management expects low double-digit percentage growth in net interest income
over last year's fourth quarter fueled by an increase in both the net interest
margin and the level of average earning assets. Other balance sheet trends:
. Lower overall funding costs due to lower interest rates of all categories.
. Positive trends in the mix of deposits are expected to continue in the near
term, highlighted by sequential and year-over-year core deposit growth rates
similar to recent periods.
. Fifth Third's deposit pricing, though lowered in recent periods, remains
highly competitive with financial market conditions.
. Average total loans and leases are expected to remain relatively flat to
third quarter on the strength of solid direct installment loan demand
mitigated by the impacts of the divestiture of the national mortgage
origination capacity and corresponding held for sale inflows in addition to
the numerous other sales, divestitures and related off balance sheet
movements of loans and leases in the third quarter.
Credit Quality
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With indicators mixed as to the depth and duration of the current economic
downturn, we are realistic about the impact a protracted recession could have on
credit quality throughout the industry and at Fifth Third. Fifth Third's long
history of low exposure limits, avoidance of national or sub-prime lending
businesses, centralized risk management, and diversified portfolio position us
well to effectively weather a downturn and reduce the likelihood of significant
unexpected losses.
. Sequentially, fourth quarter net charge-offs are expected to be in the range
of 45-50 bp as a percentage of average loans and leases, consistent with the
44 bp level seen last quarter.
. The amount of nonperforming assets as a percentage of loans and leases may
increase in the fourth quarter and is expected to be in the range of 55-60 bp
versus last quarter's 51 bp and second quarter's 44 bp.
Other
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. Fifth Third will report fourth quarter earnings on January 15, 2002 prior to
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the market opening and will again host a conference call to be held the
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morning of the release.
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This document contains forward-looking statements about Fifth Third Bancorp
which we believe are within the meaning of the Private Securities Litigation
Reform Act of 1995. This document contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of Fifth Third including statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates" or similar expressions. These forward-looking statements involve
certain risks and uncertainties. There are a number of important factors that
could cause future results to differ materially from historical performance and
these forward-looking statements. Factors that might cause such a difference
include, but are not limited to: (1) competitive pressures among depository
institutions increase significantly; (2) changes in the interest rate
environment reduce interest margins; (3) prepayment speeds, loan sale volumes,
charge-offs and loan loss provisions; (4) general economic conditions, either
national or in the states in which Fifth Third does business, are less favorable
than expected; (5) legislative or regulatory changes adversely affect the
businesses in which Fifth Third is engaged; (6) changes in the securities
markets. Further information on other factors which could affect the financial
results of Fifth Third are included in Fifth Third's filings with the Securities
and Exchange Commission. These documents are available free of charge at the
Commission's website at http://www.sec.gov and/or from Fifth Third.