Fifth Third Bancorp · NASDAQ:FITB
Fifth Third Bancorp — Q1 2023 Earnings Presentation
45 slides from Fifth Third Bancorp's earnings presentation, Apr 20, 2023
Slide 1: Fifth Third Bancorp 1Q23 Earnings Presentation
© Fifth Third Bancorp | All Rights Reserved Ó Fifth Third Bancorp | All Rights Reserved Fifth Third Bancorp 1Q23 Earnings Presentation April 20, 2023 Refer to earnings release dated April 20, 2023 for further information.
Slide 2: Forward-looking statements
© Fifth Third Bancorp | All Rights Reserved 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,
Slide 3: 1Q23 highlights
© Fifth Third Bancorp | All Rights Reserved Reported 1 Adjusted 1 EPS $0.78 $0.83 ROA 1.10% 1.17% ROE 13.7% 14.5% ROTCE 20.5% 15.4% NIM 3.29% 3.29% Efficiency ratio 60.0% 58.6% PPNR $887MM $930MM CET1 2 9.25% • Period-end and average total deposits were flat compared to 4Q22 • Net charge-off ratio o
Slide 4: Net interest income and NIM walk
© Fifth Third Bancorp | All Rights Reserved NII $ in millions; NIM change in bps 4Q22 to 1Q23 Reported NII & NIM Walk T o t a l n e t in t e r e s t i n c o m e ; $ m il li o n s NII NIM For end note descriptions, see end note summary starting on page 42 NII $1,5824Q22 3.35% NIM $1,522 3.29%1Q23 Sec
Slide 5: Noninterest income
© Fifth Third Bancorp | All Rights Reserved Noninterest income • Adjusted noninterest income 1 down $54 million, or 7% • Primary drivers: ‒ Other noninterest income (down 52%) driven by recognition of tax receivable agreement revenue of $46 million in the prior quarter ‒ Card and processing revenue
Slide 6: Noninterest expense
© Fifth Third Bancorp | All Rights Reserved • Adjusted noninterest expense 1 up $101 million, or 8% • Primary drivers: ‒ Compensation and benefits (up 16%), reflecting a seasonal increase, including $12 million from NQDC plans ‒ Technology and communications (up 6%) reflecting continued modernizatio
Slide 7: Loan and securities balances and yields
© Fifth Third Bancorp | All Rights Reserved QoQ YoY (22%) (72%) (67%) +4% QoQ YoY +1% +6% +1% +6% 5.63% Interest earning assets Commercial Securities 1 Average securities 1 and short-term investmentsAverage loan & lease balances Total loan yield $ in billions; loan & lease balances excluding HFS Sho
Slide 8: Deposits and wholesale funding
© Fifth Third Bancorp | All Rights Reserved Deposits and wholesale funding Average wholesale funding balancesAverage deposit balances Core depositsCDs > $250K Total interest bearing deposit costs $ in billions Total wholesale funding Wholesale funding cost Period-end deposit balances Period-end whol
Slide 9: We have a high-quality deposit franchise
© Fifth Third Bancorp | All Rights Reserved 9 We have a high-quality deposit franchise High concentration of operating deposit balances which has proven to be stickier in this environment Remaining 13 sectors all <5% • 26% FDIC insured 1 • 88% of balances represented by relationships that utilize Tr
Slide 10: Our deposit franchise stands out among peers
© Fifth Third Bancorp | All Rights Reserved 10 Our deposit franchise stands out among peers One of the highest % of insured deposits among peers 1 As of 4Q22; % of deposits insured Strong balance sheet in uncertain times #2 of 34 in Coin and currency revenue #2 of 29 in Retail lockbox remittances #4
Slide 11: Expect deposit betas in-line or better than industry
© Fifth Third Bancorp | All Rights Reserved 11 Expect deposit betas to perform in-line or better than the industry Cumulative interest-bearing deposit beta expectations through 4Q23 36% ~49% beta ~43% beta FITB Industry 1 Higher Assumed Beta Lower Assumed Beta FY23 NII Outlook Based On These Termina
Slide 12: Credit quality overview
© Fifth Third Bancorp | All Rights Reserved (4) bps impact from adoption of ASU 2022-02 Early stage delinquencies and NPAs Net charge-offs (NCOs) ACL as % of portfolio loans and leases • Drivers of $37MM increase in ACL: ‒ $86MM reserve build excluding the one-time $49M impact of adopting ASU 2022-0
Slide 13: Office represents 1.3% of total loans
© Fifth Third Bancorp | All Rights Reserved 13 Office represents 1.3% of total loans Office CRE portfolio stats $ billions $ balance % of total loans Multifamily $3.0 2.4% Office 1.6 1.3 Hospitality 1.5 1.2 Retail 1.2 1.0 Industrial 0.9 0.7 Other 2.2 1.8 Total non-owner occupied CRE $10.4 8.4% As of
Slide 14: Allowance for loan & lease losses
© Fifth Third Bancorp | All Rights Reserved Allowance for loan & lease losses Commercial and industrial loans Commercial mortgage loans Commercial construction loans Commercial leases Total commercial loans and leases Residential mortgage loans Home equity Indirect secured consumer loans Credit card
Slide 15: Strong liquidity and capital position
© Fifth Third Bancorp | All Rights Reserved 15 Strong liquidity and capital position • Loan-to-core deposit ratio of 78% • $4.7 billion in Holding Company cash, sufficient to satisfy all fixed obligations in a stressed environment for ~21 months • For several years, we have performed: ◦ Daily LCR ca
Slide 16: Consistently investing for growth through the cycle
Classification: Internal Use © Fifth Third Bancorp | All Rights Reserved 16 Consistently investing for growth through the cycle Consistent strong financial results and top tier profitability Consistent NIM and credit discipline Consistent customer acquisition growth Consistent peer-leading efficienc
Slide 17: Current expectations FY 2023 compared to FY 2022
© Fifth Third Bancorp | All Rights Reserved Noninterest expense 1 up 4 – 5% (FY22 baseline: $4.719BN) Net charge-off ratio 25 – 35 bps Effective tax rate ~23% For end note descriptions, see end note summary starting on page 42 As of April 20, 2023; please see cautionary statements on page 2 Total re
Slide 18: Current expectations 2Q23 compared to 1Q23
© Fifth Third Bancorp | All Rights Reserved Net interest income 1 Noninterest income 1 up 2 – 3% Noninterest expense 1 down 8 – 9% down ~1% (1Q23 baseline: $1.522BN) (1Q23 baseline: $723MM) (1Q23 baseline: $1.319BN) Net charge-off ratio 25 – 35 bps Effective tax rate ~23% For end note descriptions,
Slide 19: Appendix
© Fifth Third Bancorp | All Rights Reserved Appendix 19
Slide 20: Our purpose, vision, and core values
© Fifth Third Bancorp | All Rights Reserved 20 Our purpose, vision, and core values support our commitment to generating sustainable value for stakeholders Our Vision Be the One Bank people most value and trust Our Core Values Our Purpose To improve the lives of our customers and the well-being of o
Slide 21: ESG and community commitments
© Fifth Third Bancorp | All Rights Reserved 21 Addressing climate change Promoting inclusion and diversity Demonstrating our commitment to employees Strengthening our communities Keeping the customer at the center $180MM Neighborhood Investment Program in nine majority-Black communities $1.2BN provi
Slide 22: Actions demonstrating leadership
© Fifth Third Bancorp | All Rights Reserved 22 Actions Demonstrating Leadership Third-party recognitions $500,000 donated for hurricane relief in Florida Through Fifth Third Foundation in addition to other assistance programs Published 3 rd ESG report Available on ir.53.com Announced 10-year $100BN
Slide 23: Unsecured debt maturities and deposit composition
© Fifth Third Bancorp | All Rights Reserved 23 Unsecured debt maturities Composition of deposits by segment Holding company: • Holding Company cash as of March 31, 2023: $4.7BN • Cash currently sufficient to satisfy all fixed obligations in a stressed environment for ~21 months (debt maturities, com
Slide 24: Balance sheet positioning
© Fifth Third Bancorp | All Rights Reserved • 65% allocation to bullet/ locked- out cash flow securities • AFS yield: 3.04% 5 • Effective duration of 5.3 6 • Net unrealized pre-tax loss: $5.2BN • 98% AFS 11 $25.0BN fixed 3 | $52.2BN variable 1,2 Commercial loans 1,2,3 Balance sheet positioning 100%
Slide 25: Investment portfolio composition
© Fifth Third Bancorp | All Rights Reserved 25 Investment portfolio composition Total securities portfolio CMBS portfolio is AAA-rated Total securities portfolio $56B ~30% of interest earning assets Agency CMBS • $29BN portfolio • ~85% in Fannie/Freddie deals risk weighted at 20% and remaining ~15%
Slide 26: Managing rate risk against conservative outcomes
© Fifth Third Bancorp | All Rights Reserved Managing rate risk against conservative outcomes Estimated NII sensitivity profile and ALCO policy limits Estimated NII sensitivity at specific betas Rate Risk models assume approximately 70-75% effective up betas and 60-65% down betas in our baseline NII
Slide 27: Cash flow hedges continue to protect NIM
© Fifth Third Bancorp | All Rights Reserved ($3BN @ 2.25% 1- month LIBOR strike) Cash flow hedges continue to protect NIM 1 EOP notional value of cash flow hedges ($ in billions) Actual Cash flow hedges For end note descriptions, see end note summary starting on page 42 Swap protection extends throu
Slide 28: Mortgage banking results
© Fifth Third Bancorp | All Rights Reserved Mortgage banking results $ in millions Mortgage banking net revenue Mortgage originations and margins • Mortgage banking net revenue increased $6 million from the prior quarter, primary reflecting a $4 million increase in gross servicing fees. • $1.4 billi
Slide 29: Preferred dividend schedule
© Fifth Third Bancorp | All Rights Reserved Preferred dividend schedule 2Q23 3Q23 4Q23 1Q24 Series H 2 ~$15 ~$12 ~$12 ~$12 Series I ~$8 ~$8 ~$8 ~$10 Series J ~$6 ~$6 ~$6 ~$6 Series K ~$3 ~$3 ~$3 ~$3 Series L ~$4 ~$4 ~$4 ~$4 Class B Series A ~$3 ~$3 ~$3 ~$3 Total ~$39 ~$36 ~$36 ~$38 Upcoming preferre
Slide 30: Total commercial portfolio overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 0.05% 0.13% 0.17% 30-89 Delinquencies 0.15% 0.14% 0.15% 90+ Delinquencies 0.02% 0.02% 0.02% Nonperforming Loans 2 0.44% 0.34% 0.43% 30 Portfolio loans $ in billions Period-end QoQ change Average QoQ change Key statistics Total co
Slide 31: Commercial & industrial overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 0.07% 0.14% 0.21% 30-89 Delinquencies 0.16% 0.14% 0.17% 90+ Delinquencies 0.02% 0.02% 0.03% Nonperforming Loans 2 0.50% 0.38% 0.49% 31 Portfolio loans $ in billions Period-end QoQ change Average QoQ change Key statistics Revolvin
Slide 32: Commercial real estate overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 (0.03%) 0.00% 0.04% 30-89 Delinquencies 0.12% 0.16% 0.04% 90+ Delinquencies 0.01% 0.00% 0.00% Nonperforming Loans 2 0.30% 0.29% 0.29% Commercial real estate overview 32 CRE Mortgage Balance by occupancy CRE Construction Balance b
Slide 33: Total consumer portfolio overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 0.25% 0.38% 0.42% 30-89 Delinquencies 0.41% 0.57% 0.44% 90+ Delinquencies 0.09% 0.06% 0.06% Nonperforming Loans 2 0.49% 0.56% 0.57% Weighted average FICO at origination 3 765 765 765 Weighted average LTV at origination 77% 78% 78
Slide 34: Residential mortgage overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 (0.02%) 0.01% 0.00% 30-89 Delinquencies 0.09% 0.17% 0.10% 90+ Delinquencies 0.08% 0.04% 0.05% Nonperforming Loans 2 0.51% 0.70% 0.73% Weighted average FICO at origination 3 767 765 764 Weighted average LTV at origination 70% 71%
Slide 35: Home equity overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 (0.07%) 0.02% (0.04%) 30-89 Delinquencies 0.64% 0.74% 0.58% 90+ Delinquencies 0.03% 0.02% 0.03% Nonperforming Loans 2 1.97% 1.66% 1.72% Weighted average FICO at origination 3 764 767 767 Weighted average LTV at origination 68% 67
Slide 36: Indirect secured consumer overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 0.17% 0.32% 0.34% 30-89 Delinquencies 0.62% 0.86% 0.67% 90+ Delinquencies 0.05% 0.00% 0.00% Nonperforming Loans 2 0.13% 0.18% 0.16% Indirect secured consumer overview 36 Portfolio FICO score at origination Includes primarily RV &
Slide 37: Credit card overview
© Fifth Third Bancorp | All Rights Reserved 1Q22 4Q22 1Q23 NCO ratio 1 3.13% 2.85% 3.43% 30-89 Delinquencies 1.01% 1.12% 1.02% 90+ Delinquencies 0.83% 0.96% 1.02% Nonperforming Loans 2 1.36% 1.44% 1.65% Credit card overview 37 Portfolio FICO score at origination 3 750+720-749<660 660-719 $ in billio
Slide 38: NPL rollforward
© Fifth Third Bancorp | All Rights Reserved 1Q22 2Q22 3Q22 4Q22 1Q23 Balance, beginning of period $337 $323 $319 $298 $263 Transfers to nonaccrual status 54 49 91 68 121 Transfers to accrual status (2) — — (5) (1) Transfers to held for sale (4) — (19) — — Loan paydowns/payoffs (52) (17) (48) (63) (2
Slide 39: 1Q23 adjustments and notable items
© Fifth Third Bancorp | All Rights Reserved 1Q23 adjustments and notable items Adjusted EPS of $0.83 1 1Q23 reported EPS of $0.78 included a negative $0.05 impact from the following notable items: • $31 million pre-tax (~$24 million after-tax 2 ) charge related to the valuation of the Visa total ret
Slide 40: Non-GAAP reconciliation
© Fifth Third Bancorp | All Rights Reserved For end note descriptions, see end note summary starting on page 42; totals shown above may not foot due to rounding 40 Fifth Third Bancorp and Subsidaries For the Three Months Ended $ and shares in millions March December September June March (unaudited)
Slide 41: Non-GAAP reconciliation
© Fifth Third Bancorp | All Rights Reserved Non-GAAP reconciliation For end note descriptions, see end note summary starting on page 42; totals shown above may not foot due to rounding 41 Fifth Third Bancorp and Subsidiaries For Three Months Ended $ and shares in millions March December September Ju
Slide 42: Slide end notes
© Fifth Third Bancorp | All Rights Reserved 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 40 and 41 of this presentation and the use of non-GAAP measures on page
Slide 43: End notes
© Fifth Third Bancorp | All Rights Reserved Earnings presentation end notes Slide 17 & 18 end notes 1. Non-GAAP measure: see forward-looking statements on page 2 of this presentation regarding forward-looking non-GAAP measures and use of non-GAAP measures on pages 26-28 of the earnings release. Slid
Slide 44: Slide end notes
© Fifth Third Bancorp | All Rights Reserved Slide 29 end notes 1. Represents forward looking statement, please refer to page 2 of this presentation regarding forward-looking non-GAAP measures. 2. Projected dividends for Series J, Series H (converts to floating in 3Q23), and Series I (converts to flo
Slide 45: Slide end notes
© Fifth Third Bancorp | All Rights Reserved Slide 38 end notes 1. Loan balances exclude nonaccrual loans HFS. Slide 39 end notes 1. Average diluted common shares outstanding (thousands); 689,566; all adjusted figures are non-GAAP measures; see reconciliation on pages 40 and 41 of this presentation a