- 1Q15 net income available to common
shareholders of $367 million, or $0.44 per diluted common share
- Includes a $70 million pre-tax (~$46
million after tax) positive valuation adjustment on the warrant
Fifth Third holds in Vantiv, $37 million pre-tax (~$24 million
after tax) gain on the sale of held-for-sale residential mortgage
loans classified as troubled debt restructurings (TDRs), and a $17
million pre-tax (~$11 million after tax) charge related to the
valuation of the Visa total return swap, resulting in a net $0.07
impact on earnings per share
- 1Q15 return on average assets (ROA) of
1.12%; return on average common equity of 10.3%; return on average
tangible common equity** of 12.3%
- Pre-provision net revenue (PPNR)** of
$584 million in 1Q15
- Net interest income (FTE) of $852
million, down 4 percent sequentially and down 5 percent from 1Q14;
net interest margin of 2.86%, down 10 basis points sequentially
- Average portfolio loans of $90.5
billion, down $533 million sequentially due to the transfer of $720
million of residential mortgage TDRs to held-for-sale in 4Q14
(reduced average balances by $694 million); loans up $978 million
from 1Q14 driven by increases in C&I loans
- Noninterest income of $660 million
compared with $653 million in the prior quarter; impacted by the
gain on sale of residential mortgage TDRs in 1Q15 and valuations on
the Vantiv warrant in both quarters
- Noninterest expense of $923 million, up
1 percent from prior quarter driven by seasonally higher
compensation-related expenses, partially offset by lower
credit-related costs
- Credit trends
- Net charge-offs declined 46 percent
year-over-year; 1Q15 net charge-offs of $91 million (0.41% of loans
and leases) vs. 4Q14 NCOs of $191 million (0.83% of loans and
leases) which included $87 million of charge-offs related to the
transfer of residential mortgage TDRs to held-for-sale and 1Q14
NCOs of $168 million (0.76% of loans and leases)
- Portfolio NPA ratio of 0.76% down 6 bps
from 4Q14, NPL ratio of 0.57% down 7 bps from 4Q14; total
nonperforming assets (NPAs) of $693 million, including loans
held-for-sale (HFS), declined $90 million sequentially
- 1Q15 provision expense of $69 million;
$99 million in 4Q14 (including the $23 million impact related to
the transfer of loans held-for-sale) and $69 million in 1Q14
- Strong capital ratios*
- Common equity Tier 1 ratio 9.62%
- Tier 1 risk-based capital ratio 10.74%,
Total risk-based capital ratio 14.16%, Leverage ratio 9.61%
- Tangible common equity ratio** of
8.78%; 8.41% excluding securities portfolio unrealized
gains/losses
- 9 million reduction in average diluted
share count
- Book value per share of $17.85 up 3
percent from 4Q14 and up 10 percent from 1Q14; tangible book value
per share** of $14.87
* Capital ratios estimated; presented under current U.S. capital
regulations.** Non-GAAP measure; see Reg. G reconciliation on page
32 in Exhibit 99.1 of 8-k filing dated 4/21/15.
Fifth Third Bancorp (Nasdaq: FITB) today reported first quarter
2015 net income of $382 million versus net income of $385 million
in the fourth quarter of 2014 and $318 million in the first quarter
of 2014. After preferred dividends, net income available to common
shareholders was $367 million, or $0.44 per diluted share, in the
first quarter of 2015, compared with $362 million, or $0.43 per
diluted share, in the fourth quarter of 2014, and $309 million, or
$0.36 per diluted share, in the first quarter of 2014.
First quarter 2015 included:
Income
- $70 million positive valuation
adjustment on the Vantiv warrant
- $37 million gain on the sale of
residential mortgage loans classified as troubled debt
restructurings
- ($17 million) charge related to the
valuation of the Visa total return swap
Expenses
- ($2 million) in litigation reserve
charges
Fourth quarter 2014 included:
Income
- $56 million positive valuation
adjustment on the Vantiv warrant
- $23 million annual payment received
from Vantiv pursuant to tax receivable agreement
- ($19 million) charge related to the
valuation of the Visa total return swap
Expenses
- $3 million reversal of litigation
reserves
Results also included $23 million of provision expense related
to the transfer of residential mortgage loans classified as
troubled debt restructurings to held-for-sale.
First quarter 2014 included:
Income
- ($36 million) negative valuation
adjustment on the Vantiv warrant
- $1 million benefit related to the
valuation of the Visa total return swap
Expenses
- ($51 million) in litigation reserve
charges
Earnings Highlights
For the Three
Months Ended % Change March December September June March
2015 2014 2014 2014 2014 Seq
Yr/Yr
Earnings ($ in millions) Net income
attributable to Bancorp $382 $385 $340 $439 $318 (1%) 20% Net
income available to common shareholders $367 $362 $328 $416 $309 1%
15%
Common Share Data Earnings per share, basic 0.45
0.44 0.39 0.49 0.36 2% 25% Earnings per share, diluted 0.44 0.43
0.39 0.49 0.36 2% 22% Cash dividends per common share 0.13 0.13
0.13 0.13 0.12 - 8%
Financial Ratios Return on
average assets 1.12 % 1.13 % 1.02 % 1.34 % 1.00 % - 12% Return on
average common equity 10.3 10.0 9.2 11.9 9.0 2% 13% Return on
average tangible common equity(b) 12.3 12.1 11.1 14.4 11.0 2% 12%
Tier I risk-based capital(c) 10.74 10.83 10.83 10.80 10.45
(1%)
3% Common equity Tier I(c) 9.62 N/A N/A N/A N/A N/A N/A Tier I
common equity(b) N/A 9.65 9.64 9.61 9.51 N/A N/A Net interest
margin(a) 2.86 2.96 3.10 3.15 3.22 (3%) (11%) Efficiency(a) 61.0
59.6 62.1 58.2 64.9 2% (6%) Common shares outstanding (in
thousands) 815,190 824,047 834,262 844,489 847,569 (1%) (4%)
Average common shares outstanding (in thousands): Basic 810,210
819,057 829,392 838,492 845,860 (1%) (4%) Diluted 818,672 827,831
838,324 848,245 857,924 (1%) (5%) (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. The percentages in all of the tables
in this earning release are calculated on actual dollar amounts and
not the rounded dollar amounts. NA: Not applicable.
“Our results this quarter were solid despite the impact of
expected first quarter seasonality and challenging market
conditions, and reflect the strength of our franchise in generating
strong shareholder returns resulting from our strategic decisions
to build and invest in our businesses. We are very focused on
growing businesses that will operate profitably in all environments
by deepening our relationships with customers and managing our risk
exposures to achieve optimal returns for our shareholders. Our
quarterly results include the significant value that we have
achieved in our Vantiv investment and the gain on the sale of our
TDR loans, which is another step toward reducing future sources of
potential volatility,” said Kevin Kabat, CEO of Fifth Third
Bancorp.
“First quarter net income of $382 million, which reflected
record investment advisory revenue and solid mortgage banking
revenue growth, produced an ROA of 1.12% and ROE of 10.3%. These
results included the impact of the NII decline associated with the
changes in our deposit advance product in the quarter.
“Our loan growth, especially in the C&I category, was weaker
at the end of last year which impacted the starting balances early
in the quarter, but we were encouraged by better activity in
February and March. Average loans increased 2 percent compared with
the year ago quarter with continued strength in C&I lending,
which was up 3 percent, and growth in commercial real estate and
bankcard loans of 4 percent each.
“Credit results were very good, resulting in net charge-offs of
41 bps for the quarter, with commercial loan net charge-offs of 29
bps and consumer loan net charge-offs of 59 bps. Total
delinquencies also continued to be at very low levels and were
highlighted by total non-performing assets, which were down 11
percent compared with last quarter.
“Average core deposits were up 2 percent sequentially, with 6
percent growth in interest checking, and were up 7 percent year
over year, with demand deposit growth of 10 percent.
“During the quarter, we received a non-objection from the
Federal Reserve for our 2015 CCAR plan. That plan demonstrates the
strength of Fifth Third’s current capital levels and our resiliency
under stress conditions. We are pleased to be able to continue the
measured return of capital to shareholders under our 2015 CCAR
plan.”
Income Statement Highlights
For the
Three Months Ended % Change March December September June March
2015 2014 2014 2014 2014 Seq
Yr/Yr
Condensed Statements of Income ($ in millions)
Net interest income (taxable equivalent) $852 $888 $908 $905 $898
(4%) (5%) Provision for loan and lease losses 69 99 71 76 69 (30%)
- Total noninterest income 660 653 520 736 564 1% 17% Total
noninterest expense 923 918 888 954
950 1% (3%) Income before income taxes
(taxable equivalent) 520 524 469 611
443 (1%) 18% Taxable equivalent
adjustment 5 5 5 5 5 5% 2% Applicable income taxes 133
134 124 167 119 (1%) 11%
Net income 382 385 340 439 319 (1%) 20% Less: Net income
attributable to noncontrolling interests - -
- - 1 NM (61%) Net income
attributable to Bancorp 382 385 340 439 318 (1%) 20% Dividends on
preferred stock 15 23 12 23 9
(35%) 60% Net income available to common shareholders
367 362 328 416 309 1%
15% Earnings per share, diluted $ 0.44 $ 0.43
$ 0.39 $ 0.49 $ 0.36 2% 22%
Net
Interest Income
For the Three Months Ended
% Change March December September June March 2015
2014 2014 2014 2014 Seq Yr/Yr
Interest Income ($ in millions) Total interest income
(taxable equivalent) $975 $1,016 $1,023 $1,013 $998 (4%) (2%) Total
interest expense 123 128 115
108 100 (4%) 22%
Net interest income (taxable equivalent) $852
$888 $908 $905 $898
(4%) (5%)
Average Yield Yield on
interest-earning assets (taxable equivalent) 3.28% 3.38% 3.49%
3.53% 3.58% (3%) (8%) Rate paid on interest-bearing liabilities
0.60% 0.61% 0.56%
0.54% 0.51% (3%) 16% Net
interest rate spread (taxable equivalent) 2.68%
2.77% 2.93% 2.99%
3.07% (3%) (13%) Net interest margin (taxable
equivalent) 2.86% 2.96% 3.10% 3.15% 3.22% (3%) (11%)
Average Balances ($ in millions) Loans and leases, including
held for sale $91,659 $91,581 $91,428 $91,241 $90,238 - 2% Total
securities and other short-term investments 29,038 27,604 24,927
23,940 22,940 5% 27% Total interest-earning assets 120,697 119,185
116,355 115,181 113,178 1% 7% Total interest-bearing liabilities
83,339 82,544 81,157 80,770 79,130 1% 5% Bancorp shareholders'
equity 15,820 15,644 15,486
15,157 14,862 1%
6%
Net interest income of $852 million on a fully taxable
equivalent basis decreased $36 million from the fourth quarter, as
expected, primarily driven by a $21 million negative impact of the
previously announced changes to the Bancorp’s deposit advance
product that were effective January 1, 2015. Additionally, net
interest income was negatively impacted by $13 million due to fewer
days in the quarter. Otherwise, the effects of lower deposit costs
and increased investment securities balances generally offset the
negative effect of loan repricing during the quarter.
The net interest margin was 2.86 percent, a decrease of 10 bps
from the previous quarter primarily driven by a 7 basis point
impact due to the changes to the deposit advance product, 3 basis
point impact of loan repricing and 2 basis point impact of higher
cash balances as we continue to experience strong deposit flows.
Day count benefitted the net interest margin by 3 basis points in
the quarter.
Compared with the first quarter of 2014, net interest income
decreased $46 million and the net interest margin decreased 36 bps.
The decline in net interest income was driven by the effect of the
aforementioned changes to the deposit advance product as well as
continued loan repricing. Otherwise, the impact of higher
investment securities balances and loan balances generally offset
the impact of higher interest expense resulting from increased
long-term debt balances. The decline in the net interest margin was
primarily driven by the impact of loan repricing.
Securities
Average securities and other short-term investments were $29.0
billion in the first quarter of 2015 compared with $27.6 billion in
the previous quarter and $22.9 billion in the first quarter of
2014. Average securities of $23.2 billion increased $733 million
from the prior quarter reflecting purchases of securities. Other
short-term investments average balances of $5.9 billion increased
$701 million sequentially. On an end of period basis, securities
balances of $27.0 billion increased $4.0 billion driven by
purchases of securities towards the end of the quarter and other
short-term investments decreased $3.0 billion reflecting lower cash
balances held at the Federal Reserve.
Loans
For the Three Months Ended % Change March
December September June March 2015 2014 2014
2014 2014 Seq Yr/Yr
Average Portfolio Loans
and Leases ($ in millions) Commercial: Commercial and
industrial loans $41,426 $41,277 $41,477 $41,374 $40,377 - 3%
Commercial mortgage loans 7,241 7,480 7,633 7,885 7,981 (3%) (9%)
Commercial construction loans 2,197 1,909 1,563 1,362 1,116 15% 97%
Commercial leases 3,715 3,600
3,571 3,555 3,607 3%
3% Subtotal - commercial loans and leases 54,579
54,266 54,244 54,176
53,081 1% 3% Consumer:
Residential mortgage loans 12,433 13,046 12,785 12,611 12,659 (5%)
(2%) Home equity 8,802 8,937 9,009 9,101 9,194 (2%) (4%) Automobile
loans 11,933 12,073 12,105 12,070 12,023 (1%) (1%) Credit card
2,321 2,324 2,295 2,232 2,230 - 4% Other consumer loans and leases
440 395 361 359
343 11% 28% Subtotal - consumer
loans and leases 35,929 36,775
36,555 36,373 36,449 (2%)
(1%) Total average loans and leases (excluding held for
sale) $90,508 $91,041 $90,799 $90,549 $89,530 (1%) 1%
Average loans held for sale 1,151 540
629 692 708 NM
63%
Average loan and lease balances (excluding loans held-for-sale)
decreased $533 million, or 1 percent, sequentially and increased
$978 million, or 1 percent, from the first quarter of 2014. The
sequential decrease in average loans and leases was primarily
driven by declines in residential mortgage due to the transfer of
certain residential mortgage loans classified as troubled debt
restructurings to held-for-sale at the end of the fourth quarter of
2014, which reduced average loans by $694 million. The increase
from the prior year was driven by increased commercial and
industrial (C&I) balances. Period end loans and leases
(excluding loans held-for-sale) of $91.2 billion increased $1.2
billion sequentially, and increased $1.5 billion, or 2 percent,
from a year ago primarily driven by increases in C&I loans.
Average commercial portfolio loan and lease balances increased
$313 million, or 1 percent, sequentially and increased $1.5
billion, or 3 percent, from the first quarter of 2014. Average
C&I loans increased $149 million from the prior quarter and
increased $1.0 billion from the first quarter of 2014. Within
commercial real estate, average commercial mortgage balances
continued to decline and average commercial construction balances
increased for the ninth consecutive quarter. In total, average
commercial real estate balances increased $49 million sequentially
and $341 million from the prior year. Commercial line usage, on an
end of period basis, was 32 percent of committed lines in the first
quarter of 2015 compared with 32 percent in the fourth quarter of
2014 and 30 percent in the first quarter of 2014.
Average consumer portfolio loan and lease balances decreased
$846 million, or 2 percent, sequentially and decreased $520
million, or 1 percent, year-over-year. Average residential mortgage
loans decreased 5 percent sequentially and 2 percent from a year
ago driven by loans transferred to held for sale at the end of the
fourth quarter. Average auto loans declined 1 percent on a
sequential and year-over-year basis. Average home equity loans
declined 2 percent sequentially and 4 percent from the first
quarter of 2014. Average credit card loans were flat sequentially
and increased 4 percent from the first quarter of 2014.
Average loans held-for-sale balances of $1.2 billion increased
$611 million sequentially primarily due to the transfer of certain
residential mortgage loans classified as troubled debt
restructurings to held-for-sale in the fourth quarter of 2014 and
increased $443 million compared with the first quarter of 2014.
Period end loans held-for-sale of $724 million decreased $537
million from the previous quarter due to $568 million of
residential mortgage loans subsequently sold in the first quarter
and decreased $56 million from the first quarter of 2014.
Deposits
For the Three Months Ended %
Change March December September June March 2015 2014
2014 2014 2014 Seq Yr/Yr
Average
Deposits ($ in millions) Demand $33,760 $33,301 $31,790 $31,275
$30,626 1% 10% Interest checking 26,885 25,478 24,926 25,222 25,911
6% 4% Savings 15,174 15,173 15,759 16,509 16,903 - (10%) Money
market 17,492 17,023 15,222 13,942 12,439 3% 41% Foreign office(a)
861 1,439 1,663
2,200 2,017 (40%) (57%) Subtotal
- Transaction deposits 94,172 92,414 89,360 89,148 87,896 2% 7%
Other time 4,022 3,936 3,800
3,693 3,616 2% 11%
Subtotal - Core deposits 98,194 96,350 93,160 92,841 91,512 2% 7%
Certificates - $100,000 and over 2,683 2,998
3,339 3,840 5,576
(11%) (52%) Total deposits $100,877
$99,348 $96,499 $96,681
$97,088 2% 4%
(a) Includes commercial
customer Eurodollar sweep balances for which the Bancorp pays rates
comparable to other commercial deposit accounts.
Average core deposits increased $1.8 billion sequentially and
increased $6.7 billion, or 7 percent, from the first quarter of
2014. Average transaction deposits increased $1.8 billion from the
fourth quarter of 2014 primarily driven by higher interest
checking, money market account, and demand deposit balances,
partially offset by lower foreign office balances. Year-over-year
transaction deposits increased $6.3 billion, or 7 percent, driven
by higher money market account, demand deposit, and interest
checking balances, partially offset by lower savings and foreign
office balances. Other time deposits increased 2 percent
sequentially and 11 percent compared with the first quarter of
2014.
Average commercial transaction deposits increased 1 percent
sequentially and 8 percent from the previous year. Sequential
performance reflected higher interest checking balances partially
offset by lower foreign office balances. Year-over-year growth
reflected higher demand deposit, interest checking, and money
market account balances as customers are holding higher balances
partially offset by lower foreign office balances.
Average consumer transaction deposits increased 2 percent
sequentially and increased 6 percent from the first quarter of
2014. The sequential performance reflected higher money market
account, interest checking, and demand deposit balances partially
offset by lower savings balances. Year-over-year growth was driven
by increased money market account and demand deposit balances
partially offset by lower savings and interest checking
balances.
Wholesale Funding
For the Three Months Ended
% Change March December September June March 2015
2014 2014 2014 2014 Seq Yr/Yr
Average Wholesale Funding ($ in millions) Certificates -
$100,000 and over $2,683 $2,998 $3,339 $3,840 $5,576 (11%) (52%)
Federal funds purchased 172 161 520 606 547 7% (69%) Other
short-term borrowings 1,602 1,481 1,973 2,234 1,808 8% (11%)
Long-term debt 14,448 14,855
13,955 12,524 10,313 (3%)
40% Total wholesale funding $18,905
$19,495 $19,787 $19,204
$18,244 (3%) 4%
Average wholesale funding of $18.9 billion decreased $590
million, or 3 percent, sequentially and increased $661 million, or
4 percent, compared with the first quarter of 2014. The sequential
decrease was driven by a decrease in long-term debt due to $500
million of bank-level subordinated debt that matured during the
quarter as well as a decrease in certificates $100,000 and over,
partially offset by an increase in other short-term borrowings. The
year-over-year increase in average wholesale funding reflected an
increase in long-term debt due to issuances during 2014, partially
offset by a decrease in certificates $100,000 and over, federal
funds purchased, and other short-term borrowings.
Noninterest Income
For the Three
Months Ended % Change March December September June March
2015 2014 2014 2014 2014 Seq
Yr/Yr
Noninterest Income ($ in millions) Service
charges on deposits $ 135 $ 142 $ 145 $ 139 $ 133 (5%) 2% Corporate
banking revenue 92 120 100 107 104 (23%) (11%) Mortgage banking net
revenue 86 61 61 78 109 40% (21%) Investment advisory revenue 108
100 103 102 102 7% 6% Card and processing revenue 71 76 75 76 68
(6%) 5% Other noninterest income 164 150 33 226 41 9% NM Securities
gains, net 4 4 3 8 7 16%
(34%) Total noninterest income $ 660 $ 653
$ 520 $ 736 $ 564 1% 17%
Noninterest income of $660 million increased $7 million
sequentially and $96 million compared with prior year results.
These comparisons reflect the impacts described below.
For the quarters ending March 31, 2015, December 31, 2014, and
March 31, 2014, the impacts of Vantiv warrant valuation adjustments
were a positive $70 million, positive $56 million, and negative $36
million, respectively. Quarterly results also included the impact
of valuation adjustments of the Visa total return swap of negative
$17 million, negative $19 million, and positive $1 million in the
first quarter of 2015, the fourth quarter of 2014, and the first
quarter of 2014, respectively. First quarter 2015 also included a
$37 million gain on the sale of held-for-sale residential mortgage
loans classified as troubled debt restructurings. Excluding these
items and net securities gains in all periods, noninterest income
of $566 million decreased $46 million, or 8 percent, from the
previous quarter and decreased $26 million, or 4 percent, from the
first quarter of 2014. The sequential decrease was primarily due to
the $23 million annual payment recognized from Vantiv pursuant to
the tax receivable agreement in the fourth quarter of 2014 and a
decrease in corporate banking revenue, partially offset by
increased mortgage banking revenue. The year-over-year decline was
primarily due to lower mortgage banking net revenue and corporate
banking revenue.
Service charges on deposits of $135 million, which were
seasonally low in the first quarter, decreased 5 percent from the
fourth quarter and increased 2 percent compared with the same
quarter last year. The sequential decline was due to a 9 percent
decrease in retail service charges due to lower overdraft
occurrences as well as a 2 percent decrease in commercial service
charges.
Corporate banking revenue of $92 million decreased $28 million
from the fourth quarter of 2014 and $12 million from the first
quarter of 2013. The sequential decrease was primarily due to a $21
million decline in syndication fees as a result of decreased
activity in the market in the current quarter and compared with
strong fourth quarter results, as well as a decline in business
lending fees. The year-over-year decrease was driven by lower
syndication fees, institutional sales revenue, and lease
remarketing fees, partially offset by an increase in foreign
exchange fees.
Mortgage banking net revenue was $86 million in the first
quarter of 2015, up 40 percent from the fourth quarter of 2014 and
down 21 percent from the first quarter of 2014. First quarter 2015
originations were $1.8 billion, compared with $1.7 billion in the
previous quarter and $1.7 billion in the first quarter of 2014.
First quarter 2015 originations resulted in gains of $44 million on
mortgages sold, compared with gains of $36 million during the
previous quarter and $41 million during the first quarter of 2014.
The sequential and year-over-year increases were primarily driven
by higher gain on sale margins due to increased refinance activity
during the quarter given the low rate environment and slightly
higher production. Mortgage servicing fees were $59 million this
quarter, $60 million in the fourth quarter of 2014, and $62 million
in the first 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 $17 million in the first quarter of 2015 (reflecting MSR
amortization of $34 million and MSR valuation adjustments of
positive $17 million); negative $34 million in the fourth quarter
of 2014 (MSR amortization of $32 million and MSR valuation
adjustments of negative $2 million); and positive $6 million in the
first quarter of 2014 (MSR amortization of $22 million and MSR
valuation adjustments of positive $28 million). The mortgage
servicing asset, net of the valuation reserve, was $788 million at
quarter end on a servicing portfolio of $64 billion.
Investment advisory revenue of $108 million increased 7 percent
from the fourth quarter and increased 6 percent year-over-year. The
sequential increase was attributable to higher tax-related private
client services revenue, which is seasonally stronger in the first
quarter, as well as an increase in securities and brokerage fees
due to a continued shift from transaction-based fees to recurring
revenue streams. The year-over-year increase reflected an increase
in personal asset management fees due to market-related growth and
an increase in securities and brokerage fees.
Card and processing revenue of $71 million in the first quarter
of 2015 decreased 6 percent sequentially and increased 5 percent
from the first quarter of 2014. The sequential decrease reflected
lower transaction volumes compared with seasonally strong fourth
quarter volumes. The year-over-year increase reflects an increase
in the number of actively used cards and an increase in customer
spend volume.
Other noninterest income totaled $164 million in the first
quarter of 2015, compared with $150 million in the previous quarter
and $41 million in the first quarter of 2014. As previously
described, the results included the impact of Vantiv warrant
valuation adjustments, the gain on sale of troubled debt
restructurings, and charges related to the valuation of the Visa
total return swap. Excluding these items, other noninterest income
of $74 million decreased approximately $39 million, or 35 percent,
from the fourth quarter of 2014 and decreased approximately $2
million, or 3 percent, from the first quarter of 2014. The
sequential decrease was primarily due to payments recognized from
Vantiv pursuant to the tax receivable agreement of $23 million in
the fourth quarter of 2014 as well as normal seasonality in
Vantiv’s business as reflected in our equity method of
earnings.
Net gains on investment securities were $4 million in the first
quarter of 2015, compared with $4 million in the previous quarter
and $7 million in the first quarter of 2014.
Noninterest Expense
For the
Three Months Ended % Change March December September June
March 2015 2014 2014 2014 2014
Seq Yr/Yr
Noninterest Expense ($ in millions)
Salaries, wages and incentives $369 $366 $357 $368 $359 1% 3%
Employee benefits 99 79 75 79 101 26% (3%) Net occupancy expense 79
77 78 79 80 2% (1%) Technology and communications 55 54 53 52 53 2%
3% Equipment expense 31 30 30 30 30 1% 3% Card and processing
expense 36 36 37 37 31 (2%) 14% Other noninterest expense
254 276 258 309 296 (7%)
(13%) Total noninterest expense $923 $918 $888
$954 $950 1% (3%)
Noninterest expense of $923 million increased 1 percent compared
with the fourth quarter of 2014 and decreased 3 percent compared
with the first quarter of 2014.
First quarter 2015 expenses included $2 million in charges to
litigation reserves, compared with a $3 million reversal of
litigation reserves in the fourth quarter of 2014 and $51 million
in charges to litigation reserves in the first quarter of 2014.
Excluding these items, noninterest expense of $921 million was flat
sequentially and increased $22 million, or 2 percent,
year-over-year. The sequential comparison was affected by a
seasonal increase in FICA and unemployment tax expense recorded in
employee benefits, partially offset by lower credit-related costs
and the year-over-year increase reflected higher incentive-based
compensation expense and increased credit-related costs.
Credit costs related to problem assets recorded as noninterest
expense totaled $14 million in the first quarter of 2015, compared
with $33 million in the fourth quarter of 2014, and $9 million in
the first quarter of 2014. Credit-related expenses included
provision for mortgage repurchases that was an immaterial amount in
the first quarter of 2015 and the fourth quarter of 2014 and $3
million in the first quarter of 2014. (Realized mortgage repurchase
losses were $3 million in the first quarter of 2015, compared with
$2 million in the fourth quarter of 2014, and $10 million in the
first quarter of 2014.) Provision for unfunded commitments was a
benefit of $4 million in the current quarter, compared with an
expense of $1 million last quarter and a benefit of $9 million a
year ago. Derivative valuation adjustments related to customer
credit risk were positive $2 million for the current quarter,
negative $10 million in the fourth quarter, and positive $2 million
for the year ago quarter. OREO expense was $7 million, compared
with $4 million last quarter and $5 million a year ago. Other
problem asset-related expenses were $13 million in the first
quarter, compared with $17 million in the previous quarter, and $13
million in the same period last year.
Credit Quality
For the Three
Months Ended March December September June March 2015 2014
2014 2014 2014
Total net losses charged off
($ in millions) Commercial and industrial loans ($38) ($44)
($50) ($31) ($97) Commercial mortgage loans (1) (10) (5) (9) (3)
Commercial construction loans - - - (8) (5) Commercial leases - (1)
- - - Residential mortgage loans (6) (94) (9) (8) (15) Home equity
(14) (11) (14) (18) (16) Automobile loans (8) (7) (7) (5) (8)
Credit card (21) (20) (23) (21) (19) Other consumer loans
and leases (3) (4) (7)
(1) (5) Total net losses charged off (91)
(191) (115) (101) (168) Total losses (115) (215) (146) (127)
(190) Total recoveries 24 24 31
26 22 Total net losses charged off
($91) ($191) ($115) ($101) ($168)
Ratios (annualized) Net
losses charged off as a percent of average loans and leases
(excluding held for sale) 0.41% 0.83% 0.50% 0.45% 0.76% Commercial
0.29% 0.40% 0.40% 0.35% 0.79% Consumer 0.59%
1.47% 0.66% 0.60%
0.72%
Net charge-offs were $91 million, or 41 bps of average loans on
an annualized basis, in the first quarter of 2015 compared with net
charge-offs of $191 million, or 83 bps, in the fourth quarter of
2014 and $168 million, or 76 bps, in the first quarter of 2014. For
comparison purposes, the fourth quarter of 2014 net charge-offs
included $87 million (38 bps) related to the transfer of certain
residential mortgage loans classified as troubled debt
restructurings to held-for-sale and the first quarter of 2014
included three large credits that together resulted in combined
charge-offs of $60 million (27 bps).
Commercial net charge-offs were $39 million, or 29 bps, and were
down $16 million sequentially. C&I net charge-offs of $38
million decreased $6 million from the previous quarter and
commercial real estate net charge-offs decreased $9 million from
the previous quarter.
Consumer net charge-offs were $52 million, or 59 bps, down $84
million sequentially. Excluding consumer net charge-offs of $87
million related to the transfer of certain residential mortgage
loans classified as troubled debt restructurings to held-for-sale
in the fourth quarter of 2014, consumer net charge-offs were up $3
million sequentially. Net charge-offs on residential mortgage loans
in the portfolio were $6 million, down $88 million from the
previous quarter primarily reflecting the impact of the charge-offs
in the fourth quarter of 2014 mentioned above. Home equity net
charge-offs were $14 million, up $3 million from the fourth quarter
of 2014, and net charge-offs in the auto portfolio of $8 million
were up $1 million compared with the prior quarter. Net charge-offs
on consumer credit card loans were $21 million, up $1 million from
the fourth quarter. Net charge-offs on other consumer loans were $3
million, down $1 million compared with the previous quarter.
For the Three Months Ended March December
September June March 2015 2014 2014
2014 2014
Allowance for Credit Losses ($ in
millions) Allowance for loan and lease losses, beginning $1,322
$1,414 $1,458 $1,483 $1,582 Total net losses charged off (91) (191)
(115) (101) (168) Provision for loan and lease losses 69
99 71 76 69
Allowance for loan and lease losses, ending 1,300 1,322 1,414 1,458
1,483 Reserve for unfunded commitments, beginning 135 134
142 153 162 Provision (benefit) for unfunded commitments (4) 1 (8)
(11) (9) Charge-offs (1) - -
- - Reserve for unfunded commitments,
ending 130 135 134 142 153 Components of allowance for
credit losses: Allowance for loan and lease losses 1,300 1,322
1,414 1,458 1,483 Reserve for unfunded commitments 130
135 134 142
153 Total allowance for credit losses $1,430 $1,457 $1,548 $1,600
$1,636
Allowance for loan and lease losses ratio As a
percent of loans and leases 1.42% 1.47% 1.56% 1.61% 1.65% As a
percent of nonperforming loans and leases(a) 247% 228% 228% 228%
202% As a percent of nonperforming assets(a) 188% 178% 178% 175%
157% (a) Excludes nonaccrual loans and leases in loans held
for sale.
Provision for loan and lease losses totaled $69 million in the
first quarter of 2015 and decreased $30 million from the fourth
quarter of 2014 and was flat from the first quarter of 2014. The
decrease from the prior quarter was driven by the $23 million
impact in the fourth quarter of 2014 related to the transfer of
certain residential mortgage loans classified as troubled debt
restructurings to held-for-sale. The allowance for loan and lease
losses declined $22 million sequentially reflecting the portfolio’s
overall risk profile and charges to the allowance. The allowance
represented 1.42 percent of total loans and leases outstanding as
of quarter end, compared with 1.47 percent last quarter, and
represented 247 percent of nonperforming loans and leases, and 188
percent of nonperforming assets.
As of March December September
June March
Nonperforming Assets and Delinquent
Loans ($ in millions) 2015 2014 2014 2014
2014 Nonaccrual portfolio loans and leases: Commercial and
industrial loans $61 $86 $102 $103 $153 Commercial mortgage loans
57 64 77 86 96 Commercial construction loans - - 2 3 3 Commercial
leases 2 3 3 2 3 Residential mortgage loans 40 44 52 56 68 Home
equity 71 72 69 73 75 Automobile loans - - - - - Other
consumer loans and leases - - - -
- Total nonaccrual loans and leases (excludes restructured
loans) $231 $269 $305 $323 $398 Restructured loans - commercial
(nonaccrual)(c) 205 214 201 202 209 Restructured loans -
consumer (nonaccrual) 90 96 114 115
126 Total nonaccrual portfolio loans and leases $526 $579
$620 $640 $733 Repossessed personal property 20 18 19 18 6 Other
real estate owned(a) 145 147 157 174
207 Total nonperforming assets(b) $691 $744 $796 $832 $946
Nonaccrual loans held for sale 2 24 4 5 3 Restructured loans -
(nonaccrual) held for sale - 15 3 -
- Total nonperforming assets including loans held for sale
$693 $783 $803 $837 $949
Restructured Consumer loans and leases (accrual) $943 $905 $1,610
$1,623 $1,682 Restructured Commercial loans and leases (accrual)(c)
$774 $844 $885 $914 $847 Total loans and leases 90 days past
due $78 $87 $87 $94 $94 Nonperforming loans and leases as a percent
of portfolio loans, leases and other assets, including other real
estate owned(b) 0.57% 0.64% 0.68% 0.70% 0.82% Nonperforming assets
as a percent of portfolio loans, leases and other assets, including
other real estate owned(b) 0.76% 0.82% 0.88% 0.92% 1.05% (a)
Excludes government insured advances. (b) Does not include
nonaccrual loans held for sale. (c) Excludes $21 million of
restructured nonaccrual loans and $7 million of restructured
accruing loans as of March 31, 2015, December 31, 2014, September
30, 2014, June 30, 2014, and March 31, 2014.
Total nonperforming assets, including loans held-for-sale, were
$693 million, a decline of $90 million, or 11 percent, from the
previous quarter. Nonperforming loans (NPLs) at quarter-end were
$526 million or 0.57 percent of total loans, leases and OREO, and
decreased $53 million, or 9 percent, from the previous quarter.
Commercial NPAs were $421 million, or 0.76 percent of commercial
loans, leases and OREO, and decreased $40 million, or 9 percent,
from the fourth quarter. Commercial NPLs were $325 million, or 0.59
percent of commercial loans and leases, and decreased $42 million
from last quarter. C&I NPAs of $216 million decreased $30
million from the prior quarter. Commercial mortgage NPAs were $186
million, down $9 million from the previous quarter. Commercial
construction NPAs were $16 million, flat from the previous quarter.
Commercial lease NPAs were $3 million, down $1 million from the
previous quarter. Commercial NPAs included $205 million of
nonaccrual troubled debt restructurings (TDRs), compared with $214
million last quarter.
Consumer NPAs of $270 million, or 0.75 percent of consumer
loans, leases and OREO, decreased $13 million from the fourth
quarter. Consumer NPLs were $201 million, or 0.56 percent of
consumer loans and leases and decreased $11 million from last
quarter. Residential mortgage NPAs were $113 million, $13 million
lower than last quarter. Home equity NPAs of $111 million increased
$3 million sequentially and credit card NPAs of $38 million were
down $3 million compared with the previous quarter. Consumer
nonaccrual TDRs were $90 million in the first quarter of 2015,
compared with $96 million in the fourth quarter of 2014.
First quarter OREO balances included in NPA balances were $145
million, down $2 million from the fourth quarter, and included $81
million in commercial OREO and $64 million in consumer OREO.
Repossessed personal property of $20 million increased $2 million
from the prior quarter.
Loans over 90 days past due and still accruing were $78 million,
down $9 million from the fourth quarter of 2014. Commercial
balances over 90 days past due were $3 million compared with less
than $1 million in the prior quarter, and consumer balances 90 days
past due of $75 million were down $12 million from the previous
quarter. Loans 30-89 days past due of $203 million were down $47
million from the previous quarter. Commercial balances 30-89 days
past due of $25 million were up $9 million sequentially and
consumer balances 30-89 days past due of $178 million decreased $56
million from the fourth quarter. The above delinquencies figures
exclude nonaccruals described previously.
Capital Position
For the Three Months
Ended March December September June March 2015 2014
2014 2014 2014
Capital Position Average
shareholders' equity to average assets 11.49% 11.54% 11.71% 11.57%
11.53% Tangible equity(a) 9.38% 9.41% 9.65% 9.77% 9.61% Tangible
common equity (excluding unrealized gains/losses)(a) 8.41% 8.43%
8.64% 8.74% 8.79% Tangible common equity (including unrealized
gains/losses)(a) 8.78% 8.71% 8.84% 9.00% 8.93% Tangible common
equity as a percent of risk-weighted assets (excluding unrealized
gains/losses) 9.59%(b) 9.70%(d) 9.70%(d) 9.67%(d) 9.57%(d)
Regulatory capital
ratios:
Basel III Transitional(c) Basel I(d) Common equity Tier I 9.62%(b)
N/A N/A N/A N/A Tier I risk-based capital 10.74%(b) 10.83% 10.83%
10.80% 10.45% Total risk-based capital 14.16%(b) 14.33% 14.34%
14.30% 14.02% Tier I leverage 9.61% 9.66% 9.82% 9.86% 9.71% Tier I
common equity N/A 9.65%(a) 9.64%(a) 9.61%(a) 9.51%(a) Book
value per share 17.85 17.35 16.87 16.74 16.27 Tangible book value
per share(a) 14.87 14.40 13.95 13.86 13.40 (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 remained strong during the quarter, reflecting
growth in retained earnings, the payment of preferred dividends,
and share repurchase activity. The common equity Tier 1 ratio was
9.62 percent, the tangible common equity to tangible assets ratio*
was 8.41 percent (excluding unrealized gains/losses), and 8.78
percent (including unrealized gains/losses). The Tier 1 risk-based
capital ratio was 10.74 percent, the total risk-based capital ratio
was 14.16 percent, and the Leverage ratio was 9.61 percent.
The Basel III Final Rule was effective for the Fifth Third on
January 1, 2015, subject to phase-in periods for certain of its
components and other provisions. Transition provisions apply to the
minimum regulatory capital ratios; regulatory capital adjustments
and deductions; and non-qualifying capital instruments. Transition
provisions for the regulatory capital adjustments and deductions
will change the amount deducted from capital each calendar year
until the transition period ends. As of March 31, 2015, Fifth
Third’s regulatory capital adjustments and deductions were
primarily impacted by the transition provision related to the
deduction of intangible assets other than goodwill and mortgage
servicing assets. Also, Fifth Third will make a one-time permanent
election to not include AOCI in common equity Tier 1 capital in the
March 31, 2015 regulatory filings.
Book value per share at March 31, 2015 was $17.85 and tangible
book value per share* was $14.87, compared with the December 31,
2014 book value per share of $17.35 and tangible book value per
share of $14.40.
As previously announced, Fifth Third entered into a share
repurchase agreement with a counterparty on January 22, 2015,
whereby Fifth Third would purchase approximately $180 million of
its outstanding common stock. This transaction reduced Fifth
Third’s first quarter share count by 8.54 million shares on January
27, 2015. Settlement of the forward contract related to this
agreement is expected to occur on or before April 23, 2015. In
addition, the settlement of the forward contract related to the
October 20, 2014 $180 million share repurchase agreement occurred
on January 5, 2015. An additional 0.79 million shares were
repurchased upon completion of the agreement. In total, the
incremental impact to the average diluted share count in the first
quarter of 2015 was approximately 8.97 million shares due to share
repurchase transactions in the first quarter of 2015 and the fourth
quarter of 2014.
On March 11, 2015, Fifth Third announced that the FRB did not
object to Fifth Third’s 2015 CCAR capital plan, which included the
potential increase in the quarterly common stock dividend to $0.14
per share in 2016 and the potential repurchase of common shares
during the CCAR period in an amount up to $765 million. In
addition, the capital plan incorporated Fifth Third’s potential
repurchases of common shares in the amount of any after-tax gains
from the sale of Vantiv, Inc. (“Vantiv”) stock. These capital plans
were intended to maintain common equity capital levels in the
current range during the CCAR period. Any such actions would be
based on environmental and market conditions, earnings results, our
capital position, and other factors, as well as approval by the
Fifth Third Board of Directors, at the time.
* Non-GAAP measure; see Reg. G reconciliation on page 32 in
Exhibit 99.1 of 8-k filing dated 4/21/15.
Tax Rate
The effective tax rate was 25.9 percent this quarter compared
with 25.9 percent in the fourth quarter of 2014 and 27.3 percent in
the first quarter of 2014.
Other
Fifth Third Bank owns 43 million units representing a 22.8
percent interest in Vantiv Holding, LLC, convertible into shares of
Vantiv, Inc., a publicly traded firm (NYSE: VNTV). Based upon
Vantiv’s closing price of $37.70 on March 31, 2015, our interest in
Vantiv was valued at approximately $1.6 billion. Next month in our
10-Q, we will update our disclosure of the carrying value of our
interest in Vantiv stock, which was $394 million as of December 31,
2014. 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
warrant to purchase additional shares in Vantiv which is carried as
a derivative asset at a fair value of $485 million as of March 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 Tuesday, May 5, 2015 by dialing
800-585-8367 for domestic access or 404-537-3406 for international
access (passcode 9854806#).
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio. As of March 31, 2015, the
Company had $140 billion in assets and operated 15 affiliates with
1,303 full-service Banking Centers, including 101 Bank Mart®
locations, most open seven days a week, inside select grocery
stores and 2,637 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 a 22.8%
interest in Vantiv Holding, LLC. Fifth Third is among the largest
money managers in the Midwest and, as of March 31, 2015, had $308
billion in assets under care, of which it managed $27 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 news 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,” “is
anticipated,” “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. 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 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 weakening in the economy, specifically 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, are less favorable than expected;
(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 that could have an adverse effect on Fifth Third’s
earnings and future growth; (22) ability to secure
confidential information and deliver products and services through
the use of computer systems and telecommunications networks; and
(23) 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.
Fifth Third BancorpJim Eglseder (Investors),
513-534-8424Laura Wehby (Investors),
513-534-7407Larry Magnesen (Media), 513-534-8055
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