FITB - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bank’s 3Q '17 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank of Head you begin may Sameer Investor conference. your Gokhale, Relations,

Sameer Gokhale

the We've results thank Good statements earnings statements. review discussing our and uncertainties for for about call. after XXXX. Fifth statements these Melissa. financial forward-looking you, These update some in to and of at obligation in of results contain you performance to discussion historical date our you them. the quarter from could may This that materials, morning factors identified results Third be Thank forward-looking no objectives. to statements we'll undertakes of and any the and to all these materially operations, such to other involve Third encourage this we certain and of end release and differ forward-looking risks Today, joining statement financial cause our pertaining Fifth expect cautionary third condition, would us. of plans our and not

non-GAAP Chief and our Richard Officer, in by Bank, joined the the Tuzun; included Leonard. on www.XX.com. Lars regarding in most Carmichael; earnings our be Greg Additionally, reconciliations release of are Commercial conference financial corporate the the Jamie A information earnings Anderson; other of by copy release Stein; financial today's President during of quarterly measures. with section accessed Operating our Investor along This Relations of of Tayfun CFO, our call public call non-GAAP site, use Head recent reference we can Web morning, I'm Treasurer, and measures CEO,

call open up and Greg by Tayfun, prepared Following will we the for questions. remarks

for call over comments. Let me his the to now Greg turn

Greg Carmichael

all this morning. and of us joining you for thank Sameer, Thanks,

EPS income our $X.XX. third As of $XXX results, available and million we net reported you’ll common shareholders see of to XXXX quarter in

included our of Vantiv few reported including Our a items August $X.XX sale. net benefit a significant from share EPS

targets long-term make by sheet, building continue were excess results profitable reflect Our strengthening we returning our shareholders. relationships for the balance strong, for our progress and financial to the quarter to our capital

highlights I’d macroeconomic discussing few the quarter, observations to the broader like of a make Before environment. about

Our strong. gain opportunities. Consumer commercial be of customers the business clients confidence, like But to overall their consumer clarity and markets our the about labor to continue the to optimistic remain spending economy. more U.S. direction expansion cautiously

U.S. a continue. Although cash growth The picked second Many forecast reform also public acceleration quarter, unclear is for U.S. and relatively tepid. this GDP clients GDP will which up wait-and-see currently is approach approximately of policies. the Fed of in growth for our to other take where administration’s XXXX, still continue X% it pro-growth

stimulus periods expansion this current much faster for one the run this given help Additionally, but the the expansion growth this longest U.S. from is of is unclear Fiscal may of rate cycle. economic will length the the how of economy extend

Lastly, the reduce market to on of liquidity balance in the put Fed’s pressure rates. its decision size some sheet interest could

given mentioned. While are how economic just some faster about uncertainty is still factors the there of I positive, grow economy can the indicators the much

that I targets in improvement Our and out In ago credit project Star. financial management we with laid effective our from towards growth, benefitted metrics. North to an results we that a making demonstrate progress over revenue are continue expense our year QX,

yielding to us growth higher grow increased income growth and sheet asset-sensitive Our – balance allows continue loans. short-term from rates to higher interest net resulting interest in

impact period exits. of weak, loans end our loan the of inclusive remains demand we grew Although relatively strategic

last of relationship up for loan this fees relationship Our X% XX% year-over-year. on year manager per improvement with XX% year an commercial up is production manager top

into rates a higher a Our net shift and benefit loans. of expanded previous interest consumer our guidance. exceeding reflected margin yielding sequentially points X higher basis This

discipline interest margin. maintained pricing overall our helped loan also which We our net commercial

exits commercial sequentially. at net the flat average of announced impact about year year our direct deliberate commercial loan total a we loans decline to and business, portfolio home $X.X we our exit beginning which continued was relatively the will In loan as Our this commercial equity loan billion of reflected balances. as of This well impact in growth. that the plan

of For the of we first have three exited quarters XXXX, loans. billion $X.X

X% Excluding deliberate grew our sequentially X% commercial exits, portfolio average and year-over-year.

As end year-over-year. stated this we loans, auto loan consumer expect efforts balances previously, the have of In year. will by portfolio, completed to excluding consumer commercial were X% authorization continue we that the average be the

to of During importance. while manage continued diligently in investing the strategic our expenses third quarter, areas we

grow we internal The positive For rate previous direct more campaigns mailings. return than households times these campaigns. marketing have of example, increased targeted our been two improved of to results through capabilities very an analytical reflecting spend higher with

IT to infrastructure our also expenses reflect well expenses year-over-year. were continue cyber customers, necessary Despite spending serve these strategic to measures. our upgrades as other security better and Our flat enhance investments, noninterest as QX investment

We continue XXXX. be to expect expenses to year full XXXX flat to compared

quarter. and the during loans assets nonperforming effectively nonperforming continue decreased We risk manage and to credit substantially

Our level NPA at was XXXX. ratio lowest since the

Our over level with years. criticized the stable quarter X.X% in XX assets lowest remains asset during the at classified ratio of our

ratio to historically charge-off at continues net remain Our low levels.

the remains Although an credit select on losses. expect provisioning would some we pressure upward loan on growth. economy clearly that relatively This have Any weakness assumes from stable. strong, credit remains economy the impact in again quality

at very requirements remain regulatory with capital exceeded X Tier our XX%. our over equity ratio by Our LCR while liquidity XX.X% strong and common levels

Our to during nearly and in invest strong increase repurchases billion dividend capital share XX% to both quarter. $X us position the allowed to our

dividend our XXXX. third We increased of have quarter since the XX%

making New our on plan also December, you update our provide Investor on We’re detailed a North in we progress. Star In initiatives. to progress during our York, Day

at stated As services products, and are experiences. we pace before, are better and which accelerating the introducing we I’ve new

solutions solve best on fuel To are growth. think-tank possible. are with problems partnerships as We end, acquisitions implementing to focused as select embracing the quickly customer we that to

particular also area company’s Research to One innovation innovation. of capability and headquarter recently relates an to Millennial at Project. culture for innovation. in-house We this foster us focus leveraging We’re of center help opened our the

generations, is tremendous with the the aren’t opportunity what in recognize long-term we the ignoring we already generational largest Although segment today. U.S. other

student are our called our their their Through of rounding early want Momentum. they are possible. and our automatically their well of promising. app Millennial The the pay drags soon activated downloaded as help financial Momentum XX being on incubator biggest millennial app, innovation transactions and down was days first launched very see times at we loan app to In customers the our first to idea results as that as XX,XXX out debt up balances. August, the was one pay debt loan the of end off since student

solutions in future. We will continue to rollout additional millennial-focused the

geographical capabilities. new with innovation leveraging science also We’re

technology developed refine analytics staffing more the sales to assess accurately branch network have in specialized and We goals. our allocation and

other announced We first agreements equity have additional you acquisitions throughout This the follows we investments. in also of recently several discussed part the year. with strategic relationships

to Our enables consulting capabilities recent acquisition and and our Integrity services. of us HR enhance Epic insurance HR Insurance Solutions

expect We The acquisition capabilities. insurance to further R.G. services complements year McGraw products financial Insurance acquisition to our build their expanding the this risk in with and management early provide modest help challenges. our clients pressing acquisition of value-added and most on to

investment payment our a and management Sightline, in the to to play NRT equity company payment solutions and comprehensive enables relationship provide and entertainment, and pure strategic vertical. world leisure lodging us largest technology the of Our in suite casino treasury

and to customers. our accounts payable We Mastercard solutions bring best-in-class also to automated recently with announced relationship AvidXchange a strategic

are the BXB transaction. of by end-to-end provides electronic that joining commercial into to done Hub. the an processes traditionally Hub converts bank We forefront automated on This first revolutionizing an proud platform payments be paper payable Mastercard’s by

result in solutions will We over fee expect solutions payment and increased these time that HR consulting insurance, revenue.

experience. customer on We the are very focused improving

to to solutions their Our objective of our into provide and to is a financial trusted be every appropriately tiered customers aspect life. advisor

Banking three the for in being overall this industry by including in customers’ recognition and for addition with just Our in ability leader categories, our named service two satisfaction year. top the bearing We efforts move customer across and to money securely surveys two the are Javelin customer fruit confidence. XXXX for were earlier easily to ranked independent Online

in aligning from Express Lending Scala in our to division. Commerce client where recently of over led to further and head most joined he improve us announced also services. Payments addition the business. Jed Jed Consumer the recently payments experience of business. decades resources We’re He the We two U.S. American experience financial has our Solutions

We of a on mobile Third fortunate part across Fifth the longer our the no on street team. is to phone, experience and the on competition is the our applications. have deliver rated customers’ branch, bar the in Jed bank experience. but as the rising that The Today’s are world-class customer to highly best reality the Web is last continuously

ways in is developing to data solutions, just controls. proactive are we also we continue we attacks the enhance facing new the as that recent cyber While to be our know with security important. security Especially news, future given client cyber

I’ll Tayfun attacks, results in critically again results discuss customer the to our our over our I’d to deliver key share and each Day year. community to dedication strong more our their customers’ I and and plan on track. at hard firmly that, believe and our financial that we is was we prevent were outreach quarter the defending to and once risk ongoing information bank With initiatives and systems necessary for Investor our work in the North able We financial are employees from our about Although the thank current the face. third again remain are controls XX,XXX pleased for I it like to outlook this of remainder that our our of satisfaction efforts. to data our Star December. turn employees to nearly results, which scores evident

Tayfun Tuzun

Good joining for Thanks, and Greg. morning thank you us.

to summary X of Slide Let’s the presentation. move financial the on

during a management, net stable expansion, the margin driving basis returns. credit up to outstanding. total were last management, improved flat were NIM common shares revenues equity results was performance NII and and shareholder were focus point interest in continued a was quality expense charge-offs increase up net year’s higher. efficient our X%, reduction our core Tier in our third reflected basis XX% positive quarter, by financial were so on XX X% These mentioned, Greg X capital As our Relative X% noninterest to and accompanied disciplined all lower, commitment quarter and expenses XX ratio points,

years. will Although continue growth year, past financial these positive results returns coming our income impact during benefits have which had on our impact in pre-tax the materially share Vantiv decisions some over to in and by on apparent the impacted billion. over negative results were by sheet our $X boosted loan are actions strategic of a the a sale of quarter Reported shareholder balance

increased We a increase for X% Visa in sequentially noninterest charge share during reduction income presentation The a with the the adjusted revenue litigation million year-over-year. charge to Pre-provision to Visa X% price. is as to the disclosed swap. and developments also attributable $XX and recognized associated in quarter items our net

Our positive focus a enabled operating management leverage basis. drive to expense on year-over-year on us prudent

to We expect to in did reduction a mortgages and sequentially these Growth leverage C&I policy in impact it in Average legislation commercial year commercial forth not whether X% to portfolio. loan a consumer healthcare lot Having well was The clients on our quarter residential these important down the exits. or and in commercial year-over-year overall. to and loans achieve understandably this the as are XXXX. hurdles next mostly be lack by did our ongoing related clarity investments including business. navigating and we challenging M&A commercial for impact continues said job again and the topics its lending, slowed keeping other positive Average quarter tax in The loan capital impact planned the operating think healthcare related as offset certain return good uncertainties challenges is indirect actually our and the through sidelines. these that of its back estate, uncertainty real loans has balances flat risk I decline flat of meet were the on environment auto planned also were that full sequentially. activity exposures sector, on the of the on of very

X% and remainder impact consisted the average exits. were the and sequentially the exits, loans of commercial of Excluding Approximately based up exits XX% year-over-year. return-based were credit these of X%

have Indiana. a decline regional our pick construction We estate growth in in seen balances funding loans The coupons our production, sequential and partially loans. The was especially construction. this by quarter, were offset average larger existing strong stable. of C&I markets by real Cincinnati, in Chicago growth in Production up it was commercial X% driven in in mainly embedded construction most from loans in

multifamily improvement segments to such self-storage of are continue while are in conservative We urban losing profile Certain more others we a the as the basis construction go industrial as maintain move are and risk their combined lending commercial luxury XXXX. like cycle. portfolio. hospitality million appealing. later point $XXX production XX time, resulted the At exits roughly in of and segments in we stages a attractiveness of quarter that spreads, the new this another yield in LIBOR have fourth Expanding with to for in

are in during been growing which We and force. maintaining portfolio our all commercial the doable expecting markets expanding competitive growth fourth and profitable modest these our are the further are focus in impact sales boost growth, board we will Commercial production loan the reflect remain exits. the our on We of loan of relationships. has To across commercial steady. quarter,

auto the future additional geographic or were continue should sequentially also middle opportunities. portfolio, the average and lending decline indirect X% loans consumer down Including flat in which provide revenue assess loan growth within year-over-year. We to expansion loan market planned

consumer year-over-year reflecting Returns originations down and improved the loans ongoing of business to were single curtail from the auto, this single year. decision average year-over-year. X% XX% impact the mid to Excluding digits were high digits in redeploy up earlier have the our loans Auto indirect capital. with

to activity quarter. origination fixed certain to balance how depend XX as X% continue by mortgages mortgage much improve. X% as of ARMs, well retain Residential on year-over-year as will sequentially and continue grew our rate the loans mortgages, XX-year and pace jumbo on sheet during returns Our we

originations home X% were sequentially Our year-over-year. lower equity loan up and X%

decreased volumes, in X% X% legacy to As continued our year-over-year. loan our exceed pay-downs and sequentially book portfolio origination

second the end last credit reflecting card and from up growth of rollout year-over-year X% card active new Purchase were accounts from increased sequentially quarter. both portfolio at Our stronger the year.

our expect drive offerings quarter more capabilities and along enhanced faster in to the simplified into We card competitive with fourth our XXXX. growth and analytical

at We balances approximately generated primarily currently to XXXX XX% the between third will quarters. personal expect consumer first by we GreenSky personal are as in to and before. million to customers portfolio better Loan were help increased accelerate had through billion $X by expecting remain our commercial providing Other to with us us consumer high-quality loans of our discussed coming lending X% loss a the of revenue our $XXX on grow loans Growth closer in lending prime should focused end achieve stream and portfolios. originations GreenSky was driven portfolio higher growth personal quarter from We coverage generate Growth quarter balance loans sequentially. fourth partnership. rate ROE allow XXXX. and to a

Excluding digit balances, indirect to auto continue consumer loan fourth we the in in mortgage growth expect mid-single loans low and quarter. to

balances Our had quarter investment stable relatively in the portfolio third remained expected. as we

international We competitive are the appropriately drove make demand last and level investment in good at between markets deposits. our in to from accounts deposits rational were money feel savings A money relationship-based by and decisions deposit DDA were growing last sequential for balances. demand aggressively which core consumer competing quarter. and banks maintaining X% portfolio continue about pricing market, as an balances we LCR-friendly deposit XX% up openings We new and them the market increases offset expect consumer maintain and continue account roughly up was and quarter particular from to sequentially. year. are in in marketing decline Improving X% for Average our fourth Deposit analytics profitability increase deposits. deposit partially commercial consumer same accounts in to commercial down

million or ratio and at up liquidity from the X% of up or $XX equivalent quarter. at last previous year. from was income strong interest quarter’s coverage modified $XXX Our NII million continued net is million be of X% Taxable very end the the XXX% to $XX

short-term impact NII was of in the The benefit XX both the sequential of loan points a higher increased up our from with on performance yield influx primarily NIM temporary X reflected of The interest Growth rates. basis basis portfolios. points points total payment and paid sale interest influx and NIM of NII items of Due just temporary reflects I NII on quarter. strong from to off consumer payments that benefit the the total came basis, the basis in second Vantiv funding cash in should the to the exceeding two benefit third loans NIM be our a guidance. a up points. the increase from compared a mentioned. and rates, commercial from related lower quarter. quarter the nonaccrual loans the cash basis The to XX commercial reflected On X.XX% interest X modest temporary the in yield to during from these that points positive the a of third quarter, nature Our higher couple the fourth quarter the nonaccrual basis

impact to the relatively be a incremental blended muted the stable been low the with we items, last low with in QX. we of a so and deposit data beta remained since in commercial the for blended the on quarter-over-quarter in for of range the in in the expect first Consumer cumulative move December. the sub-XX% XXs. when the these Excluding move range pricing has far potential The beta next end the project triggered is in hike in in mid-teen rate basis. has the the XXs Overall, mid-XXs June NIM XXXX Fed

range. For If to could subsequent hikes, we expect exceed at low betas our continue we be to the guidance. rate see deposit in XX% our margin ranges, betas

spreads last loans capital across from NII. to fourth third our and executed the quarter. stable an to continue NII to performance. we the of NIM to current and absence us end outlook achieve and margins this net but We our quarter have years the securitization similar two very to of redeployment market strategic is auto Credit future of increases rate includes be The impact taken and income the Fed expect away margin This have actions maintain quarters. interest sector, in We expect low-returning even relative market led third helping quarter quarter competitive our remains full during dynamics. stability the pressure near the in coming would the banking NII of reflects the

method under acquisition third. stake. is of of Visa A not private $XXX compared quarter. partnership have third we had noninterest quarter noninterest been recognized successful the the over very future quarter million tax ownership figured ownership would X.X% Worldpay sale, earnings Excluding stake up current income million the the equity closes. equity owned the Since the in the their our once new swap, rate of company an The After was Vantiv income to and company. in Underlying impact gains. this by the we in a X% amount second our Vantiv $XXX of roughly pre-tax the gain sale about reduced which growth corporate during $XXX in partner reduced with in will in sale important CRA after-tax $XXX flows the clearly marginal transaction venture our had our corporate billion million milestone initial the from reduce cash generated decrease an regime. the Vantiv the the company. with was of $X joint The XX% we reduction X.X% tax XXXX, about in million, sale This would in

ownership billion. $X is worth roughly Our remaining

We pre-tax will We of roughly acquisition $X.X for a million unrealized believe this approximately an very was leave the good with expect at prices. report upon pre-tax current to gain of shareholders. market an which that gain Worldpay billion the step-up our transaction $XXX us close

a forward benefit accounting global to and ownership the our going larger now in company. to method related continue utilizing will equity of We from

categories, XXX retail quarter. points sequentially. basis was XXX net points in X% other to on largely $X.X in fee margins basis channels in third hurricane but and million fees dropped quarter, Origination in our X% September to Volumes sequentially. $XX second were million lower gain sale improved mortgage of the the the of up on $X from up Florida. than direct billion our was to banking Moving income Originations revenue tied

business. from remainder our mortgage In year, two-thirds above assess quarter, MSRs to through of continued our to our and of will volume. in origination items consisted levels billion loans opportunities the and which of servicing but lower of this originations residential were Corporate mix underlying so to quarter continue compared During masked banking be two-thirds channel. offset the far lease direct purchase second of $XXX $XX million sourced residual future. the second somewhat strength channels the we the in flat our retail acquired were individual fees Most correspondent and quarter. Approximately have by of markets tied the the gains line were the to capital

quarter. deals Capital from in personal asset in million to down banking higher markets of and to down XX% spend last sequentially to and of continue XX% and XXXX quarter-over-quarter X% low seen third third by levels offset environment FICC third the relative lower due asset the the sequentially quarter capital market $X equity M&A in increase service in and higher pipeline personal quarter. end of and was in the revenues. increased XX% volume costs. of quarter for revenue second growth corporate to the quarter. to quarter in revenues processing sequentially Card continued We credit have management management, rewards the Recurring expect to brokerage XXXX management of of charges XX% good due third this an X% stable, revenue showed higher were service loans by sequentially by mainly growth increased in business saw partially fees the Deposit of by that specialty client asset Revenues syndications, relatively revenue exhibit to Total corporate offset wealth million from fees fees business. Although revenues. management XXXX. reflecting the fees nature card currently the and year. driven to We’ve will and was markets double-digit we expect fees, flat XXX capital challenge the revenue. bond activity close we risk year’s given variability our versus the business, all growth fees of to also some markets quarterly Financial growth in XX% increase

shift We more will our offerings reliance transactional service to and on to activity. towards continue limit product our recurring revenues

our the quarter. excluding low reach adjusted This also we mortgage of includes the growth approximately our Recall ownership. For noninterest to outlook income approximately fourth teens quarter, guidance that incorporates the from is with JV fourth $XX payment expected income reduced potential impact XX% annual our quarter for to banking, fee million. the expect earnings Vantiv adjusted be TRA of recurring third which

to scale revenue disciplined the guidance grow investments that continuing our products fee-producing fee up healthy flat recurring while are is making growth. remain quarter trends but to expense Noninterest third client Despite fourth with in both compared fees. payment are expense and on volatility sequentially. strong XXXX invest was management of subdued this to focused some growth we current of services. quarter Our we the activity, the and mid optimistic environmental X% and underlying future very of and We light for trend scope the is fee operating and about low still our to digits

to We capabilities capabilities household to and support over growth position enhanced continuing deposit us will operating will future year. in long-term focus is and positive loan the outperformance. for example investment These A analytical of leverage still marketing strategic both making retail last drive production. our that direct us investments our while on this generate help good

company. the in to opportunities and continue technology saving investments revenue support Our many across growth cost

priority fraud there both cyber Bad compete non-bank our top Greg to clients’ banks to are as of and an ongoing investing is our in increasing. list. still to larger to security losses our protect need with information target for very Similarly, competitors. effectively defenses customers are value opportunities and active mentioned, new fraud and while the to our We prevent actors from upgrade create protection continue to and

reported to XXXX quarter quarter. from in Fourth to relative continue we to guided up We quarter. to are expenses expect expenses in last as be XXXX third about expected total the expenses flat be X.X%

Turning to Slide X. on results credit

low. at with remain a as are third quarter results gross We credit XX-year charge-offs very pleased our

basis resulting $XX points mortgage impacted points. the loan million At by year-over-year down loans fully in quarter energy certain of down completed year. the parameters. concentration continued loans low. nonperforming Shared The equity points NPL were third down but from NPLs the loan loans at from charge-off lower up residential ratio of basis in loans. up which points balances. Nearly $XXX home end from XX% charge-offs improvement. XX% remains ratio near and last of basis quarter. assets XX% were and and criticized Total Consumer but leases categories Our previous to of a NPAs all last reflect point sequentially from basis no charge-offs loan from of the $XXX quarter National the to charge-offs from risk down basis with longer comprises the nonperforming and of roughly basis the Net XX recent which points to positively XXXX basis XX third million XX last charge-offs our from Credit year. last impact results were down be portfolio nonperforming XX or in XX% of decision down our a be quarter, the million, last C&I basis X.X% year of charge-offs points, of XX-plus-year sequential from and quarter meet of showed or XX% Total commercial exit were and quarter. previous down Commercial X last quarter the deliberately last Review XX a largest basis Commercial points and continues down XX% led stable remains from by points desired points X down quarter are X XX year. basis our were second X

million largely reduction reserve driven million primarily release The due compared $XX million decline to in deconsolidation provision of ratio prior X to loss reserve up a This by was X.XX%. $XX interest due points Our the a $XX to quarter, was declined a the the to basis variable quarter. second entity.

Our NPLs XXX% last quarter. from increased reserve XXX% coverage over

XXXX. coverage a over at point broader the multiyear end the reserve since of coverage at is high with Our highest NPLs NPAs the of

a in in experience relatively caution and are our standards, Nevertheless, stable be a continue provision expense banks reflect with remain historic selection. losses. client some you relaxing environment, we continue of could highly that loan disciplined growth at that primarily and upward we will of lows market continues pressure Despite focusing While on near believe maintaining our priority our be to charge-offs to that future. we to some potentially the competitive normalizing credit credit the underwriting top some

capital strong remained Our quarter. very levels the during

of year-over-year. of ratio basis the X sale which the points was declaration was quarter buyback of XX% Tier dividend reflects from a gains after-tax The a equity common our share decrease XX million XX.X% X an Vantiv reflecting increase quarter. during which the $X.XX points initiated $XXX included prior sequential from increase and the but the a Our decline basis quarter-over-quarter

Our or down component to is Book of up tangible gains At capital sequentially tangible the excluding X% our year’s third decreased shares down of the from last value management a losses, very both million XX quarter. third and and or XX compared to important ratio, basis quarter, book million XX value equity X% increased unrealized quarter strategic common were last end basis Effective year-over-year. approach. shares XXXX and or X% XX overall were quarter. second the of common points outstanding points compared shares

we long-term always return sheet maximize to to will risk of that company profile with in environments. prudent support our balance capital and and future that amount We on the the be the capital current our very of alternative aim on keep

by need same long-term remain to lessons crisis, we capital on look return financial the and to more focused rate than the shareholders will quarter on sale and the item shareholder do Vantiv was stake value. we impacted prudently. Vantiv to from intend a Page partial X specific taxes, to the keep At tax the not time, of noted third our it learnt back our respect will we our With With release. of

been tax Our in for rate quarter Vantiv would also tax was last third tax quarter sale, quarter gain have excluding our third the XX.X%, rate A of the for the XX.X%. but year. the reported the rate large impacts our

XX%. roughly to to quarter tax fourth our be the to expect around elevated normal We from rate levels XX% slightly

fourth in tax tax range. would the XX.X% in be XXXX quarter rate full a rate XX.X% projected the Excluding result in This this range. XX% to impact, we the would to year to have XX%

outlook, create operating confidence in our changing sheet balance leverage give ability strategic appetite, value. and additional achieve risk positive growth our shareholder revenue our positioning without Our ability strong to to us our our

As mentioned December in Investor hosting this be in we will remarks, X first-ever our Greg New York. Day on

and Our progress Sameer executive our call businesses over With we for turn me up strategic that, the making let it additional towards to to details their the objectives. team about will Q&A. open share are

Sameer Gokhale

Thanks, Tayfun.

ask Q&A, to that Before one as and we up follow courtesy then limit yourself additional we to queue return you and question questions. others, you to the a start a have if

in time We many best possible have we our this as will questions as to the do answer morning.

to During period, open operator. the name up and the that firm of your Melissa, question-and-answer please questions. to your please provide the call

Operator

[Operator you. Thank Instructions].

Your first Jefferies. of from Ken question comes from Usdin the line

Your open. line is

Ken Usdin

very wanted guys. NII on trajectory. to about actually I Thanks much, ask the comments your

are and able flattish of to should fourth due that the how quarter incremental the would kind keep you walk to here? Thanks. What you So flattish, from you’re NII? expecting said, ex-rates? be You could future that of on be kind expect be Was that of And grow to drivers just then the said? then what just what ex-rates. rates NII, you’d Tayfun, through us follow

Tayfun Tuzun

provided community obviously the from interest is the color, there’s understand of to investor that a Yes, Ken, reason the of absence lot in dynamics why rates. NII I

increases do we are obviously stable stable and with And have even even a be we we will the loan NIM, rate solely influences NII. in We does from in NII and if be that increases, the a not Fed’s we’re seeing Fed growth widening left, projecting our not to the in what will believe still that rate growth able growth maintain NIM So is any an but factor absence expect expected resulting NII. numbers. clearly loan NIM erosion

Ken Usdin

what of C&I just a kind point of exits be guess back been off a get point growth? comfort base that incremental either to point the do start get up you’ve some of of we Okay. to kind of? slowing with And follow I you the So at better to a portfolios the grow on do kind At loan point what or then clear expect then. of to

Greg Carmichael

over we’ve as is communicated by business is Greg. year and this there’s is this program optimization Ken, the end of more What this usual.

X.X that So last we of of year. X couple for billion the this talked years, billion about

little the much quarter efforts. then pretty and with bit done fourth We’re left optimization that, through a the in we’re

expect could you So us going a forward base. more stable of

Tayfun Tuzun

continue one auto originations expect that our our will but items outstanding. comments obviously color we loans to loans for still to line reduction in But relate The the that auto added to be up long-term loans will in see I because under in consumer that commercial other would we reduction trends. make add Greg’s to continued with is loan

Ken Usdin

Got it.

a Okay. Thanks lot.

Operator

next Elliott Autonomous question comes Research. Your from from Geoffrey

open. is line Your

Geoffrey Elliott

Good the question. for morning. Thanks taking

details kind a you’ve revenues where territory Can noninterest forward, can the service around a grow noninterest X% like like there’s us is gains so down income, to feel thoughts X% But growth on. like of are working, you at feel if year-on-year, I to year-on-year, we update and into It look do out the charges lot called you running corporate fees, give again? maybe On wealth of growth comparison; on look you on doesn’t should at some residual you year-on-year lease couple there income then And know down you going where up what of initiatives feel to do? banking there. a X%. you positive are the there’s things back get how more been

Tayfun Tuzun

general over Great. comments some Lars it to going going to I’m turn Thanks, for I’m perspectives well. and his Geoffrey. make as to

look on you need items and mind such also detailed includes So includes related some includes the management XX especially at forward as going of processing. in clearly in last to keep the treasury It comparisons, commercial seeing that such you markets, the payment over That a capital months. exits income in line focused that are we Greg mortgage impact fee of capital as are initiatives generation. year-over-year number markets. banking. our It When general,

some the going commercial you Lars to give is side. So I think color on on the underlying strength

are you wealth or sales on. going growth in through There’s force. acquisitions as expanded management know acquisitions insurance We on also focusing either

that look specific discuss to we items to fee Lars, stronger are support you any would we a as growth. with hope line there number color? of December sort So in of forward,

Lars Anderson

Yes.

Geoffrey, a couple speaking So banking things. maybe to corporate of in fees particular,

period that comparison and Tayfun leasing we those manage what important as really out, part As actively had an that pointed is prudent gains prior of that leasing portfolio strategy.

have about on business sheet were tell a deeper and kind why year-over-year on really that’s would you I do of look a I executed balance And up lending into So you we X% fees optimization. basis to it. little our

to of capital lending grow. and see good – is overall as the particular, lending in So we fees over to continue opportunity market feel are business XX% banking fees corporate those that about we the those accelerate markets. But

us banking You with overall markets. shared is pressure we’ve continue linked became basis. despite our That’s would the that coming a our we FICC the quarter client kind XX%. begin corporate in action in capabilities, replatforming to bond, our equity Actually FICC M&A business see going going continued capital, client there. you very I’ve But to investments our our make to closer, up rolling Fed out that in was linked the syndication, take FICC very experience. on that, this on and That to and XX% in we tightening of XX% what we to was segment on in basis. capital business advisory to quarter because know the Investment quarter our a knew, Again, underwriting strong. be invest in stayed quarters. year up But growth an loan XX% enhance clients linked business close gives we’ve that as

So to to going with position that. clients ourselves we’re our capture

and verticals middle area for albeit that in got economic our environment accelerate to continue in influence a it. both the noninterest core I the future, right products of think and to overall this our industry and right the market income is we’ve business that variable lines will the of

Geoffrey Elliott

you. Thank it. Got

Operator

Your next from question comes Sandler from + Partners. O’Neill Scott Siefers

open. Your line is

Scott Siefers

the trying certainly quarter in puts to up and figure year-over-year well just pretty be looks the morning, Star guys. out fourth growth first sort you will expense of it on been of initiative. of and was couple that when takes expense be you Good sort the look in the the but just from I at they’re has curious announced up we controlled going North a like base, to percent

cost in base base? values sizable the So there as a expense just would just is about large how terms despite where we see declines the involved or North we dollar be I’m growth Star should would wondering of point be I absolute sort guess in it nature offsetting given of the dollars, thinking in

Tayfun Tuzun

know don’t we done than Yes, I I how so we guided. now, a have in row obviously quarters better think many but

fourth expenses We well towards areas expenses on projects somewhat seasonal end increase line. both operation continue the on timing in in items. to the There other some pickup some some headcount line of year, focus into related expenses to IT of as the as given the coming in increase the the is quarter the of

maintain revenue opportunities. at operating necessarily positive needed Our to but depend leverage. management to foremost it in said our first are which to ability opportunities. make expenses achieve to our that, relates growth expense low the a this investments boost leverage looking also to environment that upon be at order itself to operating respect and And revenue growth achieve – growth solely we’re is future growth opportunities. expense goal continues is it is that with we will to in not challenging of – sure how goal clearly The level to Having achieve clearly lower to by

very company the focused. So is

will fourth in and upcoming We in release with our in earnings January. quarter you December share obviously XXXX more about

Scott Siefers

to guidance quarter. understand make tax the sure just Thank XX And the fourth correctly, Tayfun, Okay. you. I XX in then, the to I want

comments, in be not we should thinking think implied rate that’s simply the new fourth a run just prepared I XXXX? event. in of your kind you quarter about That’s

Tayfun Tuzun

a color there. fourth of you a let It’s And little more bit me impact. quarter simply give correct. That is maybe a

on As see Vantiv of release, you on after-tax page – million first our after-tax is impact quarter. the this can the earnings share gain $XXX

we year-ending which in – If And $XXX to increase be you is which at close million disclosed to that on tax to million, tax quarter the million is $XXX in very Conference. ultimate going after-tax marginal our is the fourth increase marginal Barclays leads include rate, the of after-tax rate. in that Vantiv what around $XXX September gain million, $XXX impact our resulting

tax a will not one-time that’s again XXXX. only increase in rate that So show up

Scott Siefers

Okay, you perfect. much. very Thank

Operator

Saul UBS. Your from next Martinez comes from question

open. line Your is

Saul Martinez

guys. morning, Good of A Hi. questions. couple

of mentioned it’s albeit you commercial for bit. a the runoff has books First, relationships presumably and to going a of bit, be run starts auto the kind on lessen the that exiting little its to course there

forward can growth how what grow could beyond about level to you loan about more there loan how share do growth for a being how think we think XXXX, opportunities about your normalized sort of different be are and you As think going and gain quickly do you portfolios?

Lars Anderson

Good question.

focused GDP Tayfun little to forward that look We plus. at more we’re we would moving XXXX, be a rate to grow But the and in obviously Conference. market As sharing Investor our bit are obviously looking commercial made some nominal has very prior about December be that around share. portfolio a we’ll at comments on

businesses execute positioning to the We’re on the have our to capabilities and frankly that. talent

a verticals, strategy has successful We continue our us. been for very industry build which out to

of focused mentioned through operations we’re operating middle expanding markets we’ve in also verticals market banking been some earlier, in and which and past country. our Greg We’re the the on banking corporate also, as around

an is head in it. investing coming that management, So I capital been as overall an environment into markets, do believe payments, impact the the that advantage quarters. treasury Obviously, really economic have we and we’ve on going with have the our things we to

we hear months from they ago. would more are optimistic I tell continue Our than clients, They you to them. were today six

I of can growth. they lot but to that at really accelerate go, the still on that and there ready the we However, think It’s a that’s clarity sideline. is point very need commerce

Greg Carmichael

credit add focus of side, card Lars’ for would has consumer the area an I the on to thing only organization. been The comments

You slight increase see quarter. the this

people we’ve this in the both investments that expect year made and products onto We in continue to space. next with

partnership lending we’re In with. addition more that quality bright very GreenSky, relationship, to there spot unsecured in our pleased the that, also is and of another with originated

already, continue expect but we our to later we’ll retail new to course [ph] roll our grow rolling addition as and that’s In at channels rollout mortgages that, year. to platform direct consumer we in this in to

as to said, levels. confident on grow So we we GDP continue roughly, feel that can low Lars

Saul Martinez

– That’s can’t it nominal does loan bit. helpful. grow up LTR to what plus, a and closer little start pressure? And moved that if mean your to GDP Does deposit cost you growth for kick-start

You’re you at more think to do up. where moving XX% bit plus. rates How start a deposit betas in about little see do are environment we Obviously an growth?

Jamie Leonard

This is Jamie.

in mentioned Tayfun benign. have been As his pretty remarks, betas prepared

to betas a a about the will to-date mid-XX of think cycle it but we year we’re XX in the be expecting beta, December the at increase XX% the move was at move and we’re We’re certainly but June beta quarter during by XX range. the end modeling

to So we up as continues certainly pick competition expect Fed the hike to rates.

on overly aggressive begin excess pub liquidity In unwilling terms with liquidity seek deposit CRE quarter to in factors. by but commercial some rates saw There down where as combined being base side we corporate really the such trend continued needs those excess options to we certain seasonal was an second in the we’re that’s match consumer that Also, capital lose for alternative deposits, large were investment and softness has other or that those seen and seek higher seasonality of we’re and keeping segments customer few phenomenon customer One, million. we’ve the where that deployed currently are working XXX funds. a deposits, or that’s about ongoing because third a there into driven rates. quarter sequentially is they the the

space that’s to the within good It’s LCR commercial we are in have X.X look acquisition. deposit we as whereas strong nonoperational one billion client about to this think our continued your loan back and gathering runoff. comment; growth really the continue categories improvement we funding has forward LCR calculation, down our our where data had driven to point expect in where TM be operational XXXX increase deposits deposit by I

Tayfun Tuzun

giving giving on keep Having growth those guidance said levels. not in XXXX not we’re XXXX loan at that, mind we’re in guidance, all of just

just to caution So you. I want

Saul Martinez

Thanks, guys. helpful. very That’s Okay.

Operator

Your next question comes from Peter Winter from Wedbush.

open. Your line is

Peter Winter

morning. Good

Greg Carmichael

Hi, Peter.

Peter Winter

keeps talk the can just the about I puts margin some a you and hike? rate without factors of that takes stable was wondering,

Tayfun Tuzun

into is assets, Peter, years two it’s it’s reallocate or we that returning ago The higher whether from capital impact, lower decision into C&I. biggest assets whether stable us. healthy away has in mechanism defense returning made autos we the to churn in that returning capital also well for time, that higher worked are is same origination The the clearly a coupon. At very assets of seeing and

overall the our assets NIM, lending relationships spreads returning and expected stable higher lower general to helping far also are not betas whether as mean that from But continued fared auto better levels. we deposits away that pressure on for from have in guide commercial assets unsecured this us. secured, is NII and below churn necessarily or Now doesn’t into it’s stable returning within so under to

Peter Winter

Great. And don’t you’ve at I know follow gain quarter? the just quick securitization there but it how was auto much the said up. end and if the was quarter from of one the third in any it

Tayfun Tuzun

on The was one sheet we billion it where balance the auto held of transaction securitization was $X tranches.

but of XXX was mechanism, simply that it or on gain million a funding So no transaction. provided proceeds loss

Peter Winter

much. very Thanks Okay.

Operator

comes from Stanley. question Zerbe line Morgan from Ken next Your of the

Your line open. is

Ken Zerbe

Thanks. Great.

Should down. up the deposits growth? balance growth What’s the get hear follow-up I’m sense question where be grow you’re few over another strategy kind some to more to what coming to sheet quarters? side. of even your or your just you retain be deposit you the want deposits on but trying paying to be I see there? had of next, you fund deposit a operational deposits how – say, we core higher? of saying the those deposit from Should beta still launch Just

Jamie Leonard

categories. commercial consumer space down growth Jamie. billion definitely it’s want up we’re in right we’re We side. Ken, the our in it look deposit year-over-year, if you in and billion want X but X deposits the we And

And growing been consumer on we’ve our households side. and doing successful so focused very on the in we’re definitely that

allowed flexibility to and have down run simply to side, just the run from when On deposits through the faced FHLB. the it levels economics commercial deposit pricing we deposit fund with let balances we’ve where off the aggressive

lower us do amount on significant are beta. We focused time, of so; however, 'XX operational experience allowed to over still flexibility have that’s contingent deposits a growing and we and commercial forward. 'XX, going So liquidity to in

Ken Zerbe

So we commercial actually a betas in where done with deposits I guess meaningful to the leads portfolio? there deposit Where say, gradually? part therefore you step runoff, second that we we’re up see does though, betas kind more that okay, much of come point that commercial the your don’t price into stabilize need and try the deposit you a

Jamie Leonard

that not it’s possible but at happen would the the which Fed are that increases think I low expecting type of pretty step-ups Fed. we’re from

not just yet. that at We’re point

Ken Zerbe

much. very great. right, All Thank you

Operator

comes question John Pancari from next Evercore from ISI. Your

line open. Your is

John Pancari

morning. Good

Greg Carmichael

morning. Good

John Pancari

size Back was commercial pretty the intentional next that just as the at part Credit relationships the end the the Shared run remind today loan you any that of is much I was that of Can of growth, quarter. to National and of its of exiting runoff? the course has heard of portfolio, the us of

Lars Anderson

This is Lars.

number we that, particular background ago of take of large an build To our frankly really had a Shared question. the verticals out with a way. just you a that on me years bit Let which in us of National increase the Credit in of consistent benefitted give little portfolio some in industry

is it’s However, an business not just Shared of line of National business. a It strategy. outcome our Credits,

we too. our at portfolio. of It’s as look on it’s stabilized focus continue And more XX%, you remind range middle been over that this our a If type even of in to I number you XX% SNC portfolio, would stable quarters fairly markets now.

held with the of pricing Credit risk underwritten terms National the the to is Shared same in same risk profile. team Our to expectations standard, portfolio same discipline, same

to been which portfolio that Credit those drive products sheet as National us National we portfolio if optimization. in able we’re you matches really multiple relationships see that there same returns. today. pleased have There the has what fact, the quality overall we’ve portfolio In asset today, overall you have is look of at XX% of a high. largely very of Shared that with our balance in thing About executed terms churn been commercial on Credit our Shared it with would And the

that out sophisticated strategic we’re and that as The bring our ones in are building actively newer deepening management, investing client options other XX% we frankly we products treasury more to them in. relationships, relationships

a in more wouldn’t So feel would that in core good significantly there. we on I particular about we expect as the future invest grow in middle market even our basis. our But that go-forward strategy franchise

Greg Carmichael

than SNC I’ll thing commercial to only is assets are general. overall criticized our lower also our in add The comments Lars’

cycle So even have us. they well performed through extremely well the for and performed

John Pancari

loans current And to grow, that Okay. that level it the XX% pretty think mentioned I to guess shouldn’t with total range where that you XX% going that that’s XX% to stay? know but I it’s that you at much XX% of

Tayfun Tuzun

Yes, But our it’s be quarter-to-quarter environment. things that balance upon to a sheet. term smaller say longer where hard portion will overall the would of overall to go depending our economic goal for be

As focus we’re putting core the growth be our into market the I future. would of and to middle said that we business before, banking accelerating in expect lot a

John Pancari

then that. lead the up of What more are And And Credits? you percentage National yield of separately Shared Thanks. average arranger? follow Okay. on them then is your one what

Tayfun Tuzun

clearly total. smaller disclosing and of in arranger, not where we a the the We lead percentage sub-portfolios the are yields specific that’s are

Lars Anderson

to our products. of Shared balance core of relationships reinforce that what Yes, of market provider it’s a and just larger just our portfolio again what that’s about. Credit continue XX% that that verticals on have National and we true multiple moving to middle from focus our I I’d we some supporting clients. out sheet relationships, building would – These are That’s

John Pancari

Got it.

you. Thank Okay.

Operator

Cassidy question RBC Markets. from next Capital comes Gerard Your from

is open. line Your

Steven Duong

Hi. This for ratio. on Steve call. actually is Thanks our A CETX question in for Gerard. your Duong taking

reach prior target the target? there And what a so, you to? looking level that at get think XX.X Is level a if you with CETX quarter consistent the today buyback. you’re that to need even payout to do You’re after large is pretty

Tayfun Tuzun

have in terms to Obviously of capital us our adding been of level ahead we’ve three dictates very XX% a we is. term, our near type more targeting quarters In and the where results general, and in guidance CCAR that buybacks. still

term, Over potentially the change. may target that long

in handle of with roughly to if of a about additional mistaken lower $XXX Our million, what X%, risk buyback about do to their our more are we are today; a point not there clearly chose whether reduction ratio clearly peers talking profile dictate believe will business to type and basis show. carrying the go We composition than I I’m the would respect immediately. sheet if million balance capital capital that a it’s X.X%. we Time would And X ratios. $XXX – type equate XX think capital of

Steven Duong

technology And the Great. a question side. Thank just you. on follow-up

center. guys your You mentioned innovation about

As it? development what’s the far your on philosophically, on you or you are where philosophy on are most more in focused more or client-facing backend, the on technology the side

Greg Carmichael

back streamline We artificial around a I looking or digital intelligence, biased, of expect our see at processes impacting cost which ends both there’s continued the office nice to done think we’re that which we’ve and right really to But the job transformation we’re for our more of. reduce optimization we overall opportunities now achieve.

So that’s a focus.

the our customers back platform office. would our In be we’re payments help addition, house the Web our investments commercial to our making advancements their to application, continue our our automate and client-facing side mobile of and We’ll new And example in how another see established ApplePie, the with channels, mentioned whether around touch of also before, partnership that. is that. the we we’ve just the NRT Sightline partnership distribution with we GreenSky, customers, as

So we’ll sides. on to shareholders. continue again, create value make customers and our both return the it the consumer and those customers and back commercial Once our investments to gets we for

Steven Duong

Thank Great. you.

Operator

Terry from question from next McEvoy comes Your Stephens.

is open. line Your

Terry McEvoy

that new retail quarter? on more consumer morning. last international national businesses you international Is banks Good competition if something that or relates over it’s And market call as would deposits. has more it the you in operate? in say Thanks. not competitive being emerged Earlier mentioned that the you the to Hi.

Lars Anderson

increasing going the it’s and It’s side not definitely year began past you’re on a on the new over Fed phenomenon. plus since from the really pricing definitely and commercial It’s rates been types seeing FBOs. of

Terry McEvoy

could I’m SNC then for all to reduction And substitute on up size centered loans John’s at follow and portfolio of if question, you those in not that portfolio? disclosed you the a the just today? leverage Was sure the lending planned commercial

Tayfun Tuzun

size portfolio? the loan the about leverage asking of You’re

Terry McEvoy

correct. That’s

Tayfun Tuzun

lending – It on our but quarters years down. going the seen us it, is over been of typically fairly for now significant it’s we currently disclose number been for leverage It’s – -- two it’s now a don’t we’ve last

Greg Carmichael

over to loans. Terry leverage your couple question, that the was of our efforts years, last part optimization of

Tayfun Tuzun

spreads a actually respect Which with enough headwind interestingly margins. to was and

our reduction So NIM points strength in stabilize in the to also in the this. pretty ability and to way portfolio we NII a light of manage our decent leverage lending

Terry McEvoy

you. Thank

Operator

from Your JPMorgan. from Vivek next comes Juneja question

Your open. is line

Vivek Juneja

Greg, questions to and Hi, for Tayfun I a back CETX, is you One want to the that. go of guys. couple

point – lower lower not why done? back? the there if would to I not why you XX hold but to you’ve other that’s there you’re heard for why each capital? Are do basis on know Is something that said So which trying so holding you I this, XX% correctly? plans what given

Tayfun Tuzun

we additional to clearly capital shareholders. watch our to But flexible to respect There’s a of CCAR, still return enabled In peer industry going. regulatory that cognizant with the bit last the is. group are of Vivek, us where make need to the that our be more is a sure this. dimension we we they where pure aspect of

distribution lower capital that a is the moves we peers. keep with group middle make to our We like right that our progression maybe that nothing peer to a is as sheet range range are bit in above the their suggest need our would the on of currently balance the There in little plus of the to XX% well. a line sure capital, way but we middle,

because of to And also of that’s cannot at of group Fed statement, piece sheet Yes, is ultimately preferred additional So bucket, exercise. other $XXX factor peers the it at impact look and idiosyncratic but terms as when a dictates, a really group it, when we $XXX looks in our about preferred the and issuance. you about the where are. is income we still ignore balance there CCAR, they it’s the room that in think one’s have million million

factor. the that about think composition also of we as a So is capital,

Vivek Juneja

You small that said residual quarter, taken I that more episodic? rate, is to One lower this they On goes or just gains. Are at blip Thanks. Okay. be it’s – hear maybe was – something or this question did this run some are run you can Lars. they right? gains, leasing and this a you’ve to because

Lars Anderson

on And is residual strong try don’t It last for the that We are. gains. really don’t bit a so last a where quarter, necessarily We It maximize quarter portfolio comparisons where [indiscernible] have depends values plan gets quarter the asset episodic. is, item. weaker. line for necessarily to

Tayfun Tuzun

very just those actively Yes, process think is have appropriate. we robust and and and viewing a managing taking we we’re we’re gains that where portfolio where

Vivek Juneja

Okay, Thank got you. it.

Operator

over turn at There time. I’ll questions call you. are no back Mr. to Gokhale, the further this

Sameer Gokhale

Third you thank Fifth interest your Bank. in And Melissa. for you, Thank all

the follow-up we you. you happy Investor If have will to any Relations department contact questions, be please assist and

Operator

you. does conclude conference This Thank call. today’s

You may disconnect. now

Fifth Third Bancorp (FITB) 24 Oct 172017 Q3 Earnings call transcript