FITB - Earnings call transcript Q3 2024

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Operator

Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Instructions] [Operator

like of conference Investor now Curoe, to turn Director Senior Relations. to would over the Matt I

You may begin.

Matt Curoe

Chairman, Tim Good morning, provide and Earnings our outlook. XXXX Third's an Third and everyone. Welcome third to Call. the overview of This quarter BryanPreston and CFO, Spence; Fifth our Quarter CEO will President, results morning,

Our Q&A call. the portion Officer, Schroeck, also has Greg Credit of Chief joined the for

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

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

it turn Tim. me let that, over to With

Timothy Spence

in distinguish by great Thanks, by how Matt, we certain on Third, and perform believe environments, Fifth ones. good everyone. not themselves they At navigate benign but banks morning, they how rather

on stability, profitability in order well us environment predictable focus dynamic and in growth operating strong served continues this has and that results. to and produce Our

outlined thus of have basis. the provided we equity who on a XX.X% per morning, the earnings produced return certain XX-month X We second peers a quarter or trailing our and the among reported release, on in of Page share most reported excluding $X.XX, items exceeding This the we best on of $X.XX far guidance stable earnings call.

both positive despite expand investment a fourth sequential continued charge strategies. our efficiency capital quarter the quarter. the a Headcount third to X% Our We shareholder are on operating and positive achieve year-over-year portfolio quarter. the in second restructuring for operating growth year-over-year ratio the in an leverage consecutive in to basis need position to and the on in leverage without improved adjusted achieved sequential XX.X% investments declined

to economic rates, full deliver as fees, ranges year the we Third guidance January on back our for come Despite into stretch throughout activity that the interest home expenses costs we pleased demand, call. should and changes earnings in within year the say am Fifth market credit I and provided NII, XXXX,

I the detail not additional over on to consistent Before take financial providing the I which macro to Bryan long-term growth and our to been minute outlook, strategic which environment like call investments, hand to would provide growth ways that over results our a in is have years several organic are dependent. highlight

X.X% The by grew the in quarter X% the In during additional the the our benchmark an punctuated summary performance. FDIC's of growth our households bank, prior year, deposits consumer provided household to over Southeast. consumer release means of annual

We overall Southeast. in position MSAs retail measured gap second our grew large a basis. every our top gained position meaningful row, branch focused retail growth, maintained in maintained in market in where a significantly market and position JPMorgan. of Southeast deposit maintained We among year cap For in deposit Fifth compete. was the #X Midwest markets, all year-over-year our In improved our banks we Third or on market we we goal. behind nearly closed our XX markets, and the overall X our #X the year-over-year to deposits XX XX% In share #X our

time half nearly in of quarter, at novo plan which and we We fourth have will our openings will network more of Southeast. XXX branches locations the XXXX, de accelerate the open up through XX in in pace to than branch total the

expand we continue bank, middle invest our commercial to market commercial presence in to and our payments. In

in banking our Central markets in Southeast Birmingham, Over by the including the relationship Valley. past headcount XX commercial expansion opening and Kansas months, we manager increased in XX% offices have City and over

were which X market quarters, was the Southeast production up XX% XX% prior loan year. over middle in highest the by and quarter sequentially Third markets, led over the

equivalent trillion volume. Our and business by year-over-year in net the processed we XX% dollar quarter, fee in revenues Commercial grew $X.X Payments

Newline is of in have new added offerings the from our service sheet. payments managed that delinked credit been of continue relationships XX% all with Over balance commercial our payments terms to this attached. no way lead in year led growth

$XX and achieved billion. year our Management the assets Wealth to In $XX up management Asset quarterly revenues by have past Total we under XX% or business, growing record XX% year-over-year. in grown billion

Advisors Our Third generate business Private Fifth performance. strong to Third units, Fifth continue Fifth and Securities all Wealth Bank, Third

to Turning capital.

balance management growth to are providing return to shareholders. and capital strong Our disciplined profitability and increase sheet capacity the opportunity

by Even level with dividend in to of our and with $XXX repurchases CETX the growth to on in us common actions, ratio our share loan executed per This quarter. further during allow depending XX.X%. $XXX the we will million quarter, share This to these million quarter the X% to fourth to $X.XX potential increase repurchases. the increased increase share realized increased

the about the rallies, feel of uncertainty outcomes. today while a produce wide cross beginning optimistic geopolitical Looking that potential we reversals near-term rate including we of recognize interest remainder and year in and could stickiness job outlook reports, and the ahead next, inflation more also to currents, range the volatility for of economic economy, the and

liquid stability, profitability stay mind. continue with investing and in growth conservatively order with will manage while focus to Fifth and We a Third and positioned long-term that the to on

to Hurricane to enable The hardships devastated the call communities and such on tirelessly customers. to who take I reopen thank Third who in those worked hurricanes, sympathies arise to check time. lost that all our Hurricane and We also who Fifth this to Internet to our disaster the a would We the express relief. and all like answered Helene empowerment those financial Lastly, staffed recognize and FEMA bus events. And to the impacted support from I'd customers employees apply been branches to Milton. our like have moment have day for you power at since by access

these living of the disasters is natural for you Thank serve face core to Your value. inspiring. in dedication our

provide it and to quarter Bryan turn that, more to With the on outlook. detail will our I over

Bryan Preston

demonstrate Thanks, joining strength the Tim, today. us to and our once you company. our results of pleased thank that again third everyone We're quarter

well-positioned balance drove expense That net the ongoing streams Our revenue revenue in quarter resulted sequential an our sequential adjusted X% and revenue performance, diversified growth growth. on in adjusted pre-provision third fee discipline, combined X% income with basis. sheet

As shares Tim to while quarterly allowed mentioned, common purchasing continue our raising remains dividend strong us which we're the to profitability accrue X%. capital and

our XX.X% grew ago. a tangible compared ratio CETX of to quarter, year inclusive to value XX% June Our AOCI book the increased from and of and end share per XX, the at XX%

our Page on X release. Highlighted of

quarter Visa costs severance recognized automation. some to were the litigation the drive over X% billion related reported income and for and increased efficiencies impacted quarter Our MasterCard results interchange items by interest certain sequentially than the and we $X.X net during continue as including production to was this more and margin the interest Net to well X prior of driver core basis improvement and X the the compared new up on were increased improved and quarter. to points only were managed primary points. which deposit interest-bearing loan of impact basis Increase offset yields costs, work

cycle. the first we core quarter, the costs of this interest-bearing the rate decrease funds our month-over-month end With rate deposit at in experienced in during September, Fed cut

regions strong total for the verticals. and of some production Market average from as Loan we are Chicago well portfolio signs TMT leases energy life. flat contributions Banking, seeing rebounded the Middle and While and were Georgia loans with as both sequentially, and Corporate

indirect were For the portfolio declined softness average pay X% which due in total repricing. loans and to portfolio, reflecting primarily downs from to revolver up commercial originations, loans which a increased the during contributor fixed prior continued rate decreased consumer primarily to quarter be to asset significant X% our leases auto utilization, quarter, in the and increase Average X% an XX%.

the book, portfolio. saw back of book pickup basis on we quarter, front this repricing the XXX During points a in

in into higher-cost Average core savings further offset pay higher balance quarter Diving us This by market up wholesale debt well-timed has down deposit during driven core short-term a deposits performance, were borrowings. long-term and combined X% to our CDs. money balances, allowed the deposits. with sequentially issuance by decrease

paid sequentially. X As a liabilities result, interest-bearing our rates basis point total decreased on

price managing prudently have Since we as deposit rate-cutting entered the costs book of Our we been on deposit remains have current testing sensitivity officially focus mid-XXXX, our increasing on cycle. our this our We fourth net quarter income liability to and well ability the manage in beyond. costs drive be cycle. phase interest in for the of confident prepared performance remain to to

quarter. ratio Demand deposit third year. By at the X%. around the LCR DDA to increased We deposits core during sequentially, from wealth were XXX% the percent quarter. This core of X% remainder XX% average X was the full and balances our down prior segment, deposits down for we while as stable to with consistent mix is compliance expectations loan commercial deposit were from stay prior quarter, Category ended with the X% deposits from XX%, XX% the a quarter our consumer and and of level expect July,

Moving on to fees.

and adjusted total Visa Excluding the return X% year increased security impact gains of the swap, quarter. noninterest to compared ago the income the

growth mentioned, personnel. year Tim our prior delivered driven over strategic and by revenue both Businesses our products Payments As in fee results sales growth the strong Wealth and investments Commercial achieving double-digit sustained with organic

managed and In traditional products we NewLine. Commercial as management and new our treasury [ payments ], XX% service continue to acquire revenue increased offerings clients in

transactional of a $XX high Fifth increased strong wealth, Advisors record quarter $XXX at this from and Fifth and the strong the up Third led XX% from year, to prior Wealth AUM activity were billion, Securities fee growth. by Fees AUM inflows performance. the In driven benefit by our over market Third million

grew as led business deferred business. rate were also plan, mark-to-market rebounded up. more gains Fees of hedging the million bond $XX prior issuance security well from X% is activities of our offset [indiscernible] compensation Capital nonqualified which than as expense. trading our impact quarter over the Capital picked Markets Markets as in year, compensation this The by Our and

expenses. to Moving

ago performance-based increased Excluding sequentially, and compensation sales to noninterest technology, due items deferred and release, noted Page the previously to due investments and the branches our strong on the of up in generation, primarily our adjusted of year compensation mentioned mark-to-market continued increases the in expense quarter X% fee personnel. impact nonqualified X these from was X%

days the delinquencies the increased last was than XX median consumer quarter. XX points, better slightly to basis from credit. with NPAs increased quarter, The peer net and X X the X were decreased and near $XX were our line points over Early-stage XX level. experienced Commercial Shifting basis September lowest XX charge-offs expectations basis points points points, below points second and down down XX which seasonally charge-offs the million to have basis points, remains to XX basis ratio levels ratio in during sequentially basis sequentially. a average X due to our basis charge-off points basis we XX-year early up from and X NPA past basis decade. the remained basis low point points, XX

within quarter, increased $XX which C&I inflow prior given the from quarter-to-quarter. activity, be will million $XX our portfolio, nature increased to increased business NPAs of Commercial the uneven million due NPAs commercial the from

C&I million. On a $X basis, CPAs down year-over-year are

recent paying Approximately prior half related of was Our a portfolio are senior classes and better basis our charge-offs perform mortgage credit across with ratio policies loans related consumer policy change no in our the quarter. net NPAs during $XX points. owner-occupied our to accrual single to quarter to a increase timing that our portfolio. continues enacted full the XX current. this primarily Consumer and processes return in The from million align to is to increase only and well NPAs an our of commercial driven CRE in NPA nonaccrual asset in living for by increased

Hurricane Overall, perspective, on we assess we are have a credit continuing geographies. do Helene to any the across From are weakening to and expect or Milton. credit a impact Hurricane not losses, we of not industries seeing impact material broad

X point $XX Our ACL increased to an build. reserve basis and coverage million ratio included X.XX%

evaluating and We scenario continue macroeconomic when changes scenarios Moody's to our weightings. to made no utilize our allowance

significantly CETX XX.X%, Moving We strong our X.X%, minimum of exceeding reflecting buffered with the capital levels. to a ended capital. quarter ratio of

portfolio Our pro the forma X.X%. impact is AOCI CETX the including of ratio, securities

degree our portfolio We locked which given principal of XX% bullet AFS high certainty losses provides expectations. expect flow that in or continued improvement in is unrealized our securities, to of portfolio in the out securities the cash a

tangible curve of related by the the before accrete XX% book forward approximately back by of into equity XXXX. earnings, the realized, to share AOCI is AOCI accrete by securities-related securities should XX% per increasing any equity the value future end back X% losses Assuming considering of to XXXX, end will the of

share During million count the completed reduced X.X shares. repurchases quarter, our million share $XXX in we which by

continue priorities, we to As assess an our operating level. capital appropriate believe XX.X% that we near-term is

of NII and during quarter Moving of deposit offset up lower asset by X% with the continued NII to growth benefit fixed the our We partially fourth sequentially, current reflecting repricing anticipate rate outlook. impact continued and in the portfolio. XX rates outlook in were NIM cut basis December. not the rate this assumes We in if outlook from to in and occur. This point any decrease XX would our floating a to rate change cut fewer loan a point basis yield November expect cuts and

total X% up noninterest due average other rise commercial with production anticipated loan expect from balances adjusted X% and payments. income We be the is demand strong middle continued market continued auto revenue in Fourth quarter in rebound capital markets to quarter mixed third classes. offsetting to third compared quarter to the to stable in X% to and a largely growth to asset

$XX million fourth to fourth in expect of the quarter XXXX. we Additionally, TRA revenue $XX quarter down million be from

in increases be compensation investments similar in and from Fourth are to technology down quarter by to in the charge-offs to net stable third adjusted are third quarter as largely efficiencies Fourth achieved expected are areas. slightly total other be quarter or the the compared revenue-based the branches and noninterest offset projected expenses quarter.

expected an of no the to ACL outlook. major economic in build the million, fourth anticipate we million $XX change loans $XX to assuming Given quarter, increase the during

positive from on quarter in our for deliver back our a in sequential both guidance with fourth January. operating and the full to in basis, and remains a expect line We the leverage PPNR year year-over-year guidance

record position or interest no exiting income net assuming year Our in us trajectory rate economic continues XXXX, outlook the changes. to for interest major results

risk profitability share expect communities our value to repurchases customers, fourth set the growth consistent the with the shareholders, strong to streams summary, we In employees. credit on moving long-term well-positioned revenue growing potential with further quartile to balance and earnings, our in to stable top and are now and Finally, increase sheet, level management, throughout our generate million, With disciplined quarter repurchases depending $XXX of strong we capital loan quarter. and and expense and for accretion, capital.

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

Matt Curoe

Thanks, Bryan. Instructions] [Operator

Operator

[Operator comes Instructions] first Piper Siefers the Sandler. from Your of question of line Scott

Robert Siefers

to I guide. fourth of over there trajectory was see you're curious you've betas the sort about hoping of deposit and about the evolves had sort and be you -- takes quarter thinking that optimistic outlook further as discuss given and -- well. able just might NII you of about In how an that time, very been transparent you've it how puts main particular, the in have

Bryan Preston

absolutely. Yes,

the feel front. continue NII about good the performance really the We trajectory well as of to on the as deposit

the in has seeing play competition. to come then movement start to seeing to standing borrowings prepared that things expect out. basically And As spent and you then this the know, we've a cycle to beta. at lot peer of And also natural our the the down. When point what what deposits, playing same out when transition That's and start wholesale you see our that funding we're results is the as expected. results, being for look that would both are time we we're from exactly fully at that's realized, in been we broker

index $XX and matures the the deposits, promos the areas of that us, the and since get we that have additional quarter point on, of see CD CDs expected. billion, the the costs those well we'll cut. in of about out first as as some to XX% were $XX through we'll end deposit grind other the our book. terms And now approaching rate basis will continue portfolio of still maturities about the between For billion be in of of to maturities able of date we've XX betas we To mid-XXs the billion in as achieved $XX we're beta that

about good the we continue to as that out. plays trajectory really So feel

fixed be that that for a us, quarter here. then continues NII And increase repricing and asset of that's the fourth tailwind sequential the benefit rate And the to a into will to going driver from of big continue be in year. next

Robert Siefers

record know kind hear I discussed love guess, NII including updated of Okay, might you've there, perfect. further. I little out thoughts And maybe generating XXXX. Would rebound on be lending demand your in bit a any look remarks. looking to some It lending what like signs required of referred of the that? life opening like in sounded optimistic might to more you a what maybe achieve given to

Bryan Preston

Yes.

We record is The there. more heroic is don't seeing obviously going loan to the -- are some activity delivered environment growth need deliver We how be very NII NII. to dependent.

of decreases growth tailwinds driver So see shape to commercial going from we think and into That from a The we're a we side businesses. we've expect seen. for will of the to the here. transition nice behind is consumer are We the curve big the on loan what matter. how loan do most to tailwinds part perspective, some growth us, start seeing given be in

we terms to we a from bit So see bit be record but like certainly here. NII, helpful would in trajectory growth. a That delivering would that of loan little of the feel about

Operator

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

Gerard Cassidy

Can of framed you when the outlook. -- was I rosy part it yesterday I a your response and peers this out, to was question one guys posed of it

for curve go X.X%. long drops we've front around 'XX? have the X from us an net So their I'll terms Fed of may asking to give a on with X, that we're a that be over to but share caveat now kind if what not with I'm growth own us years can forward curious, X.X we for specific with not the continues impact lived they sloping where share dropping of positively you. actually outlook guidance, end you to in as -- with interest 'XX way the stays appear Can I'm you to the rates and But the inverted end a for that and curve yield curve income to X% and your

Bryan Preston

see pricing. But have the from out will year is XXXX. Gerard, right here. continue to thing little in curve, is detail expect sheet. NII relief compression we to do we Because spreads. is even guidance shape from assume then reflected us the do that fixed we're from a we're And get Obviously, economics able an benefit if would rate an would a can opportunity in some side on to normal the not inversion get a next to would now get to more if have out of forward the rate bit the powerful were cost very And little the down. assumption over balance of curve, asset We to bit for then steepness bit to the the we'll of curve, in in the that there fixed that we going And our actually duration little we confidence security portfolio and there more the rates get that's we liability be We that give come sell. more time. maintain asset on portfolio get perspective also more swap some as Yes. be of a

environment see would expansion time, you of So that us, we a [indiscernible]. see and productive significant would our would it a for be really over

Timothy Spence

what we a an the the time for absolute had inversion time, without had of a regard. rosy or like of what worth long I it's recession. environment a end was over as is bit I just the that this we've rosy a years and front XX least the us of rates of outlook both Fed's level situation Gerard. reflection a actions that front period, a on tell probably at that, But where you would And had seen feels and see zero, end realistic. that right, long and elevated historic in don't it's very like very It little haven't now we probably overly slope. think know data either because something being just your I

end Fed I be front probably If XX-year the [indiscernible] our the been plane to stickier. the manages comes that going think view in here, the down, has was

things including term lower. work historic Fed if see level out like transition are should that the And domestic manufacturing, industrial potentially the Just deficits long bit. of long all more even that basis, up the inflationary or inherently against dynamics on those little intermediate we're of the a could of moving green of the move policy, you're talking curve end the about an fiscal the energy X.X, you the the meaningfully X curve settles running, end

a one other it would environment, So if of you with doesn't for term sort really more some revenue. come an our get wonderful sheet normal portion be That along a premium. of issue the balance of

Gerard Cassidy

the remind guys know III a lifting dividends Very should come giving that for you how us of back how us, book end value year, end terms much about which about buyback to accretion, an time fourth how in through part up you the we going 'XX. next are, talked will of just shareholders earnings, Can what remind game off the good. that are example, And of you quarter. of the in burn then can we it's in by securities hopefully tangible expect of and the talked Bryan, environment where Basel the what portfolio bit you this buybacks? through you guys the of capital as to obviously, a percentage requirements comfortable in the you

Bryan Preston

Yes.

we invest capital via capital we've been the with feel share then organic share And in seeing, driven share left, range continue returns. by relative to buyback how the what's dividend -- organic generation to we buybacks now million in, good ratio front that to million $XXX The normalized would because manage to be our perspective. XX% we ultimately do right growth a to have target XX% payout preference is of the when buyback. Continue much from on we with we like say, right a see feel $XXX environments, being capacity Our about level. the or risk-adjusted good that

a a next opportunities just to we buyback. buyback which potentially growth little a have of But lot more got in invest to in. share bit time RWA, some more a bit talking bit with little benefit over organic about quarter, little because be saw we've in coming us This allows hopefully, year, lower loan we'll

Operator

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

Michael Mayo

if -- the X then could It up loan right? life, than follow And on the more you how but of more a So in bigger loan said Just would and paydowns? quarter-over-quarter production little box to loans the detail bit you give think flat, of was you aren't have there's quarters, highest just is ahead. like sounds why you seeing bread the like much grown said what sort of without might signs come this? growth you

Bryan Preston

Thanks, the million, were Mike. had we That for Yes. a about The elevated of X% around, the say, of utilization some $XXX bit in down. million. X% say, did what from quarter we in a the paydowns well other, we is would decrease as see moved typically as because revolver headwind portfolios $XXX utilization see

So this in expecting of beginning and two decent and continued perspective. the a loan of quarter pressures second and growth a we're growth in long an of those at this ultimately, period from the half driver overall seen average point, quarter. not the utilization We're the combination stabilize we've

So now. feel headwind that doesn't right us like a for

activity, was in a The obviously, quarter. the markets activity capital very markets it second robust capital

the quarter, Third into normalized do get growth here. a paydown we seeing. helps more of little bit to from and behaviors expecting loan think But then fed back we're think level, here, with we're we to that that some from that

Michael Mayo

to... you the you're mean think it next kind willing sure than And you us of depends quarters or as be when expectations the X%? going far Are I'm next more yet? any will [indiscernible] year? for the Do I to X% number over several as give

Bryan Preston

if would into loan to to But with the point line or a overall We guide, nominal next banking industry. we obviously X% of to We'll growth with the to kind back line, detail a and not And we aggregate objective gets X. the GDP gave that year. outperforming levels. in more would up XXXX be back our get in in industry be plus Historically, general, environment industry market in GDP, sequentially. if average type get grows growth, expect grow

Timothy Spence

Yes.

of are the the potentially that the a and importantly, one, system think campaigning it's elect they policy candidates environment and of the here. front favorable to thing I banking that growth on maybe view I'd would I in election of for make factors Subject who one wins to one am into The actually loan that Mike, lead add govern. to, inside are more the more way probably how their both us. things Tim.

the when are What is I'm don't there's we in make level clients environment higher. of rates hear capital it's because about out challenging an pencil elevated been the sense have just where because in investments they field rates one, from that uncertain don't are out that that Two, what 'XX see debt pay in the from this other they with in flow places. in 'XX, using the been to cash have lieu three, election, you the to we're going buildup 'XX, down businesses have time investing moving. in frame And of inventory it in associated big people

in the time to in shift just inventories. I referred from case in as it to think just we

up, the last our that one for our clients, seen, I distribution think, distribution wholesale was clients of term rates week destocking. them have we As came it use

the more So less revolving But inventory and X. can't in turn credit the inventory, reduces to material just go supply which to harder, getting sheet balance across needs. gold on chains, that less borrowing which a focus work turns,

come going rates you're investment starts worked. there. to So not and down If more headwind and sense have capital interest to that a M&A make hasn't

a see should pickup front. that You on

on across economy And the I to to banking continue we to could as have certainty a think better we the uncertainty the election we headcount environment equation, earlier. referenced the more out the then should trajectory sales side growth coupled that in the remarks, the continue market prepared above Bryan lending that of the referenced we with the support and make, to equation system to that rate the the of if of see it and see that attached relates at

Operator

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

Ebrahim Poonawala

are One, One, off guess things. loan year-over-year. lapping down growth. National standpoint, Third I of I running a you a book? XX% -- we starting just still morning. think with or couple it's Tim, two from Good Shared maybe mentioned derisking follow-ups. Fifth the Credit

And competition there? as different continue us X going are private is X, book you that any of of exposure seeing today than your would kind give that lenders, secondly, to X, it Just in nonbank direct to ago? you your credit looks from your business, years decline have sense reduce

Timothy Spence

Good Yes, question. sure.

point we at sort end year. inflection be the should the of on of the the the RWA So impact diet of by

point fact you talked focus reaching the economics done would have to I with enough quarter, and timing. spillover that in of you we of through got what think just the little world on get unit relationships everything as those the the fourth about in value year would the don't a be a normal corporate on look a be the we bit of But inflection first where last there trying some derisking, should bring levels into larger along different that the relationships. on were the perspective cash profitability, that you them of where we a the comes less capital you had like front those

it the less principally willing to that credit, things is space. the relates we you areas. And structure, that want are to is our of focus a would margins, bit in execution we their to happened What leveraged faster little As on has private the see the some do way tell question it has at but lending of in a do bleed no there are run not over line private with in lenders portfolio. that that I the

I and the financial definitely or not in was company the talked about operating ago there incline was your large you'd from backdrop was of is major X/X credit think shops. benign an environment lending about don't in distressed piece it a at private portfolios you have come ever economic most something the Fifth percentage levels. But between and journal. the a That of see at that the where X/X at of where negative payment where week I Third the amortization paper times is a is --

odd just that of It's going amount see to lending on. PIK

they're companies So they're those banking sector. do the to and scrape to we're most definition, going willing out not, the things, of the indebted

Bryan Preston

down that on it's of some detail And Ebrahim, XX the year-over-year. -- $XX of portfolio, And portfolio are on little lapping of it's The a bit a we still put facing Bryan. Slide billion slide. but we XX% headwind. our [indiscernible]

Ebrahim Poonawala

we out? XX.X at this close should that where a are point the But is point to was where bottom book the

Bryan Preston

think decreases some to think exactly point going see but moderating. not where some off coming to It start to be the should getting and at production the on the definitely setting. see you're be you're we I runoff, back floor, but to continue may you'll do

Timothy Spence

CIB level credits. the think at pipeline and to pipeline middle where is response market that shared of the pipeline, year. the the the -- in which in the I record highest The all-time an we Mike's question. been would it referenced level We national be which majority Is has originate CIB

and seeing there, So support in run-off the inflection point should turn loan increase you're in an decline production the balances. which in

Ebrahim Poonawala

it, it capital improving the as happens excess If opposed to an just for And you stayed capital saying I'm in at look When means if pace well. given capital adds up of be that expensive, it's defensibility. the it we book. question it's buybacks not economy, worse, on but picking that might growth. done allocation your more good why hold other has not stock on well tangible

Just some terms accelerating building on here? capital analysis whole of opposed you holding as excess go talk discussion around more and through and allocation the or to from dry through how buybacks in powder

Bryan Preston

and a a of things from generating investment capital Yes. of look I us perspective. earnings trajectory think be on front. think lot that of We we [indiscernible] for And good feel feel really the a is good We're every continues good for we couple a corporate bargain given like we at the we about our that, stock mean it's to company. a us, quarter.

And dynamic gives actually decisions. very to our so ability allocation capital that with the be us

lot going we to we be slow distribution buybacks for we're growth. via wanted then would down need to capital organic do confidence more And to share necessary the to capital to able of generate that. that we because get see a able or if be defensive, opportunity have We more we

our is on for just capital of you cost when XX% the a component Another high our about and cost industry equity, excess shareholders. sitting think is

where present have we now as some and income will would the capital flexibility going able and the and need positive we a really to that knowing allocation position forward thinking being a so make capital company think ahead are themselves. we're in the [indiscernible]. degenerate when to stability feel about really the about trajectory being the a we and and have we to that different if on profile decisions at opportunities with how deploy right time as we process continue we And to. the And go That's thought

Operator

Your next of question Najarian comes the Erika line from of UBS.

L. Erika Penala

My first Bryan. question is for you,

deposit the that recent cuts you your on indicated far the So are so beta mid-XXs. in

noted you about So could few go then and index might as the think given speak, terminal line of to give of higher a to through retail, think could retail and what that not cadence next it of of corporate straight terms a repricing path reprice the be the quarters? awoken sort have of rates. deposit has a can how X be us sense peers you your speed you in As been we so quickly the the beta

seen speak could you you a X bit as to we think that's that not and deposits, long. for to if a So about -- maybe speak haven't your so little neutral rate

of So us maybe X%. is natural a sense deposit of spread do is get get neutral think or What you natural environment? that X.XX% if help we in your a or rate rate

Bryan Preston

we come matter a -- Yes. commercial you curve is The will retail the shape -- pacing is the a well. The it of is as the the lot through. deposits Like is very takes that going will quickly. of obviously that beta a about scenario question. to interesting When in said, how think the XX% and CDs through very between, earlier, That of now on And quarter. bit XX the that. maturities on us the guarantee It's it's the of offering, of The primary which say, as to XX two your tend little and first days. And our the then come between mature longer. will for the I promotional CD end be portfolio. mentioned drivers period

beta of get that of of that cumulative get XXs have to kind been high So beta targeting and to beta. the kind we rest where the

is For to that. component quarters repricing a because of take the be about us, going CD X will it

perspective, compression $XX that's core a At interest-bearing think is estimate. that Now were mean deposit was billion peak level of I book. to that at really I sitting would peak of bit that level. X.XX a XXX spread. of to maintain deposits spread versus XXX potentially a points costs like to in potentially expect our But being From XXX-ish little a fund a rates, see tough here. we're we natural basis scenario. achievable seems able We to

one a magnitude big another if time. over loan you've for Gerard's obviously managing betas, more to the drive curve growth you've question One the you've question is does and the have to opportunities ultimately the and opportunities Erika, to got day, big and And at a profitability deposits that, better of end the back trajectory question, got to that how be some managing where deposit and positions shape raise not it change NII. on just to decent NII more and bit growth, a And got of those the we'll does little competitive trade-offs make. -- would be and we're are we're loan

L. Erika Penala

feels how forward-looking it in my Got an feels above year. you guess, back And next you rate of -- quarter, as sounds assuming the income given X% appropriate, that. record feedback fee should for terms way investors It XXXX, NII From like levels it. year-over-year and think activity -- that posted look feels doesn't always obviously, world. second benefit the revenues I run in general the of it more And in has if Tim. your positive we way that about grow bigger the expense from this the at even come question quite been is like it

think you ready about as projects that back guide big we for feel put we placeholder. 'XX retackle you XXXX, on right down? about have to is because -- XXXX, dollars are and get that revisit us And pulled were may coming NII from to in the as it until expenses you're a think growth in you As we what the like

Timothy Spence

Yes.

thank So you.

there fact a a me I back Rose's saying base the sprinted, think in Cincinnati I heard reference, ] there, both. he's to [ [ appreciate the first ] dates hustle I that walk. past, that name complement and Pete invented old [ that ] and was in nick a you've think, question And that's on the

we part I sprint of ethos think, that to the a walk. run is, way that try first the is to to right, think I company, on

So in quarter this got for year to positive first second NIM work we problems the NIM try in get saying there year. of that our last first that's the next I why that quarter, as part and the made the before year to over opposed to after turn leverage peers. quarter in sequential the right, And the to of inflected we most grew next the year's materialize. was this quarter on We quarter, trough environment our then NII waiting peers. most which real before we're versus of The we'll operating and think year-over-year positive

XX-plus going back Like have to none were of manage where an expenses. built company environment sense, in on make -- we we that holding thought this were to involved branches the right? year we're important investments trying We to have us or would

platform significant. and on this I in in the Wealth companies Management we've the to modernization, sales fintech the year on of payment last continued market commercial We pretty mentioned, feed both the side year, been force acquisitions the have hiring, middle on forward as we made and the continued and and

help us request expect the It's and expect company should year an the of sorts process. things And you a along resource we same the So strategic next other to the way. investment view investments through don't as efficiency self-fund to principally planning do allocation to process. initiatives

look So of X% you rate has been, it, bank I run annualized get wait time expense call the over until the a with of don't that I XXXX, for that. you a know have it. But if number helped at you to period January to specific

that's the to through average start. going periods benign where be challenging were you'd So would use more you periods certainly more past and

Operator

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

Manan Gosalia

historical index exception happen is is that and experience? deposits. the behaved deposit question of index about ask based talk So guess the there I how pricing? into you fall Or Can not really rates about on a deposits rates they've other to as on I wanted fall, those over that those chance some does move that products time? with

Bryan Preston

are fairly ultimately market some get that whereas do on ability those reality a to managed a But manage manage able spread deposit more are account, we on because try deposit better occur. that The negotiations well. you that index costs. we is on always people typically some movements, things paid have depositor see typically You'll taking are things because risk Those the on spread to as an a it. a you're it's to wider

our about it a through something had we from So perspective. process. experience behaving, a not migration headwind back controlling around pricing reverse concerned with discipline being we that overly from We're and have beta that into have our [indiscernible] good index

Manan Gosalia

[indiscernible] normalizing on Can signs XX, you're I Got you're gives that noted not then you reaching any you that What credit here? some it are give levels. separately Slide On of credit. things just are you showing us there? rates color just going know more normalized NPAs and confidence seeing it. maybe And Is down. weakening. that some

stabilize roll the So Maybe that from this Is it what side? you're just credit helps rates? the seeing on to you on what here? helps

Greg Schroeck

that I'll couple Greg. one. delinquency, of all-time levels. A low to it's take continue Look things. Yes, at the delinquencies at be our

in $X actually million NPAs. We by assets went increase quarter-over-quarter. had down criticized Our the

X commercial about and On a and side, been very consistent X it by be to were names different very very in talking continues portfolio, We've driven diverse industries. those the diverse.

dividend, consumer 'XX, on side, vintages softness so of little look in of RV. many We the you that 'XX When almost consumer seeing basis the we're you same origination the dividends points. from see across in and bit XX, will those softness they're RV tell in thing underperforming indexes the other the XX same of data outperforming at securitization the thing. asset We're actually portfolio. the On a by securitization specifically little data portfolio, But bit a the classes. originators

back for XXX a more comes normalized would I'm but elevated the vintages I highly to expect next confident X, that work through level bit or dividend so And and be little it down we'll quarter in that a level. to those

So within is pretty consumer we're it's seeing additional stable. concerns, the portfolio not or just causing commercial anything that's been

in portfolio, the got continued estate real behave. portfolio. minimal we've nonperforming very delinquencies, We've virtually Our estate commercial very, low assets to seen that borrowers have real commercial

strategic continue diversification, the that board, of expect play the played across portfolio for that to has future. in that well through-the-cycle a I So us, and would building out

Operator

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

Matthew O'Connor

more got showed next being in guess Good to as charts I from just morning. split And which a you balanced. you've still the is getting few you XX-XX pretty reshift the XX, before, Midwest the the showing On out to showed shift question here. pie we some Slide look years, mix is, the from meaningful

of combination Is how So a well? as harvesting there? and that what it harvesting simply you've get buy you do building. component there done, Is a of

Timothy Spence

and the buy which a in increase component marketing old-fashioned no way, That's there. in time the is product and right the new to there's Yes, strategies one branch distribution. support at

right? the that So if we've stage XXX the where a more built, growth. even and they built this performance them X catchment of having performing the you fact predictable. point at branches than of the pivot at they reach they look they're Matt, within pretty and then And in to sort past make continuing well. this about saturate They very in talked years, We've break area X about is their

X call it, years years, So like, most. novo right at is the now the age going average of to be X.X de

physical sort come you to as over based first of overall. on So on we'll we deposit are is in of that XX just and And branches will tailwind get XXX XX they a the of then from time there building year. the basis on ground XX the mature mix to the as up the move X-year a shift annualized base Plus, And online, the about behind operational. those what that should the distribution. that range we the the have see in pipeline. play already been an number in into That allocation mix have retail side out XX

Matthew O'Connor

helpful. super That's Okay.

what of maturing quite you've the of move And lot just... a a needle bit. So then will got already

Timothy Spence

growth that's FDIC your from deposit on summary cited there. visible I it see the deposits, of [indiscernible] that retail

Matthew O'Connor

income get lot you I repricing you the it, do of NIM? missed normalized of And curve, kind been there's rates I'm of of looking concept a whatever drivers and of and asset sorry the separately, if just interest guys NIM. net as I then about concept on And the discussion forward know but versus a the years normalized NIM few rate out talked like fixed have any

Bryan Preston

another curve what the What the take of [indiscernible]. like? $X because basis we're that the north $X Yes. the billion today, again, billion year-over-year. If point that's of holding of the in excess does mean is I future? shape cash it's out cash we're almost up billion cash, just a one like tough position look look that holding -- of we're environment does we're $XX Every you

$XX points NIM to into add some the for over year So our just repricing to We're deploy growth having to continued could year, the and with billion portfolio see the that just XX next portfolio. XX out of getting the opportunities basis hopefully the going to loan alone. NIM that

end I to curve, down, reasonable perspective, fixed we time will a little bit bit little horizon. to it's front back the rate relief on or XXX From in But that unreasonable think a a of what you was mean, normalized takes asset to XXX, not take to about just continue [indiscernible] could more a a -- time talking that more play out. if get front and get getting be

Operator

comes question of next Your of the Christopher from Montgomery Marinac Scott. Janney line

Christopher Marinac

already been this organic pipeline? your that orders I banks opportunities business wanted Does to year. create large placed you ask new beyond under have about some who for of the regulatory

Timothy Spence

industry limit I to absorb have rest growth capacity It on able else's the to market. mean has I the be to think the that any ability of a to there's in the someone time grow. the means

the they just an no at way moments of wouldn't sense, the wish fun regulatory when are I that tend the where about any better I I more anybody. work have other Yes, but that you and in to right? on the others guess create else, there's disciplined strong somewhere business. your you environment in banks position do problems ability opportunities not. sort in The think tactically, to So a grow So are in significant do disruption for may more through There's margins to run strategically, you

Christopher Marinac

on follow-up rates quick Great, get your more Or of make does a help challenging? lower it it returns interest time. returns? over invested Does sort just Tim. you And

Bryan Preston

to the Lower banking environment interest very is a a long challenging helpful comes as time. curve, as certainly be for along over that curve of the A flat rates low curve with [indiscernible] would low normalization returns yield system. a

Christopher Marinac

everybody. Great. Thank you, Bryan. Appreciate it,

Operator

We of Mayo a Securities. follow-up the Fargo have Mike line from question Wells of

Michael Mayo

big I a question. just this picture was wondering, is

And You make more much than have payments. guys kind so your shouldn't for get stock if you problem of I that if organic growth so growth Wealth you you Do for give investing much opportunities you how others. in about sense maybe buy the or the question, there. you to any or on Southeast investments our returns branches have back earlier metric thinking on sort high-class what a many back you're Commercial and you to goes those? I'm get of

Timothy Spence

breakeven. we different probably just to of Yes, across look is at Mike, right, I time all comparable mean, types the and things, the these investment easiest IRR,

been less know of the a in had the in to you those XXX location look branches the we get small of part right? out targeting the to in made nascent a has of to If branches at years, been XX% and payments, we've has you acquisitions you Southeast XX% time commercial what were because and support you're going IRR that in the build you build. and IRRs couple next the than So in to to cases the running range breakeven the after were XXs, more it's business predictable when you

anything nascent XXX higher don't we risk strategy, general, constraining XX% or of there to of XX% Like at more feel like the rate. and at expect something proven to past lower done get attached, most in years, premium are get investment down Southeast, to that to we So of the that uncertain they're the the need that. the has it risk range, if execution the subject place obviously, execution would can built about that's really X more over out just on. good course in the you more look the the strategies, sort return the you the think you I that would the we JPMorgan the branches

else. than JPMorgan. and bit believe wide #X, don't is Third between you think then pretty gap smaller I is know I have that #X and and little And everybody Fifth I to that we're there's and BofA a tell BofA I a

we know don't down said, we alternative appropriately terms at hey, to I not don't buy -- would rate We have we an for use are basis and we at in capital So moment, back of on the thinking that we be there. stock. that least aggressive that would think going deploy it being investment toward. that organic we're the an

Bryan Preston

are Mike, accelerating And XX part the we a of branch investments, proven for the what It's year strategy. mentioned, branch to the we're on build XX-plus over why from Tim was to going XX years. as

be leverage be we about an invest because have going care analysts well. trade-off gives limiter area And as that operating positive to other us us for of we the to confidence then worried going is about that more As the want to the always in. that's we are

Michael Mayo

time, losses digital. I of branch and Southeast going come less big a you with recovered last likes up, that sort hear banks much And spending versus think that to on woken from accelerating you so I have the the some and you in change at IRRs that get of those securities mean last back push have you're some of but but the few years. your build, the you, have it's I if also like technology defense to Just point. you of you offense. competitors mentioned more unrealized Do

X might years years? than So few you it's be tougher the been past in next think the it in

Timothy Spence

on right X that that is amount think making eye-popping. given large right? to of the deployed that I the constantly know. are of at relative the the the don't have think is technology we investments others. Southeast the value getting looking I years, part completely don't of set uncompetitive the agree competitors -- money our into banks I and you're what that proposition investment was you're I we just is last

opposite of but not the of It's I it's what Fifth led cases, in been regionals who been on offerings there. Fifth large the consumer-friendly some at and the actually consumer tell Third proposition, better might any see other as Fifth go look many offering account that would true into or the checking consumer you me think, if is just how for materialized proposition. But product Third, you regional been value some banks and definitely the Third lead it's value substantially in pull innovation. for those terms of up

able And the get run bank for the to be is So environments. that going to we level competitive better are competition worse. And environments, get take take matter, not it's not share. on in be able high, running that to expect going very the stay or I competitive to share bank to we to of

Operator

I back for That conference over turn the now will Matt closing session. remarks. concludes our to Q&A

Matt Curoe

call. Fifth in Please have the you, or Thank Investor contact the if follow-up Operator, department now for and thanks, everyone, you. Third. your questions. Relations Thank any calls you interest you disconnect may

Operator

conference This concludes today's call.

disconnect. You now may

Fifth Third Bancorp (FITB) 18 Oct 242024 Q3 Earnings call transcript