FITB - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Rex and I will be your conference operator today. At this time I would like to welcome everyone to the Fifth Third Bancorp Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Chris Doll, Director of Investor Relations.

conference. your begin may You

Chris Doll

of Good morning, earnings Tim second XXXX an Fifth and outlook. results Welcome This morning, to overview provide call. will CEO, Jamie Third second our quarter CFO, and quarter Leonard everyone. our President Spence; and

the regarding the use of statements information Officer, the undertakes the for These of measures These cautionary GAAP be Third's Third obligation our which forward-looking Fifth portion as statements no Chief statements Fifth non-GAAP as also Credit July Bryan found to to to and have them. call. and can XX, earnings speak only contain presentation. Stein; results, on materials Richard reconciliations as about Our of XXXX release performance. in Treasurer, well the and update Preston joined Q&A review and our Please materials,

Jamie Tim turn let open Following to and call remarks over that it we prepared With for me up will questions. by the Tim.

Tim Spence

you follow joining With an leader to Thanks, Chris, CEO it call for like Greg Carmichael. us. like my great and to this is first say honor I'd what as earnings a all thank being

as through generated focus my our saw reported our households commercial that dividend originations. improved in to new built Let's track quarter reflected strong cycle cautious delinquencies acquisitions, organic the year. for we consumer our second today, growth, economic provide outlook producing and no in [indiscernible] is record adjusted on consumer, decline growth, credit our to of our mind quality that the of coverage. With Charge-offs extended liquidity discipline remained the low, the that the expense reserve NPAs record compared view We new a and relationships and are in We and stage maintaining prudently XX% than jump profitability, forward in year. last and Due blurrier it finance adding there question recent pandemic. today we in a sequentially challenges at returns. potential during on both no households the the adjusted reflecting revenue was organic maintained buffers right Earlier in. said, and start is early our solid and growth we PPNR economic

Turning loan was corporate Average our in franchise. commercial robust and lines to which diversified all a driven Florida South loan solid X% the generated North growth banking We consumer balance our lending. on and of growth increase by and in utilization sheet, Chicago, growth was grew middle nearly Carolina in across market in loans included way our Average loan credit. C&I the led all Cincinnati, almost in verticals regions categories. revolving

trend finance. results versus dividend rising small homes homeowners the a benefit prior only dividend billion up enhances line our commentary from trading Our from results a of stable We're to prior the market costs mid-May include and existing $X second and down of sequentially Switching very excited as energy with in were their with balances, opportunity. intentionally deposits, average year. quarter our our improving about closing

we margins on focused position. given liquidity volume As over overall our

on base reports our that transaction with with any were than LCR seasonal grew rule. as alternatives to X% part very the retail banking stable year-over-year movement deposits to a Consumer of a combined sequentially Commercial a momentum double and have the We category allocation X% Southeast growth transaction down deposit the basis, yielding by deposit driven continued in in deposits institution increased excess and higher sequentially, some anticipated partially reflecting markets. strong digit of impacts. balances balance consumer growth in higher deposits

deposit since rate in hikes second Fed that occurred quarter. may, balances total remained mid the As late the stable of yesterday, have despite

income increased securities or prepayment interest our of loan of XX% Ginnie result and the impacts excluding As a XX% and income. PPP, the discipline, sequentially net penalty growth pricing Mae deposit

were which mortgage, quarter, compared strength markets, however, month, pleased grew indicated management. our capital last middle quarter investor from relationships. spend existing gross advisory management wealth quarter. softer increased for consecutive and and revenue net year-to-date both grew conference was the management, I In M&A debt management our the payments, up capital increased fourth fee majority card asset In markets volatility, and to and the As the reflecting ago despite quite XX% the market positive market and our wealth X% diversification with the inflows. in AUM am, revenue generated XX%, we underlying growth a credit revenue we management In fees X% of conditions impact on of financial risk treasury engines. was of XX%, year market personal revenue sourced of and

strategies. We to reflecting has and the our which discipline, improvement significant very funded of continue multi-year continuous manage diligently modernization organic growth throughout expenses bank, our portion tech a

respect our several buffer to With requirements our Fed the stress minimum the and with buffer proactive strategies exercise, recently to a relative forward, retention us respect over we to capital, minimum our from under capital employee provide announced the capital past inflation stress should actions regulatory years, test Looking other rules. peers. to the against wage X.X%

up to We paying to September, remains to dividend. capital and increase by for priorities in organic the top deployment conditions. board quarterly a dividend announced and funding recently subject $X.XX ability strong Our approval our growth economic

robust time. bank in our Given not the for do run the at the loan we remainder our slightly executing capital share the to our desire anticipate targets repurchases of and above environment, this current growth year

on remain we monetary geopolitical and aggressive impact While have policy credit quality the continued the could dynamics benign, economy. that FED’s cautious of the remains

Third several results resilient built under past produce we market to the strong to and years, be Over Fifth have any environment.

investments improvement and have non-core the have geographic continuous strategic consistent through We expansion, product fund pruning our in innovation in been priorities and discipline technology and to businesses. had

portfolio. quality lowest overall fixed commercial have relationships the and non-prime balance We high peers, our diversification consumer mortgages on granularity portfolio on our in and We commercial XX% continually are the of the concentrations which in and focus our with on maintained rate. loan are and improved real among portfolio sheet XX% estate homeowners, of our borrowers of a

We strong by adding next of our with we rate cash positioning, in have deposit franchise protect down series lower that relationships. for a the provide fixed maintaining to And powerful origination loan the acquisitions, primary decade. NII through added a platforms flow especially focus dividend hedges actions, including protected scenario securities the a a and environment. rate portfolio on rate will be Through

with mind, our for accountable to credit expect make today. product going and should invest we to leadership, thank you to say; my customers hold long-term provides listening Our greater our do, absorbency generate we peers. losses us for the what than in Under to are ourselves in any continue you to on of entire and to service decisions shareholders closing, virtually allowance of loss are sustainable In alike. who leadership team, to the long-term employees innovations value behalf that I’d say and like to

banks special and that where for the to know, they comes proponent change. communities a you a in with operate place positive As inhabit responsibility be special a

as fight social $XXX as purpose, live part every million of Third well us commitment. You and new Day, including I as to billion our meals to Jamie X also day achieve across do our footprint that, positioning With to hunger environmental delivering finance our our work you and our provide Fifth to improve want every customer’s I’ll day of lives. it to to outlook. additional quarter our financial thank you things over detail for turn results current second the to small myriad on hard

Jamie Leonard

you all Tim. joining And you, today. thank for of us Thank

year-over-year the We solid. strong were liquidity generated costs. in underperform again, April were volatility, continue businesses. both results but softness, Expenses expectations due quarter in Fees we categories, PPNR in points basis. growth with our we second remain did of though consumer generated even disciplined even Our entry our growth market loan at and to once reinvest controlled, on commercial managing securities attractive and well XX% deployed core excess that our deposit to the in a

sequentially generated provision As a from total in to efficiency quarter with achieved points and we positive leverage a XX% for XXXX. five points million recorded basis from basis which operating X.XX%, point a net ratio a credit The charge-offs, of the combined second acquisition, ACL Finance the result, $XX of four impact seven $XXX Dividend increased losses. includes we ratio sub million

increased the income interest approximately Net Moving statement. XX% of and billion sequentially year-over-year. income XX% $X.X to

quarter As from primarily half growth Tim to which mentioned, approximately attributable the last of underlying of of and half to C&I. the investment loan compared and growth was NII growth growth, around was in rates, XX% market the higher portfolio combination

on and of performance treasury partially at quarter. of deposit income prior points core the well and bearing points and compensation, basis to Compared of Total related earnings $XX interest the and sequentially benefits quarter costs help risk peak sensitive mark-to-market comp decreased which X% increased the XX and overall equity that impacted private company. to during security rates. Expenses driven generated financial decreased was credit controlled and capital to management continued current five dynamics income, market of from expense gross non-interest quarter prior impact our basis. compared we deferred commercial quarter to million adjusted fees the by corresponding NIM This in drive processing, basis treasury million expense in $XX the higher weaker X% Non-interest from by card impact incentive-based compensation the which has fees expense up nine just expansion just mortgage, this improved were markets including the to Our X% benefit in in sequentially the and in an businesses, quarter, a lower management a benefit reported discipline points compares management first throughout the offset seasonal quarter, and in the decline offset losses. market a non-qualified a the due included quarter. prior quarter, the basis

X% the non-qualified ago decreased the total deferred impacts to noninterest compensation or quarter. periods, expense, both decreased expense $XX compared X%. from Excluding Noninterest million year

commercial and C&I leases Average original the total Total in Commercial franchise increased remained loan X% average health quarter. to loans, our sheet. balance quarter, the increase to portfolio including reflecting production average growth compared sequentially X% loans increased portfolio prior leases and loans. to primarily loans outperforming sale throughout compared robust the X% total prior loans for the Moving expectations.

$XXX and hold the year excess Average balances transaction in a and expectations to commercial total by home our discipline dividend to was This success reflecting production to decreased ago dividend which recorded sold other equity. combined compared increase in core With and pipelines continued have as cost position. the loans compared commercial rate see X% quarter, were and reflects increased X% runoff strength relationship households. new production are sequentially, to deposits to deposits utilization the in quarter. year would to deposits. overall year payoffs X% revolver quarter. growing reflecting in loan our average total the the of XX% our result runoff ago million and growth prior consumer X% intentional and line we our consumer liquidity their transaction loans. the consumer and increased partially Compared leases offset loans pricing second higher commercial were talent, the to by average of X% and loans strategic XX% driven was ago quality end, continue deposits during with increased otherwise Average acquisition, to decision with This generation including stable our decline quarter the strong portfolio the dividend are decreased consumer Our impact a and quarter, period quarter mortgage quarter, prior and the investments X% and and of post-close At some the compared the volume. muted our compared residential from

quarter stable $XX securities The quarter. second and during entry planned We May completed portfolio in purchases in June. quarters generally balances of the of higher the of $X which purchases and previously result securities given prior improved billion the attractive first balance late second in the remain into approximately points quarter resulted security were security we points second to billion second year. portfolio, the purchases growth expect billion. during second to currently We deployed than of the in Given the average entry $XX securities net cash expected rest in through accelerating the quarter half the the XXXX of compared

X.X adding bullet allocation our to duration from locked the to on XX% We to quarter portfolio continued from to end, XX% increase Consequently, stable focus to at our and duration predictable flows. and to investment provide structure and out overall cash and structures have X.X. increase

of ratio of Moving charge and to offs basis previous points mentioned, line Tim points. credit in and delinquencies, ratio of XX as due net year than less it with amount The with expectations. our XX of was relative is quarter days past basis credit; remained of points sequentially half XX The just what XX stable early XX NPA improved healthy basis the X the stage to to due loans loans in a days past ago. was second

areas We central the monitor closely office and such living as we continue to have discussed senior CRE. same business hotels, previously district

are as rates including We the loan higher portfolio. the and may also of well exposures cost monitoring discretionary leverage of where changing the inflation impact as spending monitoring patterns consumer ongoing stress,

related $XXX Our build ACL XX% was million worsening relative the to pandemic net impact qualitative adjustments. growth, to XX% and strong including was of quarter attributable this reductions $XX acquisition March, projections from million which loan remaining was of the from approximately certain the dividend ACL in economic

we change the pandemic approach scenarios. return models measures, elected to the believe are increased economic XX% with the monetary scenario for scenarios as scenario downside and Despite clarity Given as where evaluate specific of economy's we baseline our standard XX% efficacy continue in on and to and other to to weights pandemics outcomes the better to weight risks. elevated upside reserves ability to our the and the tensions our to we and and believe wars. suited CRE, fallout vaccine geopolitical from tightening incremental We such our such withstand portfolios humanitarian portfolio on appropriately than there crises loan on

remains than our unemployment period estimate. at X.X%, Our baseline relatively and three-year which slightly is stable the scenario weaker reasonable labor previous around assumes with supportable our market ending

to price have home downside our weakened our scenarios. and forecast March both in relative forecast and growth baseline GDP Additionally,

more existing incorporate several could aggressive exacerbate than including anticipated. originally expectations and becoming that binding supply quantitative Our chains and hikes pressures risks tightening and further inflationary key supply strain rate labor constraints

Our our June best the incorporates XX estimate economic of allowance environment.

to prior capital ended quarter RWA of the robust compared in growth Moving was at strong The the decline in finance dividend the CETX to impact due organic the business our to capital, X.X% X% ratio and reflecting acquisition. quarter. primarily opportunities

resuming to accrete and year-end area expect capacity X.XX% earnings capital after time. by that buybacks to evaluate our will the We strong given we

is the Moving volumes. total growth strong full impacts, excluding expect average XXXX XX% origination Mae or we and to year. compared stable commercial between X% and the and generating finance of continue rates to our strong current for reflecting Dividend loan XXXX X% revolver year utilization over remainder around to outlook, PPP pipelines Ginnie the

our the Dividend half billion billion as around loan total of We the loan contribute is XX% in X% $X.X growth of estimates. production expect remain provide average loan to originations of original in XXXX provide Similarly in we year. which the than little than for more are together XXXX. more second total and expected strong expect $X a over production

XX% We to PPP. expect average commercial XX% loan or XX% X% growth to excluding of

to to reflecting loans lower We XXXX, capital. expect on stable consumer in returns to total average loan our auto production be decision our enhance

and balances average in XXXX. billion and growth double-digit still will for in in year, consumer $X indirect production We expect around auto which the result full specialty secured

the loans expect we to Our of revenue a of adjusted of the revenue assumes growth statement Third. for X% approximately full consumer be of continue other Shifting dividend outlook benefits income Fifth which year to X%, to record year reflecting finance. in XX% will also growth

Given end. X.XX% fed for with asset forward Xst, of which by the our curve rate as outlook combined a of funds earning assumes year July implied growth

to XX% increase NII year We full expect to XX%.

the Mae incorporates impacts portfolios. PPP of runoff Ginnie from the outlook Our and

those Excluding around would XX%. portfolios, be NII growth

quarter. billion assumes higher second of of the commercial balances a the Our excess third full muted rate low onset at quarter decline to betas the of cycle return runoff and quarter, average single-digits the hikes, in cost then date. reflecting the to the quarter deposits been deposit and current outlook deposit $X the seasonality, in have for Since impact our fourth growth and

two We the interest-bearing fed. quarters and timing deposit costs lags from earlier the to next impact to core expect accelerate hikes deposit of to our aggressive continued increases reprising rate due over the from hikes

hikes. incremental a first basis expect realized to dependent beta of sheet rate XXX hikes the XX% will and of points We management NII rate balance timing growth hikes to The on hedging securities transactions on a marginal of XX% rate deposit betas. XX continue ultimate of interest strategies, around the rate be movements, beta and of points XX% basis and magnitude including impact next the and on deposit

capital adjusted wealth expect be of more XXXX, noninterest volatility, the to mortgage outlook, the well offsetting earnings quarter to which asset markets year revenue, markets up treasury the expect income growing revenue, performance in Despite lower markets expected capital reflecting diversified success full and the nearly capital aggressive past in We a full fee X% X% down including levels, be revenue years higher rate rates combined pre-pandemic growth. few from in over decline gross management softer market strong second with and the probability continued we’ve credit to management capital XX% highlights a we had year reflecting XXXX as as markets high business.

expect year up of down previous We improvement dividend expense, including our be to impacts from noninterest guide to X% to An X% finance stable adjusted the to full XXXX. X%. of compared

We expenses. franchise, continue in invest double-digit to growth strategically in technology result should low both and in marketing which our

to Our new markets our outlook high in assumes primarily XX XXXX. growth we XX in Southeast branches, also had

July incorporates that Xth. minimum $XX increase also went into wage to per the guidance effect Our hour on

the We our in in process the overall by to our sale expense leasing the Ginnie continued expenses platforms portfolio, our throughout decline discipline expect Mae LaSalle company. these servicing from investments reduced initiatives with people given expense, and savings our automation a offset and franchise Solutions be associated

the the our the generate an around should four to X%. XX%, expense adjusted operating a compared to the be with PPNR estimate, fee partially related growth outcomes, XXXX ratio to is points to expense April revenue year total and of improvement year our full by Full adjusted expected combined positive range market of outlook in improvement strong NII and result efficiency is which XX% headwinds. our As leverage growth reflecting offset

Our combined discipline. of with grow our outlook operating benefits delivering our to strong sheet for our commitment significantly ability management leverage the base on reflects our customer expense balance positive and

to For consumer balances in sequentially and reflecting expect X% XXXX, quarter the loan average total growth increase X% stable commercial of balances. to third we X%

second average securities X% quarter. quarter. $X purchases third to reflecting X% of income the the expect billion quarter billion to adjusted to to during our increase quarter compared We of $X to Shifting growth full revenue the impact we statement, the expect portfolio made second

We expect NII reflecting sequentially, strong impact purchases up XX% be of securities to the benefits growth, our to XX% loan balance sheet and the of positioning.

noninterest adjusted expect the down income to to compared second X% be quarter. X% to We

We or the expenses the compared up adjusted quarter to to X% noninterest finance. to up provide dividend expect due ago the total second compared be quarter to and year to of acquisitions X% X%

to quarter around Excluding benefits the expect increase expenses, expenses sequentially. NQDC second noninterest X% we on

We balance management, quarter point continue to charge-offs the positioned Chris continue and growth to Q&A. this open in disciplined deliver to sheet positioning, in expect type up me to our over full With to turn well call to XX XXXX net performance PPNR range. to strong we summary be third that, we it risk engine the In with are believe for let year environment. of credit basis and XX

Chris Doll

Thanks Jamie.

Operator, then question Before you the to queue, up we and please the the up for call and limit Q&A. follow we you questions. Q&A, we have have start return to additional given one open morning, yourself if ask this time a that

Operator

[Operator comes line of Instructions] Graseck from Betsy Stanley]. question [Morgan Your the first

Your open. line is

Betsy Graseck

good morning. Hi,

Tim Spence

Betsy. morning, Good

Betsy Graseck

thought mean CETX, around And it certain is to would the function take that achieve? to you’re just buyback. one reinstatement a to process in a questions, looking Two Thanks. that the be, wanted restart XQ? when that should you'll on we it the understand I of

Jamie Leonard

Jamie. its Betsy Yes.

we're can positioning environment clearly the in, our more a Given to we, operating environment. be tell you little in as from this that are results cautious

certainly think we plan of here sit in year but be the that's will then resuming today. outlook And buybacks evaluate we So be we that the for appropriate. dependent, the remainder as of accreting would the the current capital first XXXX. would quarter And

Betsy Graseck

be And from will Thanks. robust you here on week. interesting if that the a indicating, of since mentioned Okay. a deposits raises that stable, you you is And are and outflow continues middle I'm you been wondering, depositor outflow have just I to to depositor type type the then see June. in is deposits deposit not are when certain incented but are the that rates didn't know loan the continue kind you it's looking be next that? Fed be of – stable about came you of that think corollary there What that have that growth May, borrowings side, thinking of you how access? funding will as deposit

Jamie Leonard

And in balance question. managing think Yes. at to about for we that to it Great from the talked a frankly over said turn past like we'd deposits the half, $XX was we some I'll I start for year, year plans early our billion and color. the deposit Brian your of sheet about June run additional and Actually see on off. standpoint and conference a

XX.X%. we quarter of the we deposit as again sheet finished balance to were exactly conference, really at think, your this manage and done had the at XX% I we to Fortunately, a almost we at ratio loan we'd quarter said intended able

sheet do seen that will feel And it. balance it give the we I our to I how position size little over color good on So to more and turn the a maybe Bryan about outflows. what to right with we've ability of

Bryan Preston

to on customers. market match beta, decision not debt deliberate to the made We absolutely. lower high Yes, certain relationship rates

pricing decent about XXX balances said ended these perspective all Funds we get plus. Fed We've be beta portal, at priced $XX balances were want balances Fed liquidity know our or billion book lost may funds excess to customers to home. to believed for do up be a We which find lot gives these in A that in customer in from a of Funds We a sticky. commercial not appetite a investments. access market not we've As billion our deposit about $X have relationships. our estimated back. balances new amount let that money a along, to position We of in what these it of not take would we

We impact billion also We of larger. as runoff. with $X year seasonality tax billion a to payments heightened another saw estimate some tax the the were relates little that $X bit this it Betsy, to payment

said, balances, mid-May, with bips as very since to X stable we're balances we've deposits commercial was consumer stable our And bearing were bips Our from cost interest our continued only be up of pleased sticky. X overall, core of and total the first quarter.

how sheet In funded. funding always thinking we're here, focused we be terms core of being about to balance going growth are from on deposit

that. We balance to in being mechanism levers have that to sheet And we And help from volatility us we to our borrowings month-to-month, that done. deposits the confident of that lot do continue a we're term will short we've use a said, can as manage ability to purchases pull portfolio here. opportunistic funding quarter-to-quarter. grow in investment That includes

looking do down be We important our re-enter portfolio. for back run debt get our structure to it's We'll time, obviously some framework. we've note liability the long-term think over Additionally to bank into market. us

to as we'll that our core But deposit we something that's so continue And to ability funded. confident with well. be use be

We XX% a at loan-to-deposit here are sitting ratio. still

good very overall feel we right now positioning. so our about And

Betsy Graseck

Okay. Thank you.

Operator

from [indiscernible]. line question of the Your next comes Scott

line Your is open.

Unidentified Analyst

to question. on just ask Thanks for taking I wanted a deposits. morning question the guys. follow-up Good

made we you you exclusive will or We'd runoff, are of deposits or or thinking Jamie, otherwise. in So it what of look deposits growth see sounds decisions in the second pardon quarter. in are the the the stable commercial as year? terms of consumer those grow, the continued sort what of like me, impact

Jamie Leonard

great build out. first, plan we and a Southeast de novo momentum products tremendous franchise Yes. Talking with the obviously side have on the with consumer retail and the

retail half deposits, we in would expect year. continue the back to grow So to the of

by we said bit is terms growth to business be better realize On And before a these remarks, billion side, where, very see regional how important TM we'll the presented excess in just driven the Management the probably our I or the it'll share that'll different weren't think prepared little runoff, more I Treasury just money think, commercial And experience relationships. a help my commitments in it. And in a home show to going talking to percent third quarter. be couple in fourth in business return that space, again, as revenue our I about bank of are Brian's conferences we've best-in-class and from that to lost as TMPs as we usual. business loan a of to here, of TMPs This comments expected was wallet. quarter

Tim Spence

think I has I can fully that less thing appreciated. one been there maybe if add

Banking, half of business. quarter as of we second novos out latent Southeast deposit our network otherwise. it that year year household first come that Jamie's about in of we've the also about the have above between that deposit talked in have of those will locations addition Momentum going think And and of highest the but an much opened lot Management Treasury that point, we and gathering were we than an less I open majority the our a been of that focused on investor growth and Momentum de byproduct think new of five in there of this that is a peers, that time generation getting lot come will core XX has the and the not been call additional XX we're kick out years. are been so and Banking what we've of of And beyond in environment talked next that is Management, Treasury among has to the percentage where the generation the terms provide were deposit power we out branch

Unidentified Analyst

I just on I sort third if probably, could puts your they you. of them of continued in but Thank would sort are think, weakness would some and then logically quarter, what of fees perfect. And takes. curious thoughts maybe Okay, on Jamie thoughts just a hear one of into the your drivers be, the ask think, be I separate to

Jamie Leonard

weigh to the accelerated this in fee think businesses. I the magnitude continue of the and just on rate Yes, hikes rate environment, rate dependent hikes

markets our biggest change the drivers So earnings fee of the and for mortgage TM are the outlook outlook. in credits capital

prepared As has as the additional benefit strong. earnings Tim of in back rates on give portion credit. the growth get It's been just mentioned that it we remarks, fee NII a actually equivalent the very and paid rate the hikes, we from

of I carry the from did to help the a X, of growth combination deposit here expect household day charges. fee. But reminder, implementing we and strong So, would the are the July consumer or as elimination implement service on card NSF

the there, fee it's back cities updated that on is guide. So tale is that'll on customers XX it’s along a the in net of year back have know, in that fee in or capital new commodities the weigh first up they of we'll really banking obviously we've just And half syndication of job it. our wealth hedge, asset about impact half business a revenue but fee fees big plus disruption on management improvement our year that acquisition, fees little TRA growing I the bit two manage $XXX different plus raise made the commercial in market help year, having half the and growth And guess so a minus of a add half year. exposures activity guide. fascinating and significant our the ability corporate and bond on where bit we're you in saying don't the the really fees AUM in and impact as outlook million back in the as a you the headwinds well capital make, then when we again FX, we expect $X,XXX,XXX,XXX in percent. brokerage institutional the whether total, the loan the of the want to our TRA to half with or of And of But great inflows, markets the of an is a markets outlook our little customer done a then $X,XXX,XXX,XXX

we year that's least see how back out. for the at So of playing the now, half

Unidentified Analyst

Thank perfect. much. Okay, guys you very

Operator

Capital next [RBC question Cassidy the Markets]. line Gerard from of comes Your

is Your open. line

Gerard Cassidy

you. Hi, Thank Hi Tim. Jamie.

Jamie Leonard

Hello.

Gerard Cassidy

organization. the you… for [Indiscernible] Can

Tim Spence

over? question Could at there. the I you you cut Yes. the Gerard, right apologize, beginning start out

Gerard Cassidy

Can now, you me hear Sure. Tim?

Tim Spence

yes. can, We

Gerard Cassidy

Thank well with the Can geographically numbers strong you’re growth Jamie, portfolio. seeing guys commercial industry, and as to comes pointed utilization to rates assume I Okay. loan going you up this you’re growth for as expect by in – addition go that you some where you. then as both and and industrial see us in. that, out growth share to very and probably

Jamie Leonard

point, When Yes, comes the and I’ll and that first. saw moved you that to rest total What the question. to we’re actually in I’m asked was line for the guiding we part up utilization, in for second year of question it glad stable. take the the of a the line utilization quarter second the be

up middle market line it So, market the we’ll how was group middle in see things production widespread, so standpoint, group very biggest the pretty the that the And second strong the out. see. was movement utilization, several quarter to and production. and was in points was quarter, again nice play moved of From actually that a a

but, consistent more remarks, very is of prepared offset in story as to his East the than Ohio us in continues Midwest performance little geographies Northern several vertical strong Southeast. energy Michigan, softness of the for the team where, in mentioned, Cincinnati, Tim a Florida, think And perspective, well TMT bit from robust it’s as in our business. the and rest Carolinas, continues a a go by then renewables I

very good new west worked we the acquire RM the environment, to in this the with about Southeast ability well. as frankly sales expansion in has play teams well customers the out as So, feel

on of us We’re performing frankly, economy. but quarter. And very the to what this is little appears to edges, we’re just results you core in bit and well mindful a therefore, see the that a slowing the trimming be

Gerard Cassidy

loans you can a And credit follow your you peers, and And in that two out small as moment, the a with for I move up question, good. quality credit so pointed and then have as to and obviously pivoting quarter. numbers. the with the up numbers strong you this guys built understand Very very one reserves or quality, being you

portfolio? as increase $XX give nonaccrual First with questions So the this about some prior $XXX can quarter commercial million quarter. that color to on the That transfer you million is on status. was in the the a a of us backdrop, two versus an

at I just one had the in And again, a versus million low, million color numbers, they’re as higher believe in there. $XX you those that charge-off so I I’m category curious. quarter. loan number well emphasize can And numbers prior Just any $X move second, but since the

Richard Stein

Richard. Yes. Thanks it’s Hey Gerard, for the question.

You’ve described what’s your it happening. question in

handful, both where a at was bottom rolled We’re and more charging you bit finally of balancing levels needed terms will. a a making them loans. handful a And NPA non-accrual along direct The in there’s of just to purposing, was to off. that are we of change them take if so charge-offs in action little low, in place the a in

as think to portfolio where very well. us. of I appetite very sit Well, point the about front we’re our we pleased form and today, in also inside out then with overall both and today continues you the outlook

Gerard Cassidy

Thank you.

Operator

comes ISI]. the of The next John [Evercore from question line Pancari

is line open. Your now

John Pancari

guys. morning Good

Tim Spence

morning, John. Good

John Pancari

you credit. Well, as terms talked loans, or follow-up just a the The that and Gerard’s to the said the was you businesses charge-offs on a non-accruals side of handful us in industries of noting? Thanks. would know commonality leverage commercial on question you increasing bit keeping in any in stress well. there? any it the emerging your portfolio separately, within anywhere I seeing of commercial your help then give eye you’re estate are portfolio a worth of an And signs real on and as little color about

Tim Spence

industry by in names. Yes, no those commonality

action. of causes elements consumables they but segments, common supply put discretionary those headwinds from portfolio, the little any continues that’s places consumer different – it’s that about. see again, the where challenged, behavior non-discretionary, it of can bit as watching from take durables a Broadly we’re office that rate inflation but I in – certainly different were economic a to, changes and inflation labor then same the disconnect and nothing think what it’s what that be on terms to And the but about living but elements, industries, to and whether idiosyncratic shifting another major reimbursement I And perspective. pressure, mean, where senior no the flow. concern. to were said, thing a movement different they are are cash chain large us get place across I of ultimately you cost We’ve we’ve There’s in pressure talked caused between talked segments. us

John Pancari

All that in to Can of your it the reminder and a what just right. back follow competition give back up kind to is about pull my a And I then, degree. Okay. The, reason talk auto, to about of is color or did well. that the in then as we us pullback you have quarter. space, don’t having we about or seeing Thanks. decision? something you the front trend driving are are just that. Great. know rationale talking us you’ve you’re Is somewhat other banks for change Because And credit you related on more your credit separately been know a if some on the can that on pull that seeing? you the give criticized see, asset

Jamie Leonard

Yes, sure question. John. Thanks the for

plus in In for auto Marine. combination when production a business total billion the RV & year started about $XX the auto, terms we of forecast of was specialty

total expecting $X now asset We’re do to class. billion in that in about

driven very certainly don’t pricing. by where And players compete solely not returns reduction aggressive it’s on want certainly, therefore spreads. the it’s large $X to in sector is at dynamic asset the indirect if an irrational, low class several we have so that billion And of such

the levels six of when ago. drop did to back, So that reminiscent pull years five a or were spreads we

good us the dealer news is, relationships. for keep we So the

continuing to monitor We’re performance.

up back class from as target asset to credit returns But an towards good quality spreads have you the about want level grow, capital. not feel a spread. a our single perspective, and on as its it’s just digit production We well

a quarter, the there. credits, report to were they of the terms In lot fairly stable not in

John Pancari

Jamie, Great. thank right, All you.

Operator

the of comes [Jefferies]. question line Ken from next Usdin Your

is open. line Your

Ken Usdin

guys. morning. Hey Good

up deposit Just the on following side.

hearing bearing earlier basis the business? good you on and costs a give purposeful where the So, comments betas on where from Thanks. deposit here at your how to the just you’re updated us we up like, trend five to points. thoughts Can relative you wondering sense to your are expecting given spot give if interest betas prior only side, were of bottoming can about just outflows, the start right non-operational

Jamie Leonard

wanted Yes, I think deposits. excess to accomplish period perspective, the from end accomplished on what non-operational an of we’ve we

So again, half there’ll of a average in year said, $XX excess ago, third we out. overall, and be like get an the the quarter, billion to but a we’d effect

deposits are frankly I And year-over-year think we’ve flat. done that.

certainly XX.X right of loan, it’s as size period not more years at runoff. deposit to growth again, would deposit by surprise shouldn’t we be the would into to the to but it. over opposed it be that So a And big a any mid-XXs get love people to more able driven loan the several that ratio were continued

that quarter think is see the is the and In terms by chunks, such year midyear month the we we'd is big time track quarter that in betas then it of difficult betas, be of to we get by fourth December fed XX% the when out XX% but I ends next effect XXX moving up a the there'll beta to of a those effect it quarter catches normal playing how trail have basis as of because the up than stopping bit in time. a our longer little then And that forecast be beta to a drift and we ultimate of period on have little the so hike. XX% points in the of fed therefore for three bit being going lag rate that

rates beginning mid-XXs quarter in a of this'll the fourth continue how to the play think perspective, from the it area then fourth out thereafter. X we of points and the and basis this So deposit goes in quarter and to second something looks then to third, in paid mid-XXs the That's the growth quarter see by in the XXXX. drifts mid-XXs

Ken Usdin

a thanks right, lot. All

Operator

of Fargo Your next comes question Mike Mayo the [Wells from line Securities].

is open. line Your

Tim Spence

Mike. morning, Good

Mike Mayo

Hi. like I X. your really Slide

it I Your only June, to that; XX basis and X due NIM and is good but like is growth. May security, XX up in was looks timing get due point rates, your basis link XX quarter loan to due to late is points

the portfolio I So higher up. yielding the show into yielding I about remixing higher Yes, think which loans, guess but even doesn't of securities.

X% So deposits I guess are period end. on your down the one hand

low really saying stuff. deposits that's guess you, I been on So like the you've margin those what was margin

You're beta not for around deposit staying deposits. XXX%

that probably you helping get that off. – that's I that's So running

growth? Are or loans the why pickup don't yielding what? you have you On more just loan originating other low hand, from

Jamie Leonard

of of NII. loan and where wouldn't book floating been nature has and in just that our The loans. originating been yielding our a the decent growth portfolio I of of terms impact. lot relatively drive a neutral does But it amount loan No, it's say – in we're NIM a pricing C&I mix given rate of

it's of just Some in the been we've quarter late especially assets a consumer the dividend particular; assets that about talking impact.

to the just So balances a – The some But we those fourth will because a quarter. of rate from impact. expect you'll nice the a year. start C&I here continue the pickup. our NIM some continue to X.XX overall asset bigger to as do floating we and sensitivity see pickup benefits from of future average expect have our see to to drive see in the balance those see We from the kind of NIM of perspective throughout to we'll X.XX-ish portfolio. a range some increase end And kind would year will in in commercial

to powers lot a of So come. still earnings

Mike Mayo

Actually and I even first get expenses. based to should as earnings your, higher if said your for NII your so third guidance, your of while probably to expenses the on guidance, be to you guys your you by X% guiding you be Tim, in call quarter going one-fourth this terms rate at right. X% only guess quarter your going is are And expense core control, And you higher third your lower. CEO, up run as then look quarter first and revenues guide is

confident are your how is would profit existing margin? why that incremental be and margin and your better so than So guess in I it much profit what you

Tim Spence

of answer level for narrowly in manage to I confidence vary Yes. mean, thanks our our expenses. of the question. to on terms ability Mike

a to costs expense technology base. the I are expense automation past continuous focus costs been have business, that with a over unit making years only think our very drive real it’s the on think and a when about made to course not leveraging discipline, also associated we've few think been, the of processing the the about the overall of driver investments a efforts drive core share have culture And here public but our of huge we activities. reduce you right, we people I

savings is So the expense our of a about right terms in now, us. that's management a – driver helping count big XXX on of is and down FTE which

So it's the the business our the progress incremental to less much activity. and the on margin on cost as it is a base business fixed dynamic with costs around continuing make so existing us variable associated

Jamie Leonard

would say, I Mike, And yes.

have good that the very math continued NII see say would as and things, in management Your extremely and the you sheet the is third expansion two is are as we good there at, on cost to profit the highly than NII and an back there is we're as the expansion, question, margin bottom NII. are course in I obviously your part's one confident if that. balance also fee year. over Bryan mentioned NIM fees is higher have from of the happening weakness, that efficient what expense dropping and And for straight line. most is of to weakness there delivery a the you very standpoint the is fee then

addition but ratio, have year-over-year as XXX so efficiency going an element initiatives helping that people. all in certainly expense we the And to in down of the were that's on company, mentioned, savings of Tim the

down rightsizing dispositions, ops the business, then sites, interact and sizing from slow the the first volumes acquisitions our of benefits and and quarter. the and sequentially exclude branch reducing fulfillment XXX the right and LPA people and IT one specialty exclusive the just you dispositions and of with and of closing business mortgage the all If closure enhancements given our and we're acquisitions the down that's auto

have underneath mindful on of then help to to a tailwinds on going we lot invest. but those provide So we're continuing expenses, very

But to income overall and up from an have sheet X% quarter, NQDC good driver noise sequentially. third quarter, our which the the And expenses, out then and increase assuming in marketing little feel an the so will efficient third very in the statement. deliver comes be and balance about in at the X% guide is you zero ability to Y in it bit a an technology of efficient

Mike Mayo

you. Thank Alright.

Tim Spence

Thank you.

Operator

the Najarian America]. of line Erika Your question from comes of [Bank next

Your line is open

Erika Najarian

how Two of you'll of securities especially Jamie, me we that's how about think the after follow to for could should as thinking deposit questions deposit that growth you're like think up feel here? be build you back pricing please. something it continue from accelerates? you source funding comes or Do portfolio a

Jamie Leonard

is liquidity could not be the expect here. a more the stable would usage in to to crisis I Yes. that source from at portfolio collateral growth. probably in – for backing XXX portfolio public as expect year for as stable it backstopping back But the third It the deposits. through be great the selling yield, year on of be fund funds basis. a I but obviously be be would investment overall the our of well in full the yield guide or loan quarter expect FHLB to to both on I'd down a would half

bit yield timing Mike additional guide So with that a on pointed some added. as is up fortuitous we’ve the, the leverage out

Erika Najarian

account ACL, you And the rate you for hour. think taking this the right sort in mild that’s of assuming? because in ACL rather of than this you I’ll different would any XXXX? feels the, place. of us that about everybody’s give into unemployment charge-off your is And on. XXX the near were at anticipating be maybe obviously built to been scenario, when Richard. the downturns Got It remind recession could some XXX is later. like in And What ask the it. guidance reason in What Fifth – scenarios on was you CECL a downturn, if I a now ACL the the for going mild sooner your is we end great this question Third, outcome

Jamie Leonard

I’ll one. question because history one. unemployment data how answer that And is asked level than of you the a the little the have on it’s differently bit Jamie. versus it, I Erika, I’ll piece your Hey, take only day

and baseline day were three X:X for X:X. has reserve scenario years, versus unemployment, our two So the at current the and X:X, X:X, in one X:X, X:X, one,

driver better, and and modeling one of for our is is housing reserves little values, which collateral the corporate worse. worse, day puts variance pressure outlook to in day is versus big And the auto unemployment both that, significantly are obviously one on then rate So GDP but the the a profits. environment

your levels, day a elevated point, frankly, the bit are be. quarter, we the last scenarios worse. is we’re to certainly over little a but So, sitting one think And prudent place to that versus

pricing And rates is GDP so, housing interest higher. worse, erosion,

effect, $XX related state that, we we on until production that from the should we dividend so growth, million you loan then So like standpoint, continue quarter second build of when that on have dividend expectations is portfolio of of our strong to in reaches a the dividend eroding top strong forecasts, have build. on did as CECL have have period you will the commented maturity. something And economic the you acquisition that ACL or production finance a which of for a

is a that last broad certainly Moody’s persistent a than not, worse would be recession, the mild again, ultimately utilize there builds what content in quarter But worse recession. loss the result your ACL it’s certainly those the activity scenario is that so, question a based in decline see, than bill. one And worse should and on, we’ll baseline to while we day economic

Richard Stein

we Yes. sound said, And I think, with that cautious, being right. if more

relates about. I to Like and of what’s you and credit Jamie as feel obviously what’s the we there’s in how think we, are to came actions talk going things be came in there I of, us. we said how and alignment only realistic Erika, low we do in company. the down worrying at the here. We’ve to try been really about read delinquencies And things environment, in has current probably great look based what and it that, NCOs that’s not to on what of consistent, our particular optimistic be the especially portfolio, on actually reflected and about a tried NPAs, lot the are, quarter-over-quarter. are as run about down; just And to and in front ratios

quarter spend investments off Fifth least a if could a relates backdrop to we’re a to or and cautious the we XX And take broader point then as to that the if two we’re if in the always position we and we’ve have goal happens very we you’re what fact we in otherwise and right. naturally maybe that to stock yourself than to pay NII months. have later going well Third the great XX of mindful XX my the attempting But we’ve wrong done to very you the wrong, as relative point very cycle, of sorts we’re that’s securities and buy of how next, But getting against the the that’s that gauge terms alone performance. on total portfolio, the in being the swaps, right. outlook to two did not would to asking changes, is be to at growth actions view, are has this handsomely, a to miss the of down for ACL company have the loss the are of through other or benefit And different too in have the we’re be And absorption that from it company We right. where maybe peers. otherwise otherwise back that we if dressed form case, right hand, gotten, on cautious, measure, the from it backdrop scenario taken

return on way like, one a basis. the a really other even be So this against high PPNR basis. good relative our going on is think I look up, year-over-year metrics or backdrop, to teens

is I about positioned. the bank good how really think feel we

Erika Najarian

Got it. Thank so much. you

Operator

Bank]. O’Connor Your of next Matt question comes [Deutsche from the line

open. line Your is

Matt O’Connor

as a swaps step And kind you holding here obviously. of you bought the flat you but would invested Obviously relatively plus, quarter. and keeping added on guess about, you think flat mortgage fully I deposit swaps yourself of securities of morning. securities or back, Good securities as plus of year, just rest some consider lot

Tim Spence

portfolio would to at that manage well is long-term. like I Yes. the positioned level, would the and say we it investment

about about, opportunities, of say, wouldn’t advantage we pull just going forward if Now to my as but I’m two here or which quarters running could we take from said, done, quarter, great flow, good really great with we what said that I billion a hands rates tie of see today is not a cash one I quarter here. and have and opportunities, feel stability currently

Matt O’Connor

timing you in seems it Yes, right. All spike pretty had like Okay. good and with the quarter. the rates

So thank you.

Tim Spence

Matt. Thanks,

Operator

from [Janney Your final Montgomery]. Christopher question Marinac comes

is open. Your line

Christopher Marinac

lower the rates. that protect about spend about much to for interest is Jamie in something that that is wanted Good to Thanks. I ask something time need morning. you that’s thinking and place?

Jamie Leonard

our the that’s cuts of fed life months about, in the Yes, the day on of begin after story a that the research the right hike. or because average median fed saw then, now, I other XXX that the to And we piece talked outlook, four expect my level. hikes the last

fed to order inflation, in down economy. slowing tamp the focused Now, to is on we expect in really the

and it for peak So, that, hold median level they probably the hold is. a longer time period whatever of that than

a if down balance cuts does done the activity are fed be years we’ve of over bank’s most recession, at maybe a and things that frankly, rate could left will we that past minimum a time, move for into over cuts the the the and but building to has a detrimental and there rate not, sheet And that couple so tip road rate everything been unprotected, have therefore ultimately decline.

bullet, [ph]. to fixed And And to out his Tim billion. $XX added flows grew the also should loan decline. and model, quarter, portfolio swaps. some rate platforms We up rates should be then we’ve pointed business that in billion We to $XX in added so helpful to it’s We Again, locked-out, our XX%. we’ve to this as comments, X:X the increase the portfolio. added duration cash

time team those we and think to environment. very like a be that, yes, helpful, the banks we on as to that very, good help through I from spend especially stable to activities able cost And lot are a manage So low are very enjoy. footprint generation certainly the have of deposit that funding retail

Christopher Marinac

all morning. much that very you Thank thanks walking for information and caller. the great for us through this that’s Well,

Tim Spence

Thank you.

Chris Doll

to department. Relations Thanks to everyone. free the reach feel Investor Please

any have Fifth interest can for the in thank and Operator, you follow you Third. your questions you call. If disconnect now up

Fifth Third Bancorp (FITB) 21 Jul 222022 Q2 Earnings call transcript