Earnings call transcript Q4 2022

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Operator

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]

you. Thank of Third Head begin you Relations, conference. your Investor Doll, Bancorp Fifth may Chris

Chris Doll

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

portion Stein; call. Officer, Our Bryan have the Chief Richard Credit also of Preston Treasurer, and joined the Q&A

undertakes contain be information cautionary as obligation statements update about the the presentation. on found can in January statements These no the which and to our Third's only review Fifth non-GAAP Please These well to of as XX, materials, materials regarding use reconciliations Third statements measures of them. release earnings and our XXXX performance. speak as and forward-looking results, GAAP Fifth

Tim Following Jamie, prepared questions. open we for up the by and remarks call will

turn Tim. With over that, it let me to

Timothy Spence

supporting our shareholders to Thanks the job Chris would I and did, like customers, start, good everyone. for employees XXXX. To our communities thank morning they in and

You and the our really value most vision core trust. and values our bank people be one to true to held

It's JUST American Companies, was comprehensive has XXrd that highest Capital study companies their released great and the roughly in all recognizes Thank a by do bank. out public. achievement. the ranked XXXX a Fifth who the you right Third defined study for ranking of Most America's by and stakeholders CNBC category covered the of it. recently JUST annual ranked four companies

for of and expenses prior evident numbers. generated operating the revenue billion, and and year. year year reported year-over-year, up XX today, year basis XXXX. points. results quarter the below of The financial charge-offs of We an points X% strength XXX We are X% of basis XX%. positive franchise down we quality full full $X.X Net ratio for fourth the record our over Earlier were the in managed producing efficiency leverage

tangible year quartile of which common equity group. we XX.X%, the return ex a result, on places achieved us a As peer full top our in AOCI of

said did going we importantly, do. were we what to as Just we

culture a caption, results we and exceeded it Third, total and January every net major me revenue, our have guidance We Fifth charge-offs. provided expenses proud of you full in that including accountability last year the makes

compared a PPNR guide our original result, As increased XX% X%. to of

three-year We also and We in around by our leading last organic XX XXXX, in quality at consumer in rate peer progress We for markets surpassed at important year's markets. made the over X% of XX segment. on new growth in XXXX. strategies branches a Commercial grew Southeast our bringing relationships total our X.X%, growth households our new led record branches to in Southeast opened new those

technology managed we our During the offerings. progress initiatives and digitally and enabled enhanced leading, services, in modernization peer also product our treasury made meaningful management banking momentum year our

seen have recently may extended tax that income You momentum's pay refunds. we early most include feature to

dividend Our ranking their achieve platforms, to finance, market and and in third scale FinTech provide second respective provide with dividend top and markets. ranking shares national continue

as our for focus better wealth all key to businesses helping capital to helped offset to headwinds business in Strong in markets banks generating activities, flows investment. related diversified than hedging and peers market servicing be are AUM continue all fee most Our management, treasury continued mortgage performance management that and a our net and faced client did business.

have short-term evident normalized this well remained and our focused in on The instead are granularity behaved discipline maintained of of delivering chasing We NPL ratios, and our on well continued long-term of remained earnings. During stable outcomes and early in credit levels. focus below with underwriting our XXXX all NPA, diversification. stage we results delinquency which

to advantage in in were positive of will provide protection through deploy remains NII long-term excess across yields we We by added XXXX. waiting to performance a stable on benefits various hedge extended we and securities approach and rate management environments. until centered lower provide sheet liquidity strong our significant These actions balance to event able yield Our providing environment. our the earn real derivatives rate

capital, benign credit strong and our repurchases. losses, ratio target share PPNR and fourth our With respect quarter we the to growth resumed given CETX exceeded in

dividend, are capital of a balance our a Our growth, program. priorities and XXXX sheet for share X.XX% to CETX pay purchase ratio maintain support organic continue strong and

year. We increase for a approximately during billion total each expect quarter steadily to repurchases of $X the

growth. you provide profitability but financial stability, outlook organic that will XXXX, consistent and with on priorities a for our one Jamie the strong of it is our detail is with

produce and the in AOCI to teens, with full ex tangible another equity a exceeding XX% below common high growth year We efficiency an strong year on operating mid XX%. to growth leverage ratio and revenue of expect PPNR return

the We including invest XX several in and first to will initiatives. to in organic Southeast markets, our add growth Greenville, continue Carolina South in our Spartanburg, in XX We'll efficiency corridor. branches Charleston, South and another more Carolina, three

in marketing product to household dividend growth in we'll investments increase to and continue We'll innovation provide. and scaling invest accelerate and

modernization leveraging drive we'll begin significant investments improve savings into our processes. automation the most these and progress on to our to client realize and Lastly, journey make labor tech intensive experience by

mind for franchise we have can accountable strengthen say hold we resiliency You and we and value will what do. commitment make doing our decisions to to ourselves of continue with invest my where that the to the in will long-term we

With quarter for that, Jamie turn our I'll to outlook and detail to current now financial on fourth results provide it XXXX. our additional over

James Leonard

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

strong in record combined higher with controlled by in generated full quarterly reflect and benefits repricing and continue higher and has expenses market the were was at the earning related rate fixed Fee the we We our despite has well assets, of commercial generation growth throughout financial resilient lagged remained categories resiliency our consumer deposit asset to NII positively of while income rates. headwinds repricing Our rates as and impacted businesses. reinvest revenue. year and focused market performance both generated execution bank. the loan

ratio year quarter of We fourth the year achieved a improved throughout the with efficiency which efficiency XX%, adjusted XX%. below ratio full adjusted

$X.X quarter interest increase Net income year-over-year. fourth XX% and sequentially PPNR of compared last a X% to and and to year. last for compared approximately billion bank Our record grew was the XX% quarter XX%

XX the points quarter. expanded for NIM Our basis

higher commercial it mortgage fees. revenue results growth banking banking While commercial points, revenue, XXX banking advisory fourth to in non-interest Total was interest-bearing TRA driven was reflecting a points core driven by to deposit M&A basis quarter. the in costs client basis increased interest-bearing and cycle sequentially of X% deposit primarily revenue in financial softer and by increased core date by our XX risk That origination and beta management income offset fee partially fees. XX% income

combined focus just technology expense, was increased continued Provide quarter. driven X% expense our This and Dividend during with year to acquisition Non-interest ago associated compensation the the our our in as compared wage year modernization communications expense Finance by minimum initiatives. higher reflecting on hike, well investments with growth platform as of

year-over-year. Excluding the Dividend and impacts down Provide, of total been would've X% expenses

Total Moving C&I rate year-over-year. by loans our increased the loans and X% X% increase revolver XX%. to commercial led balance in XX% robust including to Among with leases quarter, all verticals. remains led corporate total the period renewables, an production growth Growth utilization portfolio sequentially. stable was portfolio and bank increase Healthcare almost at and over last in year-over-year. sheet. reflecting prior balances. Average average The was up increased compared verticals, our which to in Provide end industry Provide quarter our was commercial by compared XXX% of strongest energy, balances leases

decline of in achieved deposits X% by the as outcomes the commercial the Finance deposit quarter, well compared as deposits X% Average compared home in strong decline franchise. X% led was end the indirect by in a consumer in offset half loans. core our portfolio loans increased Dividend of to by XXXX was quarter. increase an consumer the runoff Period After the to prior as year, in we have consumer a total of Average throughout reflecting partially prior surge compared deposit and to equity. the deposits. secured This leases quarter solid offset second deposits increase prior growth increase deliberate total partially deposits middle

credit. to Moving

trends two basis and stage has points and XXXX loan net credit early quarters. consecutive sequentially ratio The normalized to increased past delinquencies XX basis point charge-off nine XX points just our one mentioned, remained below below due declined basis MPA points now of XX only days ratio range. XX MPA and ratio commercial Tim metrics The of two our ratio healthy basis to As levels. levels. remains The increased guidance for sequentially, within our basis down also was remain credit key well points sequentially

XX% of management have lending relationships. improved have From consumer we of a In on portfolio. a focus diversification perspective, loan we through balance which our and to homeowners, are granularity the focused sheet on quality high portfolios consumer, our continually

our overall peers. have consumer also concentration in lowest non-prime among We portfolio maintained the borrowers

In we continue concentration have monitor stress rates CRE. portfolios, overall lowest in to closely Across higher cause maintained portfolio commercial to watch inflation closely and commercial, the may exposures and we the continue loan leverage and where office portfolio all CRE.

our cycle. on focused have NII balance deliver to positioning sheet We stable the strong through

deposit just from as fixed strong the and our few should continue investment provide outcomes. through Our support flow our capabilities Provide the cash Dividend protection franchise, strong portfolio next the well hedge to positioning, rate well rates of the years, addition beyond as lower and against both portfolios will lending our cycle

to Moving the ACL.

loans quarter contributed this built million primarily reflecting was million, Finance $XX ACL to the growth. build. Dividend loan Our ACL $XXX

incorporate rate know, Moody's coverage we The our downside economic X.X%. unemployment scenarios unemployment evaluating scenario our while of scenario base reaches macroeconomic the from underlying assumes you a the peak allowance As Moody's incorporates X.X%, when allowance. rate

in expected to we continued including Given a the changes currently end ACL approximately no build of the our assuming production first underlying million, period Dividend expect economic from $XXX loan growth, Finance, strong scenarios. quarter

Moving to capital.

by of December. capital $XXX repurchase X.X% share from The which was strong impact Our grew increase million in during X.X% earnings partially completed our in to the reflects quarter. offset the generation, CETX a

current Moving outlook. to our

X% expect total loan and growth XXXX. year average between X% compared We full to

We mid which expect single digits in to most of come to the the expected the in from loan portfolio, commercial increase XXXX. is growth

half expect the half markets but in improve conditions as then a We line XX% capital slightly the the decline to stable of utilization second first bit XXXX, be to in of year.

reflecting a We Dividend environment. growth home mortgage from card equity loans expect modest the by in increase Finance mostly auto offset from modestly increase an and and be will consumer and expected total to decline as

the sequentially. For average XXXX, of stable expect we total balances to loan quarter first be

middle banking, commercial and reflecting rates utilization to strong corporate We expect stable. generally and revolver increase remain commercial pipelines X% loans in assuming market

offset quarter. expect down in lower loan first to the so partially We and auto balances originations or be mortgage balances, dividend billion by of consumer $X to residential stable X%, reflecting

average before the sequentially, reflecting growth X% we a to expect From factors subsequent deposits a funding in XXXX. core quarters seasonal of down modest be stable perspective, to resuming

products interest-bearing mix of ending core into XXXX the DDA We deposits expect low from continued in throughout to with total migration year demand the deposits the XXs.

to income statement. Shifting the

we outlook our increase of to NII year and to the Given loan sheet benefits expect balance management, XX% full XX%. our

securities our assumes of basis to increasing portfolio and reflects forecast and XXXX point X% with January remains in occurring from XX the quarter relatively as Our funds half the the stable the of in cut early first fourth first quarter levels the XXXX. Fed forward curve rate second of

interest-bearing costs, total fourth basis or assumes of half X% half of settling points the were around XXXX. outlook deposit of quarter current in second in in the increase the XXXX so XXXX XXX before first which in to Our

two of an around deposit over XXXX October a in end result cumulative rate competition, guidance. XX%, beta by the contemplates our the deposit outlook of environment which continued hikes in given forecast our of would additional Our

so of margin, impacts interest net loan repricing with the portfolio of increasing our five result to the dynamics fourth lag or quarter year relative full our basis combined future of in NIM. XXXX deposit points XXXX The should

the balances. expect loan X% with be day count of combined down in a first NII impact We the reflecting in quarter to X% to quarter the lower sequentially stable

offset fees, treasury line treasury XXXX. revenue and earnings expect non-interest generate in management, leasing conditions well success revenue, in as in mortgage do market revenue lowered relatively income markets as XXXX, of asset to reflecting expect and If by stronger and adjusted improve, revenue. due to impacting headwinds stable and NII not second markets taking to and improved and wealth mortgage the capital half expenses be on we be remarketing management the capital our to credit market gross subdued share continued rates servicing top would management talent We higher investments resulting capabilities

decline to XXXX. XXXX from our We expect in revenue fourth TRA in quarter to million million $XX $XX

compared guidance amount $XX in in equity assumes Our a also of minimal private income the to XXXX around prior million year.

excluding the to X% adjusted to the fourth quarter reflecting down of the be first factors. income largely impacts to expect seasonal X% We non-interest quarter, compared TRA,

which by financial to revenue top revenue, the expect rate expect in and given we strong be of credits impacts advisory Additionally, continue earnings the will revenue banking line and management higher software M&A slowdown offset we mortgage generating risk environment.

adjusted year non-interest to to be up full expect X% to X% compared XXXX. We expense

Our one point in went expense that each Xst, change expense Finance. rate the deferred and the reduction full on on which outlook XXXX includes headwind Dividend January assessment year the plans, mark-to-market insurance a expenses impact impact a into from FDIC non-qualified was of effect compensation

We also XX% several continue consistent our result invest growth expense of in should in years. transformation, which digital around past with to the technology

We in digits area. increase the marketing to also expenses single expect mid

single growth branch and high which XXXX growth add deliver Southeast branches first XX half outlook XX digits also branches year our markets, that new high the Our assumes of network. we result XX our in will expense close to in will savings of in in

first X% compared X% be the quarter. total expect expenses We non-interest fourth to adjusted up to quarter to

As expenses our is us, compensation with timing first impacted by awards expenses for are the taxes. always case associated of quarter and the payroll seasonal

these approximately growth adjusted year full full in X% to would revenue the the ratio X% growth efficiency items, will sub the guide XX%, point for quarter. year, a down in improvement be In from a XX% our Excluding XX% resulting total, first This to implies XXXX. three in PPNR result in range. seasonal of XX% expenses

charge-offs the to point the with XX expect We basis XX point first to to net XXXX in range. be net XX charge-offs basis quarter in XX range

are discipline and to management commitment credit our long-term we generate performance to cycle, through sustainable with customers, engine, shareholders. risk communities, employees, strong the delivering strong believe PPNR continue summary, for well-positioned growth value to we In and

it over for Chris the me With call to up open that, turn to let Q&A.

Chris Doll

Jamie. Thanks

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

Operator, please call open the up Q&A. for

Operator

[Operator Instructions]

a RBC. comes from Your of line from Gerard Cassidy first question

Your line is open.

Gerard Cassidy

Good morning you? are guys. How

Timothy Spence

Gerard. Morning

Gerard Cassidy

between share you there's CECL, at your to when building. like course, understand, with and seems talk outlook loan of us, for everybody's Can disconnect customers, real you Tim, it reserve business loss We up look going building coming loan and spreads your peers to proactive are be the you losses. you high but market, the they're in. of And you're in at reserves, yield life the a then

weakness the day-to-day projecting the haven't Where disconnect? fall commercial widened But are out later pointed we share is with the can year? year? cliff commercial your are you in what happen just of are us a seeing that And business? second your One that customers everybody loan yesterday is competitors to seeing spreads off the half their the out. will Or they that of going this in possibly

Timothy Spence

markets think Yeah. the what and don't thanks the probably of I Sure, this in looked XX hear. out of in or year. of think I question. and I fall the XX cliff a consistent we're I Gerard our And at saw get was the fourth went off while clients day. certainly with XX going year. the there. past I got to for half was second not and other out That's eight I into calendar to quarter the I

the mean, chain or chain suppliers here's or supply back they or to relying the And hear. look manufacturing an that issues as in inventory or that the by example, builds I were about come they more you I because large, were on issue there feeling through it all they otherwise. facing overseas an to if either isn't moderation solved restructuring through I clients ports online supply materials. relates and much at Like what think the they're raw optimistic as the

a higher lower Two, continues also labor proportion. rates, to service building cost, through be it's into think running about revenue or the just solved labor turns, their to are issues costs and chain you they you inventory. it's rising When interest but availability. twofold. because One, I challenge now labor in add they're supply inventory challenges think debt

with this on in associated continued costs they the costs. they're out figure months increases, XX got labor, last pass materials they debt of next this to just sort looking to to through the grind service and how on all try while slow so, to And price raw year XX

evident pushing anybody took The think data continue to a problem having to is clients personally are the be inflation year. over through that like services they demand no in strong. I which and And the because optimistic remained holidays costs, vacation this has

what rather of X%, but is here may optimistic going thinking the I thing that the a operating think up byproduct if slow in and of balance be about I'm it, and else have not than years I have about market Fed in going quickly standpoint, end to outlook. the be down. the more the anything, GDP anything hear a next the of bring down the we're three rates sheet than a GDP, do and is how months X.X% little that more the X.X% that more for we terms is tepid more next, is growth, how And call plus that bit from that rates worried to minus or about you an grind with XX to overly position about higher to you able be for to worrying terms of five lot growth

Gerard Cassidy

you X% helpful. as you your the share I circling in on to in the to for XXXX into money Very taxable think that coming favorite topics, work? you yields second, back look you are one like seeing And your securities showed new number? yielding put are today. securities you guys in your release portfolio, us What the accretion Jamie, AOCI what with things? One, good. AOCI. Very of two Can does

James Leonard

to knew queue question, was thanks put Yeah. an I in so, up to And going get Gerard. AOCI the for Thanks living we that. when you yeah, I

levels of look year-end that XXX, duration It XX-year AOCI, if X.X. the across with the earns the at back you In with our pretty AOCI, time period. earns back at evenly roughly at terms

TCE back or given per that we're a Obviously, four. category of So, earn so year. billion capital impact no

you had just in the If today improvement a is, fast first days AOCI XX-year we've the where of to significant certainly in the and XX forward January.

helpful So as that would the to TCE well. be

positioned going each we're portfolio grind the yield. portfolio continue the level. higher pleased with terms investment will at and the XXX that at how year finish yields, it obviously, expect X% with a In what's that is a I securities to is quarter happen would of to very the

for range, because in or So, year as probably cash on that the the reinvesting we're right new investments we're opportunities points is area at XXX the in XXX flows now. seeing average entry looking

Gerard Cassidy

Great. Thank you.

Operator

your And question next Fargo. Mayo Mike Wells line a of comes from from

open. is line Your

Michael Mayo

Hi. being I right. was a connection ROTCE walk one got also in the you like if you there levels. I think motel, between question higher how separate? know securities. your phrase fourth securities that But guiding of And maturity you you're that guide as the relates the midpoint it off if that I have were NII your guys NII -- -- the they to and quarter guidance, your your the how for few -- And sure is but hard securities gives really -- guidance, you're book of matters. I'm take it are it's held managing you maybe securities is, much banks how what look like hardly or are maturity, ahead, to that and you that flexibility not more flexibility as which And I'm just you gives any you're

James Leonard

It outlook no reposition years commercial range on result is from NII motel both to sales driving thing innovation, for And a the And did product hard uncertainty. reference the positioning execution really deposit of flexibility I household really comes Yeah. change. that there's it of effort. back. But relationships, certainly a balance that more could pricing growth, held few having helps really of sheet NIM maturity. Jamie. the it -- as to of hide all the outcomes really new generations. is I the that's and for expansion Mike, is like the it's a And us. quarters total today's still and it's out of theme, maturity work one and guess ROTCE Yes, given deliberately FinTech company the what strong the is play acquisitions, loan that And ultimately the environments

as what is time. that's course ability really of NII well as the us giving same during So the expanding NIM XXXX, the grow at to

in the deploying that of of higher like like And that's underappreciated XX-year Third over decade buying Fifth when of the the part securities think was income were not of of you certainly a past market. level and had X% that cash over or I gross it's proven And in the we've securities patient even by one to going those below other the perhaps are said, capabilities we X% because the we excess the course XXXX, banks. below some be

of be one exceed of businesses. an generate right think bigger year. little will And I of over that on our we billion roughly fixed $X businesses growth or bit differentiators gross to million loan dividend to for being have relative in those emphasize auto rate the where now, XXXX. the XXXX a dividend will ability us the emphasis $XXX have And deemphasize this to in on then income able we

that a $X will is of roll all billion. And ability net its it NII together position of XXXX when downside of will a this of about in about of assume deposits got end so within that's with do loans by spread We've a you all fees, guide, dividend that widening. protection have helpful. portfolio core really the with through to an billion, that a And $X grow franchise portfolio investment discount really package not unamortized we and lot and

were that extent happen to the to upside guide. is, be only to our mentioned, that Tim So would

Michael Mayo

just about level reserves unemployment? what assumptions talk we hear do a do in I clients level. bottom we broader you I up think standpoint? recession your markets all terms you are a And from for recession based of mean, then mean, What hear and talking based then much your you're so on the on to? Tim, loan based your then, and growth analysis the visiting, on And high see else. a everything just you're

Timothy Spence

let I I'll probably my year. I fill Yeah. moved earlier on the Mike. specific offices reserves, this lost question on But when ball Jamie the assumptions crystal past

So, I and we at Moody's friends to hear clients from or on have otherwise. get I from rely what what our

and recession, I If think. would tell you asked that we're between you of a certainly But to of a decline the particular, a of been know past the done I there's inside growth half shallow big and derisking don't me Third I over going banking percent today, a in given Fifth a sector a decade. GDP inside amount that's have percent half the course of difference the

the more below I don't of really we dynamic about happens going trend growth above see recovery, If and we recession a the be duration to think target. is typical inflation what X% sits have the if get interesting it, you the years historic, and certainly above this right? question several that if a of historic

on But reserves? question on want inputs Jamie, fill to the you the the

James Leonard

and maintained used we or you baseline Moody the and weightings scenarios the that scenario. with scenario upside, at we XX% -- XX% the probability their weighting SX and their adverse as scenario, Mike, our of drives know, Yeah. XX.XX%

adverse, then we almost X% blend to the scenarios the baseline the up X.X%. in ACL. ratchets gets So together the -- to up to drive is unemployment those in And unemployment

or mild were think recovery. of So, Tim's in with comments a economy it a and what I then shallow downturn the meshes well

Michael Mayo

for XX% unemployment. X% that's X.X% XX% So for the and unemployment, the

James Leonard

upside that delivers the Fed threes. soft stays is the scenario in unemployment which so upside, high the XX% landing, is on the a

at a at threes a unemployment. X.X% high the in X.X% and baseline at XX% a XX%, So downside peak, then

Michael Mayo

All Thank Got right. it. you.

James Leonard

Yep.

Operator

Scott next Your the comes question line Piper Siefers from of from Sandler.

line is open. Your

Scott Siefers

you doesn't Good morning floor soon. there Jamie, doesn't about you But sort it of talked XXX based event the what low in you everybody. anytime rates. like in would Thank the the you said, I question. it for get guess on past, the taking feel -- of margin

are level? Just that the sheet, just balance own we've of we go moves -- your the about the and -- you've with thinking flows how ebbs lower forward expectations had given that bound as own all in the kind and curious, sort XXX pardon made you me of in

James Leonard

the better duration over we've through as period XXXX. downturn may more being the billion of Yeah. We layered at bullet a been additional out, feel the ability portfolio swap investment differentiator done on about decade. should the a end on with a with locked very talked XXX in XXX with have all fairly provide should then our that along at a in will the on that and XXXX protecting duration time that peers NIM as out we've the our given Provide, should And play the to is those cash that Dividend focused the level position one therefore, us that with downside little from in scenario past, that And work platforms flows all origination and we've and $XX that fixed occur of positioned of and be fixed good provide the swaps auto, of a we rate the net also the protection longer combined floor book sizable yields. well discount have as down that received investment maybe to other portfolio loan for relative we've

Scott Siefers

gears go bit. Perfect. the on of thoughts trajectory Thank then a kind switching through you. fees just And some as of Maybe the we year.

You quarter will up ramp be, But have seasonality starting the guys in fourth always the first. substantial the -- hurts pretty think a helps I that it XQ.

capital think kind half of I the second markets year. you in to curious, normalizing of the alluded recovering or Just

as drivers on out. Just the year main plays thoughts maybe your

James Leonard

from income, the to it at of course say When stable we look relatively year to components. two comes the the and Thanks. over Sure. did helpful fee it probably is

strong growth, from be category asset well business. credit product area drive digit top and growth as will our in single in do high mid would single deliver the our call both that fee first well our the area the nice area the equivalent management overall digit control business, a treasury as fees wealth I'll wealth in the given network, The as lineup. combination card a management acquisition in That commercial as of from strong customer the income and perspective line fee factors branch both a generation

for From we actually be depressed. mortgage, the good work really when item that were a opportunity. It all XXXX buying XXXX the there, that's back to transitioning into largest levels going to XXXX. And growth in and it to put goes more servicing was the business in us growing

And to servicing $XXX so, those increase million from $XXX strong given our platform, fees XXXX area. we'll in million mortgage the

a be relatively that's XX%, top line of off whereas levels. mortgage low growth So almost stable should very

feel good about So, those items. we

disruption remarks, to growth, digits half the wildcard capital we then single expect not in then once fund that Fed the additional back of expenses. And the XXXX. would said as little half level. year should the Fed growth in its year happen, again, our bit a terminal better the I the expect half given if a of were little abate loan prepared Capital relative a the growth markets, bit assume and the certainly in mid the assumption to high little reaches lower markets better of that guide, to of bit in NII And under we the that we do first first

improvement in of feel I So, that in PPNR terms markets basis, capital confident on occur. should not a the relative

fees, category it us. And when to then the facing headwinds it would the other comes be

down credit. what they're environmental a a charges single earnings XX mid will We're than interest rates, we bit the that, digits is top increase strong for the equivalent which that's on entered more offset the So, fee line the credits little with earnings that year, about better given which really and managing be even growth. in ultimately we as cycle. beta, But than thought to service

of as fees on changes bit be then year first XX%, we that just that move XXXX and TRA softer side, lower income of lap equity we those will we occurred down will structural relative the those private mid little expectations that we fee the a or XX% some overdraft peers, other well in On will overall, XXXX. But prepared sooner consumer remarks, probably said NSF to little half the the on in decline And our so changes. the a as so. as and year better given do bit be

Timothy Spence

it to there, with that say -- year, would add expect it's there's we in expect while investments normalize if not capital I one been we or to have them think might I markets I that the improve in we thing business. recover anticipating bad made year. A We business this larger footprint locked XXXX. don't and expect we're would capital a in just be recovery to as substantially result this or up full in as as than markets revenue saw

Scott Siefers

guys Excellent. very much. color. you That’s Thank terrific

Operator

question of next comes from Gosalia line Your Morgan Stanley. from Manan the

open. is line Your

Manan Gosalia

good Hey, morning.

Timothy Spence

morning. Good

Manan Gosalia

is takes a was it walk tailwind I seems I the puts around can the expansion in Southeast through here. deposit in you and mean, just the like definitely wondering, XXXX? growth

backdrop? So, how growth, given about you challenging thinking especially more are the macro deposit

Bryan Preston

This we our is we've Bryan. that Yeah. Certainly, feel and the years. about improvements franchise made over good the

and origination growth, new consumer QRs from got across engine, perspective. strong consumer both We in strong household very a a have commercial customer commercial. new strong We've

for us to We have a create a as a very management you provides And expansion, high well. mentioned, Southeast performing obviously, as business treasury well as that tailwind as of going support our is branch lot growth. deposit

them. analytically driven the customer job need And finally, and a balances we the nice proven done really and have offers driving we through that when cycle have

as confidence well to environment of to gain positioned. all of So, be the lot fair maintain we and environment a cautiously able changes. can't we going the optimistic Obviously, environments, we grow in but our that share to deposits are in continue we're deliver and

Timothy Spence

has past a grew That is in Southeast, tailwind the for on been put the number deposits consumer we point. to -- just [indiscernible] And to narrowly like us. on year X% the Southeast over by Bryan's a anti Yeah. this

Manan Gosalia

Got funding. you in year. it. is that saw funding the We wholesale side wholesale earlier of flip had the Helpful. And then, maybe some the

does strategy? those funding are for to into overall And fit the you'd be that them how where So, like now? balances

Bryan Preston

very with from a where We're are funding perspective. wholesale comfortable we Yeah.

help significant us continue us deposit across a our We the liquidity contingent to down sources have in through funding wholesale manage decent liquidity see well growth, have manage flexibility very to those environment. we income. over lot both time. If as balances But come could that help see interest as we net uncertainty funding through base we needs of

Manan Gosalia

much. so Thanks Great.

Operator

the from from Poonawala Your of Bank America. next question line of Ebrahim comes

Your line is open.

Ebrahim Poonawala

I Good question I earlier, credit guess, the on had Tim. morning. just follow-up one comments

your at does is absent stay the CRE XXXX into to And look equity, to you you has higher, on of begins the lead their longer Fed a rate, of capital on cuts? that on going demand that five-plus credit, the later in that C&I off? rates, the of cost the do customers is mentioned higher pain Fed falling book more your think lot not year weigh for when rate the maybe in you at bank. when resiliency You the to about think longer scenario But either on about or

Timothy Spence

Yeah.

answer, I'll Let comment. Richard quick Absolutely. then you me and give the let

of growing rates earlier. I slow that is on particular. than in it's cliff, it our mentioned with places the longer commercial -- that Gerard a more view pressure levels, think elevated at as a that that borrowers, here that business right, dynamic more go the we is And

homeowners cost from our had locked little consumer to lending consumer of low bit in inflation think done a share little different themselves significant that I housing. is a these such ability rate fixed borrower a of is they've the because to they bit our inoculate historically because

Richard, do where toll? grind to bit a take you want about little think that may you specifically a talk

Richard Stein

Yeah. Ebrahim, Clearly, I of to get slow interest the free board. leverage I rates rates of a things impact specifically, clearly longer levels is that's, in down. with going be things a design Fed think And cash higher impact there's to across pressure is your To We're standpoint to portfolio. from biggest starting to leverage. higher interest frankly, higher for the going The put flow. lending by here. think question couple

there's rate we our of the plus at we in underwrite fact, -- the and One we underwriting, our flow higher can basis so points can cash and loans, believe through cash borrowers we're on we cushion taking rates enough sure free the we -- make free pressure withstand margins in these the look quarterly that to we and go flow. that back do of will frankly look XXX that when rate at curve their forward underwriting monitoring curve. is and things when we curve, do is these And

other watching the revenue margins, management. and segments on mismatch particularly about labor, we're I thing in that referenced those industries to cost think both the as management we for certain for, availability between and put pressure and continues a economy and their that think expense the have Tim

got they've probably to manage long-term the senior through living. is example So, of got not-for-profit hospitals, maybe labor. where price contracts with most short-term happening talked this And which fixed of margins. acute healthcare, low they've We've have sales is pockets about in

deliver service gone pretty cost The dramatically. has care and up to

a wages maintain And good lag margins, terms these profitability. in in of can the really or for and cycle a whether to is at there revenue companies nursing example. -- You companies rates, look public where there's availability it's reimbursement private, these

question we're rates. And businesses. looking liquidity no so, sheet, quality the things on those cases, puts the other burn higher rates it the are and as -- higher in of But balance pressure liquidity at for that longer,

I think is thing, ability part client of to resilience adapt the last of to and is our borrowers selection understanding things. this the and the these

what's rates relationship understanding the of just consumers market counsel and customers, in it's looking adapt for model So, part to advice customers. alternatives, new these don't happening, or it's finding finance of of our companies to and don't and with ways the not a terms way go the are part And we situation where higher, adapt.

continue endure. that So to will cycle through resilience the

Ebrahim Poonawala

that was down think aware provisioning. growth on of Finance. the I year picking Finance Dividend in About last slowing Dividend about things Jamie, growth as Anything just up million around or versus we outlook this of $XXX we of? the helpful. And else follow-up, underlying one That guess, business? just Are terms year quick should be in

James Leonard

solar, especially Home Yeah. of And we're again, very weighting about XX% Dividend that We good a improvement. it's $X.X feel the good with. cycle. side us, product originations other doing, we're home is expecting improvement But aisle. points enamored in for solar with a offering roughly the of XXXX in the business the for less on billion of XX%

And So, deemphasized, a as pricing our strength it's continues on and well. do power. there's being well as XXXX, perhaps given business just bit of NII to incredibly the for to guide the Dividend little the solar of if anything, upside

Ebrahim Poonawala

Noted. Thank you.

Operator

Pancari next Evercore. Your from comes from line of question John the

open. is line Your

John Pancari

Morning.

Timothy Spence

Morning.

John Pancari

assets have On migrated what the on good really the criticized quarter? know I front, areas what they us you credit have criticized delinquencies gave in you Do non-accruals. negatively? did and And detail of

Richard Stein

This quarter, question. flat Yeah. Thanks nominally. Criticized for is Richard. assets both for the the were

XX I charge-offs above, to XX quarter and side. I three think would down the loan had NPAs stable, so on points basis little [ph] commercial commercial being the improvement in a across also point the credit of we XX, were addition that growth, for about board. bit out delinquencies all to

portfolio inventory issues. of consumer And The from durables and and specialty living little from down stable within I we've specialty there specifically trading pressure things consumers the hospitals and a pressure hit in been for little of has operating products, of right? the standpoint we've and watching That's just senior a mismatch that's think consumables our seen bit, movement. where and we're seen of the we bit the That's on leverage I not-for-profit it reasons supply and to chain shifting expectations. most between function management management. management expense issue. and the some and healthcare, about, an in discretionaries the non-discretionary watching, revenue A talked products, quality commercial because asset

John Pancari

is to and commercial delinquencies both helpful. looks sticking follow-up credit, commercial Thank estate up noteworthy it well in you as And around pretty That's home then my real equity. as non-accruals. did In move the estate, Okay. like you. just see real

types you're can pretty in noteworthy like And a home talk real and little And also bit distress so, your a there. you property ratios increase in about loan looks saw then where where seeing delinquencies are? commercial it the you to estate guys equity, within value

that around Thanks. want portfolio. Just color to get

Richard Stein

real commercial estate. take me Let

points, none. XX look really, in to think delinquencies, about on the it's deck a you slide off the basis We've at I XX is this when zero. on is think XX, base. got still low, six delinquencies Movements really and if you the XX, plus low slide

about that a So, from estate real something perspective. we're not concerned commercial it's

we're people thing we're on the know a questions us. a for think got lot number of -- office. watching -- I That's watching office. I small We're watching for

there some or fact, But -- as of continue and in In is to our line rates better than the lease pressure occupancy and commercial in there to bank. attendance actually with performance fall. the sublease rates continue office rest is

terms new That's We've a Class vintage the of subletting of class, most district new That's things. ESG, us there's lead of think golden matters. A qualified addition that amenities. very It's the also tell property. would all It's got is rates. in central urban to I a all That has product. business in small of is amount couple modern a for product. office. It I pressure you where platinum.

properties. The of sublease So, about those the across And again, office have rate you we markets. lease perspective tenant same rest and a our the from really board. rate, feel pressure particular more a good don't in sits portfolio suburban

well. commercial real demographic formation to continue the of The trends, to faster construction continue strong. accelerate very perform estate, than rest continues be household multifamily costs. Across the Rental rates to

continue So, demand, again, kind to industrial. strong, Industrial continues there's reshoring goes in. the this a with thing back there. really hold to Industrial Same rates of is thing, -- positive lease tailwind demand trend.

good be stable. is So, continues we and And a is to good feel Hospitality trend then stable. really there. retail that in

good in So, overall commercial real where about estate. perspective feeling we are an from really

add to a comment? want You

Timothy Spence

wrong think, the all the comp seeing, at us a I the seasonality. comparisons. the is from fourth just Like was moment side, equity for consumer you're the John, in I going on the are sequential just quarter third to say quarter to

dynamics the Just consumer But businesses, had that muted And are there year-over-year. than seen than reflected would the you would time. have different have that over guide I think other in delinquency at credit the That's we we what relative just those to look we they're what given normalize past. natural in really still fact pre-pandemic, the no better to to seasonality it's in the expect gave.

of equity focus area -- been not area That's the an certain. personally, I for is for that's So, home me.

John Pancari

I got well No, addition Yeah. as saw that. reserve just the I equity home allowance. the Yeah. to

Timothy Spence

I've driving credit the in bank, the quality first us long there. or a time the outcomes actually, change on for likely for as quarter-over-quarter been at is Well, the as equity outcome, actually the perspective home there of had What's dynamic that we not growth. in that but the

John Pancari

problem Good to Right. have.

you. Thank Alright. Okay.

Operator

Deutsche question next Matt O'Connor comes Bank. Your from line of from the

open. is line Your

Matthew O'Connor

is just that, Good morning. the auto spreads growth indirect loan year. I the for of expectations the kind what might have Can comment there? you and repeat in what seeing you're on misheard the strategy this

James Leonard

finished Yeah. are XXXX done solid in actually take as Actually, the the year XXXX. production, combined. you billion with to very in specialty well of We well business start as have off X.X auto and and spreads RV, a if marine

category. rate fixed consumer that secured So loan

Our be expectation so. XXXX class for asset that for X is or to billion about to down

be to balances that in we expect down. loan So, would caption,

yields, XXXX However, fourth improve we points expect to quarter to levels. fourth quarter XXX levels the basis from XXXX

nice NIM to question So, driver. helpful expansion. deliver growth accelerator both NII and certainly a how the it a is That to earlier around is able are you

Matthew O'Connor

targeting on But of regulators kind the behind the else we're hold some agencies anything more, like given are not Got board I'm just it. with it's that on peers seeming uncertainty then high. to level, your rating there biggest to you. to of certainly pressure seeing? pressure we're relevant a bit of or the closer very scenes is wondering, at And there. Obviously, capital or not then whether just And some But some upward XX%. banks, any the targeted X%, macro separately little there's out I'm seeing really divergence in capital

James Leonard

We've, performance balance that perspective. execution Great been outlook it And Yeah. of positioning. cautious really to what years our as is. Matt. willing to I differentiation a risk both has that this from informed discussing really a think, create now do sheet appetite I environment unfolds, how to question, we're credit quarters and for asking. is, would number for Thanks overall say point, going in your and

capital profile levels sheet well the factor credit a as have. levels ultimately of of the as the reserve that on are the So, what's we

external And as So, loss sufficient loss a absorption credit think given the say the or XXX a level an ACL of we're as factors minimum, a at from at that very profile CETX very perspective and is would the creates from well-positioned level capacity. forces well XXX capacity. level SCB absorption our I

we good So, that. about feel

Matthew O'Connor

you Thank very much. Okay.

Operator

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

Your line is open.

Unidentified Analyst

Ken. Ben on for Hey, [ph] guys. This is Reseck

Dividend Just a the on quick Finance. follow-up

mortgage loans? go And assuming Thanks. benefit NII and loans remind As do you those rates those ramp to up of that reserve when accretive type on what see to the sheet, originations loss then, balance you're you dividend just of can earnings? overcoming ultimately builds and becoming continue on us

James Leonard

the unamortized accelerate The back then XXXX. or large be levels fees -- of prepayments post positive Certainly, Yes. or will for in Great accretive come Dividend of question. Dividend will positive be of in half will net we if that playing basis would blended modeled, roughly or dividend And area for it portfolio now, But how and to P&L, rates over have The income eight platform we the point expect faster the would the amount through than what PPNR profile. XXXX. in ACL years. that's life XXX we model it that accelerate asset for the improve out. those an we return on have a the per in basis eight-year year loss have on

Unidentified Analyst

taking Great. the Thanks for question.

Operator

further And closing time. remarks. for call at turn Chris this some you I questions over there the back Doll, are no Mr. to

Chris Doll

investor your operator, relations you contact and in questions. department any if everyone thanks you Thank have the for interest follow-up Third. Please Fifth

now can the Operator, call. disconnect you

Operator

conference your for today's participation. Thank concludes call. This you

now may You disconnect.

Fifth Third Bancorp (FITB) 19 Jan 232022 Q4 Earnings call transcript