2015 Earnings Per Diluted Share of
$2.01
- 4Q15 net income available to common
shareholders of $634 million, or $0.79 per diluted common share
- Includes a $331 million pre-tax (~$215
million after-tax) gain on the sale of Vantiv shares, an $89
million pre-tax (~$58 million after-tax) gain on Vantiv warrant
actions taken during the quarter, a $49 million pre-tax (~$32
million after-tax) payment received from Vantiv to terminate a
portion of its tax receivable agreement, a $21 million pre-tax
(~$13 million after-tax) positive valuation adjustment on the
remaining warrant Fifth Third holds in Vantiv, a $10 million
pre-tax (~$7 million after-tax) charge related to the valuation of
the Visa total return swap, and a $10 million pre-tax (~$7 million
after-tax) contribution to Fifth Third Foundation, resulting in a
net $0.38 impact on earnings per share
- 4Q15 return on average assets (ROA) of
1.83%; return on average common equity of 17.2%; return on average
tangible common equity** of 20.6%
- Pre-provision net revenue (PPNR)** of
$1.0 billion in 4Q15
- Net interest income (FTE) of $904
million was down $2 million sequentially and up $16 million from
4Q14; net interest margin of 2.85%, down 4 bps sequentially
- Average portfolio loans of $93.6
billion, up $221 million sequentially and up $2.6 billion from
4Q14; the increase from the prior year was primarily driven by
increases in C&I and commercial construction loans
- Noninterest income of $1.1 billion
compared with $713 million in the prior quarter; primarily driven
by the Vantiv-related items mentioned above
- Noninterest expense of $963 million, up
2% from 3Q15, primarily driven by a contribution to Fifth Third
Foundation
- Credit trends
- 4Q15 net charge-offs of $80 million
(0.34% of loans and leases) decreased from 3Q15 NCOs of $188
million (0.80% of loans and leases) primarily due to the 3Q15 $102
million net charge-off related to the restructuring of a student
loan backed commercial credit
- Portfolio NPA ratio of 0.70% up 5 bps
from 3Q15, NPL ratio of 0.55% up 6 bps from 3Q15; total
nonperforming assets (NPAs) of $659 million, including loans
held-for-sale (HFS), increased $51 million sequentially
- 4Q15 provision expense of $91 million;
$156 million in 3Q15 and $99 million in 4Q14; decrease from the
prior quarter was primarily impacted by the restructuring of a
student loan backed commercial credit in 3Q15
- Strong capital ratios*
- Common equity Tier 1 (CET1) ratio
9.83%; fully phased-in CET1 ratio of 9.73%
- Tier 1 risk-based capital ratio 10.93%,
Total risk-based capital ratio 14.13%, Leverage ratio 9.54%
- Tangible common equity ratio** of
8.71%; 8.59% excluding securities portfolio unrealized
gains/losses
- 10 million reduction in common shares
outstanding during the quarter
- Book value per share of $18.48; up 1%
from 3Q15 and up 7% from 4Q14; tangible book value per share** of
$15.39
* Capital ratios estimated; presented under current U.S. capital
regulations.
** Non-GAAP measure; see Reg. G reconciliation on page 34 in
Exhibit 99.1 of 8-k filing dated 1/21/16.
Fifth Third Bancorp (Nasdaq: FITB) today reported full year 2015
net income of $1.7 billion, up 16 percent from net income of $1.5
billion in 2014. After preferred dividends, 2015 net income
available to common shareholders was $1.6 billion, or $2.01 per
diluted share, up 16 percent compared with 2014 net income
available to common shareholders of $1.4 billion, or $1.66 per
diluted share.
Fourth quarter 2015 net income was $657 million, an increase of
72 percent from net income of $381 million in the third quarter of
2015 and an increase of 71 percent from net income of $385 million
in the fourth quarter of 2014. After preferred dividends, net
income available to common shareholders was $634 million, or $0.79
per diluted share, in the fourth quarter 2015, compared with $366
million, or $0.45 per diluted share, in the third quarter 2015, and
$362 million, or $0.43 per diluted share, in the fourth quarter of
2014.
Fourth quarter 2015 included:
Income
- $331 million gain on the sale of Vantiv
shares
- $89 million gain on Vantiv warrant
actions taken during the quarter
- $49 million payment received from
Vantiv to terminate a portion of its tax receivable agreement
- $21 million positive valuation
adjustment on the remaining Vantiv warrant
- ($10 million) charge related to the
valuation of the total return swap entered into as part of the 2009
sale of Visa, Inc. Class B shares
Expenses
- ($2 million) in severance expense
- ($10 million) contribution to Fifth
Third Foundation
Results also included a $31 million annual payment recognized
from Vantiv pursuant to the tax receivable agreement recorded in
other noninterest income.
Third quarter 2015 included:
Income
- $130 million positive valuation
adjustment on the Vantiv warrant
- ($8 million) charge related to the
valuation of the Visa total return swap
Expenses
- ($9 million) charge associated with
executive retirement and severance costs
Results also included $35 million of provision expense related
to the restructuring of a student loan backed commercial credit
originally extended in 2007.
Fourth quarter 2014 included:
Income
- $56 million positive valuation
adjustment on the Vantiv warrant
- ($19 million) charge related to the
valuation of the Visa total return swap
Expenses
- ($6 million) in severance expense
Results also included a $23 million annual payment recognized
from Vantiv pursuant to the tax receivable agreement recorded in
other noninterest income and $23 million of provision expense
related to the transfer of residential mortgage loans classified as
troubled debt restructurings to held-for-sale.
Earnings Highlights
For the Three Months Ended % Change December
September June March December 2015 2015
2015 2015 2014 Seq
Yr/Yr
Earnings ($ in millions) Net income attributable to
Bancorp $ 657 $ 381 $ 315 $ 361 $ 385 72 % 71 % Net income
available to common shareholders $ 634 $ 366 $ 292 $ 346 $ 362 73 %
75 %
Common Share Data Earnings per share, basic $
0.80 $ 0.46 $ 0.36 $ 0.42 $ 0.44 74 % 82 % Earnings per share,
diluted 0.79 0.45 0.36 0.42 0.43 76 % 84 % Cash dividends per
common share 0.13 0.13 0.13 0.13 0.13 - -
Financial
Ratios Return on average assets 1.83 % 1.07 % 0.90 % 1.06 %
1.13 % 71 % 62 % Return on average common equity 17.2 10.0 8.1 9.7
10.0 72 % 72 % Return on average tangible common equity(b) 20.6
12.0 9.7 11.7 12.1 72 % 70 % CET1 capital(c) 9.83 9.40 9.42 9.52
N/A 5 % N/A Tier I risk-based capital(c) 10.93 10.49 10.51 10.62
10.83 4 % N/A Tier I common equity(b) N/A N/A N/A N/A 9.65 N/A N/A
CET1 capital (fully-phased in)(b)(c) 9.73 9.30 9.31 9.41 N/A 5 %
N/A Net interest margin(a) 2.85 2.89 2.90 2.86 2.96 (1 %) (4 %)
Efficiency(a) 48.0 58.2 65.4 62.3 59.6 (18 %) (19 %) Common
shares outstanding (in thousands) 785,080 795,439 810,054 815,190
824,047 (1 %) (5 %) Average common shares outstanding (in
thousands): Basic 784,855 795,793 803,965 810,210 819,057 (1 %) (4
%) Diluted 794,481 805,023 812,843 818,672 827,831 (1 %) (4 %)
(a) Presented on a fully taxable equivalent basis. (b) These
ratios have been included herein to facilitate a greater
understanding of the Bancorp's capital structure and financial
condition. See the Regulation G Non-GAAP Reconciliation table for a
reconciliation of these ratios to U.S. GAAP. (c) Under the banking
agencies' Basel III Final Rule, assets and credit equivalent
amounts of off-balance sheet exposures are calculated according to
the standardized approach for risk-weighted assets. The resulting
values are added together resulting in the Bancorp's total
risk-weighted assets used in the calculation of the tier I
risk-based capital and common equity tier 1 ratios beginning
January 1, 2015. Current period regulatory capital ratios are
estimated. NA: Not applicable.
“Core fourth quarter results were in line with our
expectations,” said Greg D. Carmichael, President and CEO of Fifth
Third Bancorp. “Our fee businesses produced stable results despite
lower levels of capital markets activity, and our expenses were up
less than one percent relative to the third quarter, excluding the
contribution we made to our Foundation in support of our
communities. We were also pleased with the low charge-off levels at
34 basis points. We view the Fed’s December rate move as a positive
first step towards a normalized environment but there is
uncertainty around the extent and timing of the future rate
decisions.
“Additionally during the quarter, we have taken important steps
towards reducing our direct ownership stake in Vantiv in the best
interest of our shareholders while reducing a significant amount of
volatility associated with our warrant position. Vantiv continues
to perform well and we were happy to participate in their success.
In this quarter we executed on all three pieces of our financial
interests, namely the TRA, warrants, and direct ownership in a
well-planned manner to maximize the returns to our shareholders.
After these transactions, we continue to hold a significant
ownership stake in the company which we believe will result in
healthy returns for our shareholders.
“We view 2016 as an important transition year tactically and
strategically to position our company to achieve operating leverage
in a sustainable manner regardless of the rate environment going
forward. In 2015 we took significant steps in that direction and we
will continue our efforts in 2016. We are working simultaneously on
long-term revenue growth as well as expense efficiencies to achieve
our goal. We have taken actions to reduce our run-rate expenses and
those savings will partially fund the strategic investments and
expenses related to our risk and compliance infrastructure which we
expect will peak in 2016. Our strategic decisions will continue to
result in the re-allocation of our resources to improve
profitability with reduced volatility. We are committed to
achieving the industry leading level of operational results that
our constituents have historically seen from us when it comes to
service, efficiency, growth, and returns.”
Income
Statement Highlights
For
the Three Months Ended % Change December September
June March December 2015 2015
2015 2015 2014 Seq
Yr/Yr
Condensed Statements of Income ($ in millions) Net
interest income (taxable equivalent) $ 904 $ 906 $ 892 $ 852 $ 888
- 2 % Provision for loan and lease losses 91 156 79 69 99 (42 %) (8
%) Total noninterest income 1,104 713 556 630 653 55 % 69 % Total
noninterest expense 963 943
947 923 918 2 %
5 % Income before income taxes (taxable equivalent) $
954 $ 520 $ 422 $ 490 $ 524
83 % 82 % Taxable equivalent adjustment 5 5 5
5 5 - - Applicable income taxes 292 134
108 124 134
NM NM Net income $ 657 $ 381 $ 309 $ 361 $ 385
72 % 71 % Less: Net income attributable to noncontrolling interests
- - (6 ) -
- - - Net income
attributable to Bancorp $ 657 $ 381 $ 315 $ 361 $ 385 72 % 71 %
Dividends on preferred stock 23 15
23 15 23 53
% - Net income available to common shareholders
$ 634 $ 366 $ 292 $ 346 $
362 73 % 75 % Earnings per share, diluted $
0.79 $ 0.45 $ 0.36 $ 0.42 $ 0.43
76 % 84 %
Net Interest Income
For the
Three Months Ended % Change December September
June March December 2015 2015 2015 2015
2014 Seq Yr/Yr
Interest Income ($ in millions)
Total interest income (taxable equivalent) $ 1,035 $ 1,031 $ 1,008
$ 975 $ 1,016 - 2 % Total interest expense 131
125 116
123 128
5 % 2 % Net interest income (taxable
equivalent) $ 904 $ 906
$ 892 $ 852 $ 888
- 2 %
Average
Yield Yield on interest-earning assets (taxable equivalent)
3.26 % 3.29 % 3.28 % 3.28 % 3.38 % (1 %) (4 %) Rate paid on
interest-bearing liabilities 0.61 %
0.58 % 0.56 % 0.60
% 0.61 % 5 % - Net
interest rate spread (taxable equivalent) 2.65 %
2.71 % 2.72 %
2.68 % 2.77 % (2
%) (4 %) Net interest margin (taxable equivalent) 2.85 %
2.89 % 2.90 % 2.86 % 2.96 % (1 %) (4 %)
Average Balances
($ in millions) Loans and leases, including held for sale $
94,587 $ 94,329 $ 92,739 $ 91,659 $ 91,581 - 3 % Total securities
and other short-term investments 31,256 30,102 30,563 29,038 27,604
4 % 13 % Total interest-earning assets 125,843 124,431 123,302
120,697 119,185 1 % 6 % Total interest-bearing liabilities 85,415
85,204 83,512 83,339 82,544 - 3 % Bancorp shareholders' equity
15,982 15,815
15,841 15,820
15,644 1 %
2 %
Net interest income decreased $2 million to $904 million on a
fully taxable equivalent basis from the third quarter, primarily
driven by the full quarter impact of $2.4 billion of wholesale debt
issuances in the third quarter, the $750 million auto
securitization completed in November, and commercial loan yield
compression, partially offset by residential mortgage loan
growth.
The net interest margin was 2.85 percent, a decrease of 4 bps
from the previous quarter, primarily driven by the impact of debt
issuances and the auto securitization above, slower prepayments
reducing net discount accretion on the investment portfolio, and an
increased short-term cash position during the quarter.
Compared with the fourth quarter of 2014, net interest income
increased $16 million and the net interest margin decreased 11 bps.
The increase in net interest income was driven by the impact of
higher investment securities balances, partially offset by a $22
million decline due to the changes to the Bancorp’s deposit advance
product that were effective January 1, 2015. The decline in the net
interest margin from the prior year was primarily driven by a 7
basis point impact due to the changes to the deposit advance
product and loan repricing.
Securities
Average securities and other short-term investments were $31.3
billion in the fourth quarter of 2015 compared with $30.1 billion
in the previous quarter and $27.6 billion in the fourth quarter of
2014. Other short-term investments average balances of $2.3 billion
increased $454 million sequentially reflecting higher cash balances
held at the Federal Reserve.
Loans
For the Three Months Ended % Change
December September June March December 2015 2015
2015 2015 2014 Seq Yr/Yr
Average Portfolio Loans and Leases ($ in millions)
Commercial: Commercial and industrial loans $ 43,154 $ 43,149 $
42,550 $ 41,426 $ 41,277 - 5 % Commercial mortgage loans 7,032
7,023 7,148 7,241 7,480 - (6 %) Commercial construction loans 3,141
2,965 2,549 2,197 1,909 6 % 65 % Commercial leases
3,839 3,846 3,776
3,715 3,600 -
7 % Subtotal - commercial loans and leases $
57,166 $ 56,983 $ 56,023
$ 54,579 $ 54,266 - 5 %
Consumer: Residential mortgage loans $ 13,504 $ 13,144 $ 12,831 $
12,433 $ 13,046 3 % 4 % Home equity 8,360 8,479 8,654 8,802 8,937
(1 %) (6 %) Automobile loans 11,670 11,877 11,902 11,933 12,073 (2
%) (3 %) Credit card 2,218 2,277 2,296 2,321 2,324 (3 %) (5 %)
Other consumer loans and leases 676
613 467 440
395 10 % 71 % Subtotal -
consumer loans and leases $ 36,428 $ 36,390
$ 36,150 $ 35,929 $
36,775 - (1 %) Total average loans and
leases (excluding held for sale) $ 93,594 $ 93,373 $ 92,173 $
90,508 $ 91,041 - 3 % Average loans held for sale $
993 $ 956 $ 566 $ 1,151
$ 540 4 % 84 %
Average loan and lease balances (excluding loans held-for-sale)
increased $221 million sequentially and increased $2.6 billion, or
3 percent, from the fourth quarter of 2014. The year-over-year
increase in average loans and leases was driven by increased
commercial and industrial (C&I) and commercial construction
balances. Period end loans and leases (excluding loans
held-for-sale) of $92.6 billion decreased $992 million, or 1
percent, sequentially and increased $2.5 billion, or 3 percent,
from a year ago.
Average commercial portfolio loan and lease balances increased
$183 million sequentially and increased $2.9 billion, or 5 percent,
from the fourth quarter of 2014. Average C&I loans were flat
from the prior quarter and increased $1.9 billion, or 5 percent,
from the fourth quarter of 2014. Within commercial real estate,
average commercial mortgage balances were flat and average
commercial construction balances increased $176 million. Commercial
line usage, on an end of period basis, decreased 77 bps from the
third quarter of 2015 and 49 bps from the fourth quarter of
2014.
Average consumer portfolio loan and lease balances increased $38
million sequentially and decreased $347 million from the fourth
quarter of 2014. Average residential mortgage loans increased 3
percent sequentially and 4 percent from a year ago. Average auto
loans decreased 2 sequentially and 3 percent from the previous
year. Average home equity loans declined 1 percent sequentially and
6 percent from the fourth quarter of 2014. Average credit card
loans decreased 3 percent sequentially and 5 percent from the
fourth quarter of 2014.
Period end loans held-for-sale balances of $903 million
decreased $91 million sequentially. Period end loans held-for-sale
balances decreased $358 million compared with the prior year due to
the impact of the transfer of certain residential mortgage loans
classified as troubled debt restructurings to held-for-sale in the
fourth quarter of 2014.
Deposits
For the Three Months Ended
% Change December September June March December 2015
2015 2015 2015 2014 Seq
Yr/Yr
Average Deposits ($ in millions) Demand $ 36,254 $
35,231 $ 35,384 $ 33,760 $ 33,301 3 % 9 % Interest checking 25,296
25,590 26,894 26,885 25,478 (1 %) (1 %) Savings 14,615 14,868
15,156 15,174 15,173 (2 %) (4 %) Money market 18,775 18,253 18,071
17,492 17,023 3 % 10 % Foreign office(a) 736
718 955 861
1,439 3 % (49 %) Subtotal
- Transaction deposits $ 95,676 $ 94,660 $ 96,460 $ 94,172 $ 92,414
1 % 4 % Other time 4,052 4,057
4,074 4,022
3,936 - 3 % Subtotal - Core
deposits $ 99,728 $ 98,717 $ 100,534 $ 98,194 $ 96,350 1 % 4 %
Certificates - $100,000 and over 3,305 2,924 2,558 2,683 2,998 13 %
10 % Other 7 222
- - -
(97 %) 100 % Total average deposits $ 103,040
$ 101,863 $ 103,092 $
100,877 $ 99,348 1 % 4 %
(a) Includes commercial customer
Eurodollar sweep balances for which the Bancorp pays rates
comparable to other commercial deposit accounts.
Average core deposits increased $1.0 billion, or 1 percent,
sequentially and increased $3.4 billion, or 4 percent, from the
fourth quarter of 2014. Average transaction deposits increased $1.0
billion, or 1 percent, from the third quarter of 2015 and increased
$3.3 billion, or 4 percent from the fourth quarter of 2014.
Sequential performance was primarily driven by higher demand
deposit and money market account balances, partially offset by
lower interest checking and savings account balances.
Year-over-year growth reflected higher demand and money market
account balances, partially offset by lower savings, foreign
office, and interest checking account balances. Other time deposits
were flat sequentially and increased 3 percent compared with the
fourth quarter of 2014.
Average commercial transaction deposits increased 2 percent
sequentially and increased 5 percent from the previous year.
Sequential performance was primarily driven by seasonally higher
demand deposit and money market account balances, partially offset
by lower interest checking account balances. Year-over-year growth
reflected higher demand deposit and money market account balances,
partially offset by lower foreign office and interest checking
account balances.
Average consumer transaction deposits were flat sequentially and
increased 2 percent from the fourth quarter of 2014. The sequential
performance reflected higher interest checking account balances,
partially offset by lower savings account balances. Year-over-year
growth was driven by increased money market account, interest
checking, and demand deposit account balances, partially offset by
lower savings account balances.
Wholesale
Funding
For the Three Months Ended
% Change December September June March
December 2015 2015 2015 2015 2014
Seq Yr/Yr
Average Wholesale Funding ($ in
millions) Certificates - $100,000 and over $ 3,305 $ 2,924 $
2,558 $ 2,683 $ 2,998 13 % 10 % Other deposits 7 222 - - - (97 %)
100 % Federal funds purchased 1,182 1,978 326 172 161 (40 %) NM
Other short-term borrowings 1,675 1,897 1,705 1,602 1,481 (12 %) 13
% Long-term debt 15,772 14,697
13,773 14,448
14,855 7 % 6 % Total average
wholesale funding $ 21,941 $ 21,718
$ 18,362 $ 18,905 $ 19,495
1 % 13 %
Average wholesale funding of $21.9 billion increased $223
million, or 1 percent, sequentially, and increased $2.4 billion, or
13 percent, compared with the fourth quarter of 2014. The
sequential increase was primarily driven by the full quarter’s
impact of the issuance of $1.1 billion of 5-year holding company
debt and $1.3 billion of 3-year bank-level debt in the third
quarter of 2015, a $750 million auto securitization completed in
November, and an increase in certificates $100,000 and over. The
year-over-year increase in average wholesale funding reflected an
increase in federal funds purchased, an increase in long-term debt
due to issuances in 2015, as well as an increase in certificates
$100,000 and over.
Noninterest
Income
For the Three
Months Ended % Change December September June March
December 2015 2015 2015
2015 2014 Seq Yr/Yr
Noninterest Income ($ in millions) Service charges on
deposits $ 144 $ 145 $ 139 $ 135 $ 142 (1 %) 1 % Corporate banking
revenue 104 104 113 63 120 - (13 %) Mortgage banking net revenue 74
71 117 86 61 4 % 21 % Investment advisory revenue 102 103 105 108
100 (1 %) 2 % Card and processing revenue 77 77 77 71 76 - 1 %
Other noninterest income 602 213 1 163 150 NM NM Securities gains,
net 1 - 4 4
4 - (75 %) Total noninterest
income $ 1,104 $ 713 $ 556 $ 630
$ 653 55 % 69 %
Noninterest income of $1.1 billion increased $391 million
sequentially and increased $451 million compared with prior year
results. The sequential and year-over-year comparisons reflect the
impacts described below.
Noninterest Income excluding certain items
For the Three Months Ended
% Change December September
December 2015 2015
2014 Seq Yr/Yr
Noninterest Income excluding certain items ($ in millions)
Noninterest income (U.S. GAAP) $ 1,104 $ 713 $ 653 Gain on sale of
Vantiv shares (331 ) - - Gain on Vantiv warrant actions (89 ) - -
Vantiv TRA settlement payment (49 ) - - Vantiv warrant valuation
(21 ) (130 ) (56 ) Valuation of Visa total return swap 10 8 19
Securities (gains) / losses (1 )
- (4 )
Noninterest income excluding certain items $ 623
$ 591 $ 612
5 % 2 %
Excluding the items in the table above, noninterest income of
$623 million increased $32 million, or 5 percent, from the previous
quarter and increased $11 million, or 2 percent, from the fourth
quarter of 2014. The sequential growth was primarily due to an
annual payment from Vantiv pursuant to the tax receivable agreement
of $31 million recognized in the fourth quarter of 2015.
Year-over-year growth was driven by growth in mortgage banking
revenue and the annual payment from Vantiv pursuant to the tax
receivable agreement recognized in both quarters, partially offset
by a decrease in corporate banking revenue.
Service charges on deposits of $144 million decreased 1 percent
from the third quarter of 2015 and increased 1 percent compared
with the same quarter last year. The sequential decrease was due to
a 3 percent decrease in retail service charges. The increase from
the fourth quarter of 2014 was due to a 3 percent increase in
commercial service charges.
Corporate banking revenue of $104 million was flat compared to
the third quarter of 2015 and decreased $16 million from the fourth
quarter of 2014. The sequential comparison reflects higher lease
remarketing fees, partially offset by a decrease in institutional
sales revenue. The year-over-year decrease was driven by lower loan
syndications revenue, foreign exchange fees, and business lending
fees, partially offset by higher lease remarketing and
institutional sales revenue.
Mortgage banking net revenue was $74 million in the fourth
quarter of 2015, up $3 million from the third quarter of 2015 and
up $13 million from the fourth quarter of 2014. Fourth quarter 2015
originations were $1.8 billion, compared with $2.3 billion in the
previous quarter and $1.7 billion in the fourth quarter of 2014.
Fourth quarter 2015 originations resulted in gains of $37 million
on mortgages sold, compared with gains of $46 million during the
previous quarter and $36 million during the fourth quarter of 2014.
Mortgage servicing fees were $53 million this quarter, $54 million
in the third quarter of 2015, and $60 million in the fourth quarter
of 2014. Mortgage banking net revenue is also affected by net
servicing asset valuation adjustments, which include mortgage
servicing rights (MSR) amortization and MSR valuation adjustments
(including mark-to-market adjustments on free-standing derivatives
used to economically hedge the MSR portfolio). These net servicing
asset valuation adjustments were negative $16 million in the fourth
quarter of 2015 (reflecting MSR amortization of $29 million and MSR
valuation adjustments of positive $13 million); negative $29
million in the third quarter of 2015 (MSR amortization of $37
million and MSR valuation adjustments of positive $8 million); and
negative $34 million in the fourth quarter of 2014 (MSR
amortization of $32 million and MSR valuation adjustments of
negative $2 million). The mortgage servicing asset, net of the
valuation reserve, was $785 million at quarter end on a servicing
portfolio of $59 billion.
Investment advisory revenue of $102 million decreased 1 percent
from the third quarter of 2015 and increased 2 percent
year-over-year. The increase from the prior year was primarily
driven by an increase in private client services revenue.
Card and processing revenue of $77 million in the fourth quarter
of 2015 was flat sequentially and increased 1 percent from the
fourth quarter of 2014.
Other noninterest income totaled $602 million in the fourth
quarter of 2015, compared with $213 million in the previous quarter
and $150 million in the fourth quarter of 2014. As previously
described, the results included the adjustments in the table above
with the exception of securities gains in all comparable periods.
Excluding these items, other noninterest income of $122 million
increased approximately $31 million, or 34 percent, from the third
quarter of 2015 and increased approximately $9 million, or 8
percent, from the fourth quarter of 2014. The sequential and
year-over-year increases were primarily due to payments from Vantiv
pursuant to the tax receivable agreement of $31 million recognized
in the fourth quarter of 2015 and $23 million recognized in the
fourth quarter of 2014.
Net gains on investment securities were $1 million in the fourth
quarter of 2015, compared with an immaterial gain in the previous
quarter and $4 million in the fourth quarter of 2014.
Noninterest Expense
For the
Three Months Ended % Change December September
June March December 2015 2015
2015 2015 2014
Seq Yr/Yr
Noninterest Expense ($ in millions)
Salaries, wages and incentives $ 386 $ 387 $ 383 $ 369 $ 366 - 5 %
Employee benefits 74 72 78 99 79 3 % (6 %) Net occupancy expense 83
77 83 79 77 8 % 8 % Technology and communications 59 56 54 55 54 5
% 9 % Equipment expense 32 31 31 31 30 3 % 7 % Card and processing
expense 40 40 38 36 36 - 11 % Other noninterest expense
289 280 280
254 276 3 %
5 % Total noninterest expense $ 963 $ 943
$ 947 $ 923 $ 918
2 % 5 %
Noninterest expense of $963 million increased 2 percent compared
with the third quarter of 2015 and increased 5 percent compared
with the fourth quarter of 2014. The sequential increase was
primarily due to a $10 million contribution to the Fifth Third
Foundation and higher net occupancy expense. The year-over-year
increase reflected a $10 million contribution to Fifth Third
Foundation, higher compensation expense, net occupancy expense, and
technology and communications expense, partially offset by lower
employee benefits expense.
Credit Quality
For the Three
Months Ended December September June March December 2015
2015 2015 2015 2014
Total net
losses charged-off ($ in millions) Commercial and industrial
loans ($30 ) ($128 ) ($34 ) ($38 ) ($44 ) Commercial mortgage loans
(3 ) (11 ) (11 ) (1 ) (10 ) Commercial construction loans - (3 ) -
- - Commercial leases (1 ) - - - (1 ) Residential mortgage loans (3
) (3 ) (5 ) (6 ) (94 ) Home equity (9 ) (9 ) (9 ) (14 ) (11 )
Automobile loans (9 ) (7 ) (4 ) (8 ) (7 ) Credit card (19 ) (21 )
(21 ) (21 ) (20 ) Other consumer loans and leases
(6 ) (6 ) (2 )
(3 ) (4 ) Total net
losses charged-off $ (80 ) $ (188 ) $ (86 ) $ (91 ) $ (191 )
Total losses charged-off $ (105 ) $ (209 ) $ (112 ) $ (115 ) $ (215
) Total recoveries of losses previously charged-off
25 21 26
24 24
Total net losses charged-off $ (80 ) $ (188 ) $ (86 ) $ (91
) $ (191 )
Ratios (annualized) Net losses charged-off as a
percent of average portfolio loans and leases (excluding held for
sale) 0.34 % 0.80 % 0.37 % 0.41 % 0.83 % Commercial 0.24 % 0.99 %
0.32 % 0.29 % 0.40 % Consumer 0.49 %
0.51 % 0.46 %
0.59 % 1.47 %
Net charge-offs were $80 million, or 34 bps of average loans and
leases on an annualized basis, in the fourth quarter of 2015
compared with net charge-offs of $188 million, or 80 bps, in the
third quarter of 2015 and $191 million, or 83 bps, in the fourth
quarter of 2014. Third quarter 2015 net charge-offs included $102
million related to the restructuring of a student loan backed
commercial credit. Excluding this credit in the third quarter of
2015 net charge-offs were down $6 million sequentially. Fourth
quarter 2014 net charge-offs included $87 million (38 bps) related
to the transfer of residential mortgage loans classified as
troubled debt restructurings to held-for-sale.
Commercial net charge-offs were $34 million, or 24 bps, and were
down $108 million sequentially. C&I net charge-offs of $30
million decreased $98 million from the previous quarter primarily
due to the student loan backed credit mentioned above, and
commercial real estate net charge-offs decreased $11 million from
the previous quarter.
Consumer net charge-offs were $46 million, or 49 bps, and flat
sequentially. Net charge-offs on residential mortgage loans in the
portfolio were $3 million, flat compared with the previous quarter.
Home equity net charge-offs were $9 million, in line with the third
quarter of 2015, and net charge-offs in the auto portfolio of $9
million were up $2 million compared with the prior quarter. Net
charge-offs on credit card loans were $19 million, down $2 million
from the third quarter of 2015. Net charge-offs on other consumer
loans were $6 million, consistent with the previous quarter.
For the Three Months Ended December September
June March December 2015 2015 2015
2015 2014
Allowance for Credit
Losses ($ in millions) Allowance for loan and lease losses,
beginning $ 1,261 $ 1,293 $ 1,300 $ 1,322 $ 1,414 Total net losses
charged-off (80 ) (188 ) (86 ) (91 ) (191 ) Provision for loan and
lease losses 91 156
79 69
99 Allowance for loan and lease
losses, ending $ 1,272 $ 1,261 $ 1,293 $ 1,300 $ 1,322
Reserve for unfunded commitments, beginning $ 134 $ 132 $ 130 $ 135
$ 134 Provision (benefit) for unfunded commitments 4 2 2 (4 ) 1
Charge-offs - -
- (1 )
- Reserve for unfunded commitments, ending $
138 $ 134 $ 132 $ 130 $ 135 Components of allowance for
credit losses: Allowance for loan and lease losses $ 1,272 $ 1,261
$ 1,293 $ 1,300 $ 1,322 Reserve for unfunded commitments
138 134
132 130
135 Total allowance for credit losses $ 1,410 $ 1,395
$ 1,425 $ 1,430 $ 1,457
Allowance for loan and lease losses
ratio As a percent of portfolio loans and leases 1.37 % 1.35 %
1.39 % 1.42 % 1.47 % As a percent of nonperforming loans and
leases(a) 252 % 275 % 272 % 247 % 228 % As a percent of
nonperforming assets(a) 197 % 208 % 206 % 188 % 178 % (a)
Excludes nonaccrual loans and leases in loans held for sale.
Provision for loan and lease losses totaled $91 million in the
fourth quarter of 2015. The allowance represented 1.37 percent of
total portfolio loans and leases outstanding as of quarter end,
compared with 1.35 percent last quarter, and represented 252
percent of nonperforming loans and leases, and 197 percent of
nonperforming assets.
The provision decreased $65 million from the third quarter of
2015 and decreased $8 million from the fourth quarter of 2014.
Provision in the prior quarter included a $35 million impact
related to the aforementioned student loan backed commercial
credit. The allowance for loan and lease losses increased $11
million sequentially.
As of December September June March December
Nonperforming Assets and Delinquent Loans ($ in millions)
2015 2015 2015 2015 2014 Nonaccrual portfolio loans and leases:
Commercial and industrial loans $ 82 $ 47 $ 61 $ 61 $ 86 Commercial
mortgage loans 56 60 49 57 64 Commercial construction loans - - - -
- Commercial leases - 2 2 2 3 Residential mortgage loans 28 31 35
40 44 Home equity 62 65
70 71
72 Total nonaccrual portfolio loans and leases
(excludes restructured loans) $ 228 $ 205 $ 217 $ 231 $ 269
Restructured loans - commercial (nonaccrual)(c) 203 177 175 205 214
Restructured loans - consumer (nonaccrual) 75
76 83
90 96 Total nonaccrual
portfolio loans and leases $ 506 $ 458 $ 475 $ 526 $ 579
Repossessed personal property 18 17 16 20 18 OREO(a)
123 131 i 135 i
145 i 147 i Total nonperforming assets(b) $
647 $ 606 $ 626 $ 691 $ 744 Nonaccrual loans held for sale 1 1 1 2
24 Restructured loans - (nonaccrual) held for sale 11
1 -
- 15 Total nonperforming assets
including loans held for sale $ 659 $ 608
$ 627 $ 693 $ 783
Restructured Consumer loans and leases (accrual) $
979 $ 973 $ 970 $ 943 $ 905 Restructured Commercial loans and
leases (accrual)(c) $ 491 $ 571 $ 769 $ 774 $ 844 Total
loans and leases 90 days past due $ 75 $ 70 $ 70 $ 78 $ 87
Nonperforming loans and leases as a percent of portfolio loans,
leases and other assets, including OREO(b) 0.55 % 0.49 % 0.51 %
0.57 % 0.64 % Nonperforming assets as a percent of portfolio loans,
leases and other assets, including OREO(b) 0.70 % 0.65 % 0.67 %
0.76 % 0.82 % (a) Excludes OREO related to government
insured loans. The Bancorp has historically excluded government
guaranteed loans classified in OREO from its nonperforming asset
disclosures. Upon the prospective adoption on January 1, 2015 of
ASU 2014-14 “Classification of Certain Government-Guaranteed
Mortgage Loans Upon Foreclosure,” government guaranteed loans
meeting certain criteria were reclassified to other receivables
rather than OREO upon foreclosure. (b) Does not include nonaccrual
loans held for sale. (c) Excludes $20 million of restructured
nonaccrual loans and $7 million of restructured accruing loans as
of December 31, 2015. Excludes $21 million of restructured
nonaccrual loans and $7 million of restructured accruing loans as
of September 30, 2015, June 30, 2015, March 31, 2015 and December
31, 2014.
Total nonperforming assets, including loans held-for-sale,
increased $51 million, or 8 percent, from the previous quarter to
$659 million. Nonperforming loans (NPLs) at quarter-end increased
$48 million, or 10 percent, from the previous quarter to $506
million or 0.55 percent of total loans, leases and OREO.
Commercial NPAs increased $49 million, or 13 percent, from the
third quarter to $419 million, or 0.75 percent of commercial loans,
leases and OREO. Commercial NPLs increased $55 million from last
quarter to $341 million, or 0.61 percent of commercial loans and
leases. C&I NPAs increased $89 million from the prior quarter
to $272 million. Commercial mortgage NPAs decreased $27 million
from the previous quarter to $138 million. Commercial construction
NPAs decreased $11 million from the previous quarter to $8 million.
Commercial lease NPAs were $1 million, down $2 million from the
previous quarter. Commercial NPAs included $203 million of
nonaccrual troubled debt restructurings (TDRs), compared with $177
million last quarter.
Consumer NPAs decreased $8 million from the third quarter to
$228 million, or 0.62 percent of consumer loans, leases and OREO.
Consumer NPLs decreased $7 million from last quarter to $165
million, or 0.45 percent of consumer loans and leases. Residential
mortgage NPAs decreased $5 million from the second quarter to $86
million. Home equity NPAs decreased $5 million, sequentially, to
$98 million. Consumer nonaccrual TDRs were $75 million in the
fourth quarter of 2015, compared with $76 million in the third
quarter of 2015.
Fourth quarter OREO balances included in NPA balances were down
$8 million from the third quarter to $123 million, and included $69
million in commercial OREO and $54 million in consumer OREO.
Repossessed personal property increased $1 million from the prior
quarter to $18 million.
Loans over 90 days past due and still accruing increased $5
million from the third quarter of 2015 to $75 million. Commercial
balances over 90 days past due were $7 million compared with $5
million in the prior quarter, and consumer balances 90 days past
due increased $3 million from the previous quarter to $68 million.
Loans 30-89 days past due of $245 million were up $31 million from
the previous quarter. Commercial balances 30-89 days past due
increased $10 million sequentially to $35 million and consumer
balances 30-89 days past due were up $21 million from the third
quarter at $210 million. The above delinquency figures exclude
nonaccruals described previously.
Capital Position
For the Three Months Ended
December September June March December 2015 2015
2015 2015 2014
Capital
Position Average total Bancorp shareholders' equity to average
assets 11.25 % 11.24 % 11.32 % 11.49 % 11.54 % Tangible equity(a)
9.55 % 9.28 % 9.28 % 9.37 % 9.41 % Tangible common equity
(excluding unrealized gains/losses)(a) 8.59 % 8.32 % 8.33 % 8.40 %
8.43 % Tangible common equity (including unrealized
gains/losses)(a) 8.71 % 8.65 % 8.51 % 8.77 % 8.71 % Tangible common
equity as a percent of risk-weighted assets (excluding unrealized
gains/losses) 9.76 %(b) 9.37 %(b) 9.39 %(b) 9.49 %(b) 9.70 %(d)
Regulatory capital
ratios:
Basel III Transitional(c) Basel I(d) CET1 capital 9.83 %(b)
9.40 %(b) 9.42 %(b) 9.52 %(b) N/A Tier I risk-based capital 10.93
%(b) 10.49 %(b) 10.51 %(b) 10.62 %(b) 10.83 % Total risk-based
capital 14.13 %(b) 13.68 %(b) 13.69 %(b) 14.01 %(b) 14.33 % Tier I
leverage 9.54 % 9.38 % 9.44 % 9.59 % 9.66 % Tier I common
equity N/A N/A N/A N/A 9.65 %(a) CET1 capital (fully phased-in)
9.73 %(a)(b) 9.30 %(a)(b) 9.31 %(a)(b) 9.41 %(a)(b) N/A Book
value per share $ 18.48 $ 18.22 $ 17.62 $ 17.83 $ 17.35 Tangible
book value per share(a) $ 15.39 $ 15.18 $ 14.62 $ 14.85 $ 14.40
(a) These ratios have been included herein to facilitate a
greater understanding of the Bancorp's capital structure and
financial condition. See the Regulation G Non-GAAP Reconciliation
table for a reconciliation of these ratios to U.S. GAAP. (b) Under
the banking agencies Basel III Final Rule, assets and credit
equivalent amounts of off-balance sheet exposures are calculated
based upon the standardized approach for risk-weighted assets. The
resulting values are added together resulting in the Bancorp's
total risk-weighted assets. (c) Current period regulatory capital
ratios are estimated. (d) These capital ratios were calculated
under the Supervisory Agencies general risk-based capital rules
(Basel I) which was in effect prior to January 1, 2015.
Capital ratios were strong during the quarter. The common equity
Tier 1 ratio was 9.83 percent, the tangible common equity to
tangible assets ratio* was 8.59 percent (excluding unrealized
gains/losses), and 8.71 percent (including unrealized
gains/losses). The Tier 1 risk-based capital ratio was 10.93
percent, the total risk-based capital ratio was 14.13 percent, and
the Leverage ratio was 9.54 percent.
Book value per share at December 31, 2015 was $18.48 and
tangible book value per share* was $15.39, compared with the
September 30, 2015 book value per share of $18.22 and tangible book
value per share* of $15.18.
Fifth Third entered into or completed multiple share repurchases
during the quarter. Below is a summary of those share
repurchases.
- On October 23, 2015, Fifth Third
settled the forward contract related to the September 9, 2015 $150
million share repurchase agreement. An additional 1.45 million
shares were repurchased in connection with the completion of this
agreement.
- On December 14, 2015, Fifth Third
entered into a share repurchase agreement whereby Fifth Third would
purchase approximately $215 million of its outstanding stock, which
reduced the fourth quarter share count by 9.25 million shares.
- On January 14, 2016, Fifth Third
settled the forward contract related to the December 14, 2015 $215
million share repurchase agreement. An additional 1.78 million
shares were repurchased in connection with the completion of this
agreement.
In total, common shares outstanding decreased by approximately
10 million shares in the fourth quarter of 2015 from the third
quarter of 2015.
* Non-GAAP measure; see Reg. G reconciliation on page 34 in
Exhibit 99.1 of 8-k filing dated 1/21/16.
Tax Rate
The effective tax rate was 30.7 percent in the fourth quarter of
2015 compared with 26.0 percent in the third quarter of 2015 and
25.9 percent in the fourth quarter of 2014. The sequential and
year-over-year increase was primarily driven by the impact of
Vantiv-related transactions during the quarter.
Other
On October 23, 2015, Fifth Third Bancorp entered into an
agreement with Vantiv, Inc. (NYSE: VNTV) under which a portion of
its Tax Receivable Agreement (“TRA”) with Vantiv was terminated and
settled in full for consideration of a cash payment in the amount
of $48.9 million from Vantiv. Under the agreement, Fifth Third
Bancorp sold certain TRA cash flows it expected to receive from
2017 to 2030, totaling an estimated $140 million. This sale did not
impact the TRA payment recognized in the fourth quarter of 2015 and
does not impact the TRA payment expected to be recognized in the
fourth quarter of 2016. For more detail see the 8-K dated October
28, 2015.
On December 2, 2015, Vantiv, Inc. conducted a secondary offering
of 13.4 million shares of its Class A Common Stock on behalf of
Fifth Third. The offering was the culmination of a three-step
process that included 1) the partial cancellation of the warrant
held by Fifth Third to purchase additional ownership in Vantiv
Holding, LLC for a $200 million cash payment; 2) the net exercise
of a portion of the remaining warrant for 5.4 million Class C
units; and 3) the exchange of these 5.4 million Class C units and 8
million Class B units for the 13.4 million shares of Vantiv, Inc.
Class A Common Stock included in the secondary offering. During the
fourth quarter, Fifth Third recognized a pre-tax gain of $420
million related to the ownership interests included in these
transactions. For more detail see the press release dated December
3, 2015.
Fifth Third Bank owns approximately 35 million units
representing an 18.3 percent interest in Vantiv Holding, LLC,
convertible into shares of Vantiv, Inc., a publicly traded firm.
Based upon Vantiv’s closing price of $47.42 on December 31, 2015,
our interest in Vantiv was valued at approximately $1.7 billion.
Next month in our 10-K, we will update our disclosure of the
carrying value of our interest in Vantiv stock, which was $422
million as of September 30, 2015. The difference between the market
value and the book value of Fifth Third’s interest in Vantiv’s
shares is not recognized in Fifth Third’s equity or capital.
Additionally, Fifth Third has a remaining warrant to purchase
approximately 7.8 million additional shares in Vantiv which is
carried as a derivative asset at a fair value of $262 million as of
December 31, 2015.
Conference Call
Fifth Third will host a conference call to discuss these
financial results at 9:00 a.m. (Eastern Time) today. This
conference call will be webcast live by Thomson Financial and may
be accessed through the Fifth Third Investor Relations website at
www.53.com (click on “About Fifth Third” then “Investor
Relations”). Institutional investors can access the call via
Thomson Financial’s password-protected event management site,
StreetEvents (www.streetevents.com).
Those unable to listen to the live webcast may access a webcast
replay through the Fifth Third Investor Relations website at the
same web address. Additionally, a telephone replay of the
conference call will be available beginning approximately two hours
after the conference call until Thursday, February 4, 2016 by
dialing 800-585-8367 for domestic access or 404-537-3406 for
international access (passcode 96623560#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of December 31, 2015, the
Company had $141 billion in assets and operates 1,254 full-service
Banking Centers, including 95 Bank Mart® locations, most open seven
days a week, inside select grocery stores and 2,593 ATMs in Ohio,
Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West
Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth
Third operates four main businesses: Commercial Banking, Branch
Banking, Consumer Lending, and Investment Advisors. Fifth Third
also has an 18.3% interest in Vantiv Holding, LLC. Fifth Third is
among the largest money managers in the Midwest and, as of December
31, 2015, had $297 billion in assets under care, of which it
managed $26 billion for individuals, corporations and
not-for-profit organizations. Investor information and press
releases can be viewed at www.53.com. Fifth Third’s common stock is
traded on the NASDAQ® Global Select Market under the symbol
“FITB.”
FORWARD-LOOKING STATEMENTS
This release contains statements that we believe are
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Rule 175 promulgated
thereunder, and Section 21E of the Securities Exchange Act of 1934,
as amended, and Rule 3b-6 promulgated thereunder. These statements
relate to our financial condition, results of operations, plans,
objectives, future performance or business. They usually can be
identified by the use of forward-looking language such as “will
likely result,” “may,” “are expected to,” “anticipates,”
“potential,” “estimate,” “forecast,” “projected,” “intends to,” or
may include other similar words or phrases such as “believes,”
“plans,” “trend,” “objective,” “continue,” “remain,” or similar
expressions, or future or conditional verbs such as “will,”
“would,” “should,” “could,” “might,” “can,” or similar verbs. You
should not place undue reliance on these statements, as they are
subject to risks and uncertainties, including but not limited to
the risk factors set forth in our most recent Annual Report on Form
10-K as updated from time to time by our Quarterly Reports on Form
10-Q. When considering these forward-looking statements, you should
keep in mind these risks and uncertainties, as well as any
cautionary statements we may make. Moreover, you should treat these
statements as speaking only as of the date they are made and based
only on information then actually known to us. There is a risk that
additional information may become known during the company’s
quarterly closing process or as a result of subsequent events that
could affect the accuracy of the statements and financial
information contained herein.
There are a number of important factors that could cause future
results to differ materially from historical performance and these
forward-looking statements. Factors that might cause such a
difference include, but are not limited to: (1) general economic
conditions and the economy weaken and become less favorable than
expected, particularly in the real estate market, either nationally
or in the states in which Fifth Third, one or more acquired
entities and/or the combined company do business; (2) deteriorating
credit quality; (3) political developments, wars or other
hostilities may disrupt or increase volatility in securities
markets or other economic conditions; (4) changes in the interest
rate environment reduce interest margins; (5) prepayment speeds,
loan origination and sale volumes, charge-offs and loan loss
provisions; (6) Fifth Third’s ability to maintain required capital
levels and adequate sources of funding and liquidity; (7)
maintaining capital requirements and adequate sources of funding
and liquidity may limit Fifth Third’s operations and potential
growth; (8) changes and trends in capital markets; (9) problems
encountered by larger or similar financial institutions may
adversely affect the banking industry and/or Fifth Third; (10)
competitive pressures among depository institutions increase
significantly; (11) effects of critical accounting policies and
judgments; (12) changes in accounting policies or procedures as may
be required by the Financial Accounting Standards Board (FASB) or
other regulatory agencies; (13) legislative or regulatory changes
or actions, or significant litigation, adversely affect Fifth
Third, one or more acquired entities and/or the combined company or
the businesses in which Fifth Third, one or more acquired entities
and/or the combined company are engaged, including the Dodd-Frank
Wall Street Reform and Consumer Protection Act; (14) ability to
maintain favorable ratings from rating agencies; (15) fluctuation
of Fifth Third’s stock price; (16) ability to attract and retain
key personnel; (17) ability to receive dividends from its
subsidiaries; (18) potentially dilutive effect of future
acquisitions on current shareholders’ ownership of Fifth Third;
(19) effects of accounting or financial results of one or more
acquired entities; (20) difficulties from Fifth Third’s investment
in, relationship with, and nature of the operations of Vantiv, LLC;
(21) loss of income from any sale or potential sale of businesses;
(22) difficulties in separating the operations of any branches or
other assets divested; (23) inability to achieve expected benefits
from branch consolidations and planned sales within desired
timeframes, if at all; (24) ability to secure confidential
information and deliver products and services through the use of
computer systems and telecommunications networks; and (25) the
impact of reputational risk created by these developments on such
matters as business generation and retention, funding and
liquidity.
You should refer to our periodic and current reports filed with
the Securities and Exchange Commission, or “SEC,” for further
information on other factors, which could cause actual results to
be significantly different from those expressed or implied by these
forward-looking statements.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160121005198/en/
Fifth Third BancorpJim Eglseder
(Investors)513-534-8424orLarry Magnesen
(Media)513-534-8055
Fifth Third Bancorp (NASDAQ:FITB)
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