Fifth Third Bancorp · NASDAQ:FITB
Fifth Third Bancorp — Q2 2021 Earnings Presentation
33 slides from Fifth Third Bancorp's earnings presentation, Jul 22, 2021
Slide 1: Fifth Third Bancorp 2Q21 Earnings Presentation
Fifth Third Bancorp 2Q21 Earnings Presentation July 22, 2021 Refer to earnings release dated July 22, 2021 for further information. 1 © Fifth Classification: Third Bancorp |Internal Use All Rights Reserved
Slide 2: Cautionary statement
Cautionary statement This presentation 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 3
Slide 3: 2Q21 highlights
2Q21 highlights Reported1 Adjusted1 • Strong reported and adjusted return metrics, reflecting solid operating results EPS $0.94 $0.98 • Adjusted PPNR1 growth of 6% compared to the year-ago ROA 1.38% 1.43% quarter ROE 13.0% 13.5% • Historically low NCO ratio reflecting improvements in consumer and co
Slide 4: Net interest income
Net interest income1 1Q21 to 2Q21 Reported NII & NIM Walk NII $ in millions; NIM change in bps $1,203 $1,211 NII NIM $1,179 1Q21 $1,179 2.62% Incremental investment portfolio prepayment 11 3 penalties Total net interest income; $ millions Wholesale funding actions 7 2 Government-guaranteed loans pur
Slide 5: Noninterest income
Noninterest income 2Q21 vs. 1Q21 • Adjusted noninterest income1 up $9 million, or 1% $759 $768 $749 $741 • Primary drivers: $670 ‒ Other noninterest income (up 56%) $650 ‒ Card and processing revenue (up 9%) Total noninterest income; $ millions ‒ Commercial banking revenue (up 5%) ‒ Partially offset
Slide 6: Noninterest expense
Noninterest expense 2Q21 vs. 1Q21 $1,215 $1,215 • Adjusted noninterest expense1 down $62 million, or 5% $1,153 $1,153 $1,121 $1,106 • Primary drivers: ‒ Compensation and benefits (down 10%) Total noninterest expense; $ millions ‒ Card and processing expense (down 33%) ‒ Marketing expense (down 13%)
Slide 7: Interest earning assets
Interest earning assets Average loan & lease balances Average securities1 and short-term investments $ in billions; loan & lease balances excluding HFS $ in billions $118.5 $69.0 $70.5 $109.0 $108.5 % change % change $39.6 QoQ YoY $56.8 QoQ YoY $39.6 $40.1 $32.7 $33.6 +1% +1% +3% +69% ~$3.8BN $19.8
Slide 8: Core deposits and wholesale funding
Core deposits and wholesale funding Average core deposit balances Average wholesale funding balances $ in billions $ in billions $156.9 $161.5 % change % change $146.5 QoQ YoY QoQ YoY $77.7 $81.2 $23.7 $71.6 +5% +13% $18.4 $16.5 (10%) (31%) $74.9 2.42% 2.47% $79.2 $80.3 +1% +7% 2.27% 0.27% 0.06% 0.0
Slide 9: Well diversified commercial portfolio with several potential risk mitigants to recent stresses
Well diversified commercial portfolio with several potential risk mitigants to recent stresses COVID-19 high impact portfolios of interest Total Commercial balances ex. PPP Key takeaways: Restaurants • ~75% of portfolio in QSR, mostly to top-tier brands and national chains ($1.6BN) • Areas of focus:
Slide 10: CRE portfolio is smaller, centrally managed, and well diversified
CRE portfolio is smaller, centrally managed, and well diversified CRE as a % of total loans and leases Well diversified by property type Total loans and leases ex. PPP Exposures by property type Apartment 15% Owner Occupied 1% Office CRE 27% 2% Home Builder 5% 3% Hospitality Non-owner Occupied CRE 8
Slide 11: Credit quality overview
Credit quality overview Early stage delinquencies and NPAs1 ACL as % of portfolio loans and leases 2.76% 2.75% 2.65% 2.64% 2.62% 2.53% 2.40% 2.22% Ex. PPP 2.50% 2.49% 2.29% 2.41% 2.15% Including MB 2.19% unamortized 0.72% 2.06% loan discount 0.65% 0.61% 0.52% 0.51% 0.28% 0.26% 0.35% 0.24% 0.33% 2Q18
Slide 12: Allowance for credit losses
Allowance for credit losses Allocation of allowance by product 2Q21 Change in Rate $s in millions Compared to: % of portfolio Allowance for loan & lease losses Amount loans & leases 1Q21 CECL Day 1 Commercial and industrial loans 744 1.56% (0.08%) 0.34% Commercial mortgage loans 371 3.59% (0.12%) 2.
Slide 13: Strong capital and liquidity position
Strong capital and liquidity position Regulatory capital position Common equity tier 1 ratio1 • Repurchased shares totaling $347 million in 2Q21 ~+38 bps ~+6 bps • Capital plans support repurchase of shares totaling 10.46% ~(16 bps) approximately $850 million in 2H21 ~(13 bps) 10.37% ~(24 bps) • Exp
Slide 14: Current expectations
Current expectations FY 2021 compared to FY 2020 • Includes expected PPP impacts Loans & leases Average: stable • Reflects impact of previous consumer (including HFS) loan purchases (~$3.7BN in GNMA forbearance pools added since December 2020, incl. ~$1BN in April 2021) • Assumes commercial line uti
Slide 15: Current expectations
Current expectations Third quarter 2021 compared to Second quarter 2021 Loans & leases Average: down ~1% (up ~1% excl. PPP (including HFS) • Reflects impact of impacts) previous consumer loan purchases • NII guidance assumes relatively stable Net interest income1 down ~2% (down ~1% excl. PPP impacts
Slide 16: Fifth Third value proposition
Fifth Third value proposition 1 Generating strong relationship growth in all our markets with a focus on our Southeast expansion, and on continually improving the digital experience 2 Diversified and growing fee revenues to support profitability and generate strong returns 3 Investing for long-term
Slide 17: Appendix
Appendix 17 © Fifth Classification: Third Bancorp |Internal Use All Rights Reserved
Slide 18: Living our purpose guided by our vision and values
Living our purpose guided by our vision and values Our To improve the lives of our customers and the Purpose well-being of our communities Our Be the One Bank people most value and trust Vision Our Work as One Bank Take Accountability Core Values Be Respectful Act with Integrity Our purpose, vision,
Slide 19: Committed to generating sustainable value
Committed to generating sustainable value Environmental, Social, and Governance (ESG) actions and impact Actions Impact 2020 ESG Report Available on investor relations website World’s Most Ethical Companies Recognized by Ethisphere in 2021 $41.6BN Delivered against 2016 $32BN community commitment1 M
Slide 20: Paycheck Protection Program update
Paycheck Protection Program update Average PPP loan balances Period-end PPP loan balances $ in billions $ in billions $5.4 $5.2 $5.1 $5.2 $5.2 $5.2 $4.8 $4.8 $3.8 $3.7 2Q20 3Q20 4Q20 1Q21 2Q21 2Q20 3Q20 4Q20 1Q21 2Q21 PPP interest income $ in millions $53 $53 • Originated $7.3BN in PPP loans across
Slide 21: Balance sheet positioning
Balance sheet positioning Commercial loans1,2,3 Consumer loans1 Investment portfolio Long-term debt4 $21.3BN fixed 3 | $42.0BN variable 1,2 $33.1BN fixed | $7.6BN variable 1 $10.1BN fixed | $2.2BN variable4 • 1ML based: 54%7 • 58% allocation to bullet/ • 1ML based: 2%8 • 1ML based: 6%9 • 3ML based:
Slide 22: Well positioned to benefit from higher rates
Well positioned to benefit from higher rates NII is asset sensitive in year 1 and year 2 to rising rates. Estimated NII sensitivity profile and ALCO policy limits • As of June 30, 2021, 48% of HFI loans were variable % Change in NII (FTE) ALCO policy limit rate net of existing hedges (66% of total c
Slide 23: Cash flow hedges
Cash flow hedges Cash flow hedges continue to protect NIM for next 3+ years Notional value of cash flow hedges ($ Billions) Blended rate of swaps will continue to improve throughout time: • 2Q21-4Q22: 3.02% • 1Q23-3Q23: 3.08% $11 $11 $11 $11 $11 $11 $11 • 4Q23-1Q24: 3.09% $10 $10 $10 • 2Q24: 3.14% •
Slide 24: Strong liquidity profile
Strong liquidity profile Holding company: Unsecured debt maturities • Holding Company cash as of June 30, 2021: $5.4B $ millions – excl. Retail Brokered & Institutional CDs • Cash currently sufficient to satisfy all fixed obligations in $3,987 a stressed environment for ~30 months (debt maturities,
Slide 25: Mortgage banking results
Mortgage banking results Mortgage banking net revenue Mortgage originations and margins $ millions $ billions $5.00 $99 $76 $85 $4.53 $4.68 $18 $64 $3.94 $1.31 $1.11 $1.06 Originations HFI $3.42 $63 $66 $25 $59 $1.03 $59 $1.01 $66 $95 $93 $89 $81 Originations HFS $47 $2.41 $3.42 $2.91 $3.62 $3.69 ($
Slide 26: Future TRA payment schedule
Future TRA payment schedule Estimated potential GAAP noninterest income recognition1,2 $ Millions; pre-tax $44 $45 $22 $11 4Q21 4Q22 4Q23 4Q24 For end note descriptions, see end note summary starting on page 32 26 © Fifth Classification: Third Bancorp |Internal Use All Rights Reserved
Slide 27: Treasury Management transformation has delivered strong results
Treasury Management transformation has delivered strong results and is well-positioned for future success Fifth Third Treasury Management At a Glance Evolution of Managed Services • TM product relationships • Fifth Third has a with 35 of Fortune 100 #4-7 market share 2015: Cash companies rank for mo
Slide 28: NPL rollforward
NPL rollforward1 Commercial $ millions Consumer $ millions Total NPL $ millions For end note descriptions, see end note summary starting on page 32 28 © Fifth Classification: Third Bancorp |Internal Use All Rights Reserved
Slide 29: 2Q21 adjustments and notable items
2Q21 adjustments and notable items Adjusted EPS of $0.981 2Q21 reported EPS of $0.94 included a negative $0.04 impact from the following notable item: • $37 million pre-tax (~$28 million after-tax2) charge related to the valuation of the Visa total return swap For end note descriptions, see end note
Slide 30: Non-GAAP reconciliation
Non-GAAP reconciliation Fifth Third Bancorp and Subsidiaries For the Three Months Ended $ and shares in millions June March December September June (unaudited) 2021 2021 2020 2020 2020 Net income (U.S. GAAP) (a) $709 $694 $604 $581 $195 Net income (U.S. GAAP) (annualized) (b) $2,844 $2,815 $2,403 $2
Slide 31: Non-GAAP reconciliation
Non-GAAP reconciliation Fifth Third Bancorp and Subsidiaries For the Three Months Ended $ and shares in millions June March December September June (unaudited) 2021 2021 2020 2020 2020 Average interest-earning assets (a) $184,918 $182,715 $182,418 $180,704 $176,224 Net interest income (U.S. GAAP) (b
Slide 32: Earnings presentation end notes
Earnings presentation end notes Slide 3 end notes 1. Reported ROTCE, NIM, pre-provision net revenue, and efficiency ratio are non-GAAP measures: all adjusted figures are non-GAAP measures; see reconciliation on pages 30 and 31 of this presentation and the use of non-GAAP measures on pages 27-29 of t
Slide 33: Earnings presentation end notes
Earnings presentation end notes Slide 21 end notes Note: Data as of 6/30/21. 1. Excludes HFS Loans & Leases. 2. Fifth Third had $11B of variable loans classified as fixed given the impacts of $3BN in floors with a 2.25% 1ML strike and $8BN in receive-fix swaps. 3. Excludes ~$3.7BN in Small Business