Resilient balance sheet and disciplined expense management leads to strong and stable returns

Reported results included a negative $0.05 impact from certain items on page 2 of the earnings release

Fifth Third Bancorp (NASDAQ: FITB):

Fifth Third’s financial results once again demonstrated our resilient profitability, well-managed liquidity, and diversified revenue streams.

Our core deposit funded balance sheet generated improved net interest income and margin. Our strong liquidity position continues to provide flexibility to navigate through uncertain economic and regulatory environments. Our net charge-offs were as expected for the quarter and our nonperforming assets decreased.

We continue to invest in our Southeast expansion, Commercial Payments, and Wealth and Asset Management businesses, leading to continued strong acquisition of new quality relationships in commercial and consumer households. We remain disciplined in managing expenses, which were well managed from the prior year.

Our strong and stable returns resulted in achieving our capital targets during the second quarter, which enabled us to execute a $125 million share repurchase in June while continuing to grow our capital.

We remain well-positioned to respond to a range of economic outcomes and will continue to adhere to our guiding principles of stability, profitability, and growth - in that order.

Fifth Third Bancorp (NASDAQ^®: FITB) today reported second quarter 2024 net income of $601 million compared to net income of $520 million in the prior quarter and $601 million in the year-ago quarter. Net income available to common shareholders in the current quarter was $561 million, or $0.81 per diluted share, compared to $480 million, or $0.70 per diluted share, in the prior quarter and $562 million, or $0.82 per diluted share, in the year-ago quarter.

Compared to the prior quarter, NII increased $3 million. Excluding the $5 million reduction related to the customer remediations, NII was up $8 million, or 1%, primarily reflecting the increased yields on new production of fixed-rate consumer loans and higher C&I loan yields, partially offset by lower average commercial loan balances and continued, but slowing, mix shift from demand deposits to interest-bearing accounts. Compared to the prior quarter, NIM increased 2 bps. Excluding the aforementioned customer remediations, NIM increased 3 bps, primarily reflecting the net benefit of higher market rates and higher loan yields, partially offset by commercial demand deposit runoff. NIM results continue to be impacted by the decision to carry elevated liquidity given the environment, with the combination of cash and other short-term investments of approximately $24 billion at quarter-end.

Compared to the year-ago quarter, NII decreased $70 million, or 5%. Excluding the aforementioned customer remediations, NII decreased $65 million, or 4%, reflecting the impact of higher funding costs and deposit mix shift from demand to interest-bearing accounts, partially offset by higher loan yields. Compared to the year-ago quarter, NIM decreased 22 bps. Excluding the aforementioned customer remediations, NIM decreased 21 bps, reflecting the impact of higher market rates and their effects on deposit pricing and the decision to carry additional cash, partially offset by higher loan yields.

Reported noninterest income decreased $15 million, or 2%, from the prior quarter, and decreased $31 million, or 4%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below, including securities gains/losses which incorporate mark-to-market impacts from securities associated with non-qualified deferred compensation plans.

Noninterest income excluding certain items was stable compared to the prior quarter, and decreased $32 million, or 4%, from the year-ago quarter.

Compared to the prior quarter, service charges on deposits increased $5 million, or 3%, primarily reflecting an increase in commercial payments revenue. Commercial banking revenue increased $1 million, or 1%, primarily reflecting increases in client financial risk management revenue and M&A advisory revenue, partially offset by a decrease in loan syndication revenue. Mortgage banking net revenue decreased $4 million, or 7%, primarily reflecting an increase in MSR asset decay, partially offset by an increase in origination fees and gains on loan sales. Wealth and asset management revenue decreased $2 million, or 1%, primarily driven by strong tax season-related revenue in the prior quarter, partially offset by an increase in personal asset management revenue. Card and processing revenue increased $6 million, or 6%, driven by an increase in interchange revenue.

Compared to the year-ago quarter, service charges on deposits increased $12 million, or 8%, primarily reflecting an increase in commercial payments revenue. Commercial banking revenue decreased $2 million, or 1%, primarily reflecting decreases in client financial risk management revenue and loan syndication revenue, partially offset by an increase in corporate bond fees. Mortgage banking net revenue decreased $9 million, or 15%, primarily reflecting decreases in origination fees and gains on loan sales and MSR net valuation adjustments. Wealth and asset management revenue increased $16 million, or 11%, primarily reflecting increases in personal asset management revenue and brokerage fees. Leasing business revenue decreased $9 million, or 19%, reflecting a decrease in operating lease revenue. Other noninterest income decreased $37 million, or 50%, due to equity fund and direct investment gains in 2023.

Reported noninterest expense decreased $121 million, or 9%, from the prior quarter, and decreased $10 million, or 1%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below.

Compared to the prior quarter, noninterest expense excluding certain items decreased $86 million, or 7%, primarily reflecting a seasonal decrease in compensation and benefits expense. Noninterest expense in the current quarter included a $4 million expense related to the impact of non-qualified deferred compensation mark-to-market compared to a $15 million expense in the prior quarter, both of which were largely offset in net securities gains through noninterest income.

Compared to the year-ago quarter, noninterest expense excluding certain items was flat, primarily reflecting decreases in leasing business expense and other noninterest expense (excluding the aforementioned certain items), offset by increases in compensation and benefits expense and marketing expense. The year-ago quarter included a $10 million expense related to the impact of non-qualified deferred compensation mark-to-market, which was largely offset in net securities gains through noninterest income.

Compared to the prior quarter, total average portfolio loans and leases were stable. Average commercial portfolio loans and leases decreased 1%, primarily reflecting a decrease in C&I loan balances due to lower demand from corporate borrowers. Average consumer portfolio loans were stable, primarily reflecting an increase in indirect consumer loan balances, offset by a decrease in other consumer loan balances.

Compared to the year-ago quarter, total average portfolio loans and leases decreased 5%, reflecting decreases in both the commercial and consumer portfolios. Average commercial portfolio loans and leases decreased 7%, primarily reflecting a decrease in C&I loan balances. Average consumer portfolio loans decreased 2%, primarily reflecting decreases in indirect secured consumer loan balances, residential mortgage loan balances, and other consumer loan balances, partially offset by an increase in solar energy installation loan balances.

Average securities (taxable and tax-exempt; amortized cost) of $57 billion in the current quarter were stable compared to the prior quarter and decreased 1% compared to the year-ago quarter. Average other short-term investments (including interest-bearing cash) of $21 billion in the current quarter decreased 3% compared to the prior quarter and increased 164% compared to the year-ago quarter.

Period-end commercial portfolio loans and leases of $72 billion were stable compared to the prior quarter, primarily reflecting increases in commercial lease balances and commercial mortgage loan balances, offset by a decrease in C&I loan balances. Compared to the year-ago quarter, period-end commercial portfolio loans and leases decreased 6%, primarily reflecting a decrease in C&I loan balances. Period-end commercial revolving line utilization was 36%, compared to 36% in the prior quarter and 35% in the year-ago quarter.

Period-end consumer portfolio loans of $45 billion increased 1% compared to the prior quarter, reflecting increases in indirect secured consumer loan balances and home equity loan balances, partially offset by a decrease in other consumer loan balances. Compared to the year-ago quarter, period-end consumer portfolio loans decreased 2%, reflecting decreases in indirect secured consumer loan balances and other consumer loan balances, partially offset by an increase in solar energy installation loan balances.

Total period-end securities (taxable and tax-exempt; amortized cost) of $57 billion in the current quarter were stable compared to the prior quarter and the year-ago quarter. Period-end other short-term investments of approximately $21 billion decreased 8% compared to the prior quarter, and increased 93% compared to the year-ago quarter.

Compared to the prior quarter, total average deposits decreased 1%, primarily reflecting the seasonal impact of tax payments, partially offset by an increase in money market balances. Average demand deposits represented 25% of total core deposits in the current quarter, consistent with the prior quarter. Compared to the prior quarter, average consumer segment deposits increased 2%, average commercial segment deposits decreased 2%, and average wealth & asset management segment deposits decreased 2%. Period-end total deposits decreased 2% compared to the prior quarter.

Compared to the year-ago quarter, total average deposits increased 4%, primarily reflecting increases in interest checking and money market balances, partially offset by decreases in demand account balances and savings balances. Period-end total deposits increased 2% compared to the year-ago quarter.

The period-end portfolio loan-to-core deposit ratio was 72% in the current quarter, compared to 71% in the prior quarter and 77% in the year-ago quarter. Estimated uninsured deposits were approximately $72 billion, or 43% of total deposits, as of quarter end.

Compared to the prior quarter, average wholesale funding decreased 2%, primarily reflecting a decrease in CDs over $250,000. Compared to the year-ago quarter, average wholesale funding decreased 6%, primarily reflecting a decrease in FHLB advances, partially offset by an increase in long-term debt.

Nonperforming portfolio loans and leases were $606 million in the current quarter, with the resulting NPL ratio of 0.52%. Compared to the prior quarter, NPLs decreased $102 million with the NPL ratio decreasing 9 bps. Compared to the year-ago quarter, NPLs decreased $23 million with the NPL ratio remaining flat.

Nonperforming portfolio assets were $643 million in the current quarter, with the resulting NPA ratio of 0.55%. Compared to the prior quarter, NPAs decreased $100 million with the NPA ratio decreasing 9 bps. Compared to the year-ago quarter, NPAs decreased $18 million with the NPA ratio increasing 1 bp.

The provision for credit losses totaled $97 million in the current quarter. The allowance for credit loss ratio represented 2.08% of total portfolio loans and leases at quarter end, compared with 2.12% for the prior quarter end and 2.08% for the year-ago quarter end. In the current quarter, the allowance for credit losses represented 400% of nonperforming portfolio loans and leases and 377% of nonperforming portfolio assets.

Net charge-offs were $144 million in the current quarter, resulting in an NCO ratio of 0.49%. Compared to the prior quarter, net charge-offs increased $34 million and the NCO ratio increased 11 bps. Commercial net charge-offs were $80 million, resulting in a commercial NCO ratio of 0.45%, which increased 26 bps compared to the prior quarter. Consumer net charge-offs were $64 million, resulting in a consumer NCO ratio of 0.57%, which decreased 10 bps compared to the prior quarter.

Compared to the year-ago quarter, net charge-offs increased $54 million and the NCO ratio increased 20 bps, reflecting an increase from near-historically low net charge-offs in the year-ago quarter. The commercial NCO ratio increased 29 bps compared to the prior year, and the consumer NCO ratio increased 7 bps compared to the prior year.

The CET1 capital ratio was 10.60%, the Tangible common equity to tangible assets ratio was 7.92% excluding AOCI, and 5.80% including AOCI. The Tier 1 risk-based capital ratio was 11.90%, the Total risk-based capital ratio was 13.93%, and the Leverage ratio was 9.07%.

During the second quarter of 2024, Fifth Third repurchased $125 million of its outstanding stock, which reduced common shares by approximately 3.5 million at quarter end.

On June 28, 2024, Fifth Third released its preliminary stress capital buffer requirement resulting from the Federal Reserve Board's annual stress test, which will be effective October 1, 2024. Fifth Third's preliminary stress capital buffer requirement of 3.2% is based off of the supervisory severely adverse scenario published in February 2024. Fifth Third's CET1 capital ratio on June 30, 2024 of 10.60% significantly exceeds the regulatory minimum of 4.5% plus the stress capital buffer, reflecting strong capital levels.

Tax Rate

The effective tax rate for the quarter was 21.3% compared with 21.1% in the prior quarter and 22.5% in the year-ago quarter.

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 and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”). 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, which will be available for 30 days.

Corporate Profile

Fifth Third is a bank that’s as long on innovation as it is on history. Since 1858, we’ve been helping individuals, families, businesses and communities grow through smart financial services that improve lives. Our list of firsts is extensive, and it’s one that continues to expand as we explore the intersection of tech-driven innovation, dedicated people, and focused community impact. Fifth Third is one of the few U.S.-based banks to have been named among Ethisphere's World’s Most Ethical Companies® for several years. With a commitment to taking care of our customers, employees, communities and shareholders, our goal is not only to be the nation’s highest performing regional bank, but to be the bank people most value and trust.

Fifth Third Bank, National Association is a federally chartered institution. Fifth Third Bancorp is the indirect parent company of Fifth Third Bank and its common stock is traded on the NASDAQ® Global Select Market under the symbol “FITB.” Investor information and press releases can be viewed at www.53.com.

Earnings Release End Notes

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. All statements other than statements of historical fact are forward-looking statements. These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions 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,” “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 by our filings with the U.S. Securities and Exchange Commission (“SEC”).

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) deteriorating credit quality; (2) loan concentration by location or industry of borrowers or collateral; (3) problems encountered by other financial institutions; (4) inadequate sources of funding or liquidity; (5) unfavorable actions of rating agencies; (6) inability to maintain or grow deposits; (7) limitations on the ability to receive dividends from subsidiaries; (8) cyber-security risks; (9) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (10) failures by third-party service providers; (11) inability to manage strategic initiatives and/or organizational changes; (12) inability to implement technology system enhancements; (13) failure of internal controls and other risk management programs; (14) losses related to fraud, theft, misappropriation or violence; (15) inability to attract and retain skilled personnel; (16) adverse impacts of government regulation; (17) governmental or regulatory changes or other actions; (18) failures to meet applicable capital requirements; (19) regulatory objections to Fifth Third’s capital plan; (20) regulation of Fifth Third’s derivatives activities; (21) deposit insurance premiums; (22) assessments for the orderly liquidation fund; (23) weakness in the national or local economies; (24) global political and economic uncertainty or negative actions; (25) changes in interest rates and the effects of inflation; (26) changes and trends in capital markets; (27) fluctuation of Fifth Third’s stock price; (28) volatility in mortgage banking revenue; (29) litigation, investigations, and enforcement proceedings by governmental authorities; (30) breaches of contractual covenants, representations and warranties; (31) competition and changes in the financial services industry; (32) potential impacts of the adoption of real-time payment networks; (33) changing retail distribution strategies, customer preferences and behavior; (34) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (35) potential dilution from future acquisitions; (36) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (37) results of investments or acquired entities; (38) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (39) inaccuracies or other failures from the use of models; (40) effects of critical accounting policies and judgments or the use of inaccurate estimates; (41) weather-related events, other natural disasters, or health emergencies (including pandemics); (42) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity; (43) changes in law or requirements imposed by Fifth Third’s regulators impacting our capital actions, including dividend payments and stock repurchases; and (44) Fifth Third's ability to meet its environmental and/or social targets, goals and commitments.

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. 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. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this press release should be read as applying mutatis mutandis to every other instance of such information appearing herein.

Category: Earnings

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