Fifth Third Bancorp · NASDAQ:FITB
Fifth Third Bancorp — Q2 2018 Earnings Presentation
26 slides from Fifth Third Bancorp's earnings presentation, Jul 19, 2018
Slide 1: Fifth Third Bancorp 2Q18 Earnings Presentation
Fifth Third Bancorp 2Q18 Earnings Presentation July 19, 2018 Refer to earnings release dated July 19, 2018 for further information. Exhibit 99.2
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, Fifth Third Bancorp’s and MB Financial, Inc.’s expectations or predictions of future financial or business perfo
Slide 3: 2Q18 highlights
2Q18 highlights Announced acquisition of Chicago-based MB Financial Developed three year branch optimization plan to re-allocate 100-125 branches to higher growth markets Implemented workforce reduction plan with estimated annualized savings of approximately $80MM NIM1 up 20 bps YoY, and up 3 bps Qo
Slide 4: 2Q18 in review
2Q18 in review Items included in 2Q18 results had a net positive $0.17 EPS impact: $205MM pre-tax (~$162MM after-tax2) gain related to the sale of Worldpay, Inc (“Worldpay”) shares $30MM pre-tax (~$24MM after-tax2) charge related to branch optimization efforts $19MM pre-tax (~$15MM after-tax2) compe
Slide 5: Balance sheet
Balance sheet Securities1 and short-term investments Loan & lease balances Core deposit balances $ billions $ billions $ billions Current Outlook Average securities1 Short-term investments Transaction Other time Loan-to-core deposit ratio Commercial up 1% vs. 1Q18; up 1% YoY Consumer down 1% vs. 1Q1
Slide 6: Net interest income
Net interest income1 2Q18 vs. 1Q18 Current outlook 2Q18 vs. 2Q17 NII up $25 million, or 3% NIM up 3 bps NII and NIM performance drivers: Market rates ($16MM, +5 bps) Growth in higher yielding commercial loans ($5MM, +1 bp) Day count ($7MM, -2 bps) Commercial deposit balance shift to interest bearing
Slide 7: Noninterest income
Noninterest income 2Q18 vs. 1Q18 2Q18 vs. 2Q17 Adjusted noninterest income1 up $14 million, or 3% Performance drivers: Corporate banking revenue growth driven by strong, broad-based capital markets revenue growth Highest capital markets revenue in history of Bank Higher card and processing revenue A
Slide 8: Noninterest expense
Noninterest expense 2Q18 vs. 1Q18 Current outlook 2Q18 vs. 2Q17 Adjusted noninterest expense1 down 3% Performance drivers: Seasonally lower compensation-related expenses Ongoing discipline in managing expenses throughout the company Adjusted noninterest expense1 up 5% Performance drivers: Higher bas
Slide 9: Credit quality overview
Credit quality overview 1Excludes HFS loans; 2Commercial criticized assets as a percentage of total commercial loans excluding HFS See forward-looking statements on page 2 Current Outlook Provision reflective of loan growth 2H18 net charge-offs expected to be below 1H18 Net charge-offs of 0.41%, up
Slide 10: Strong capital and liquidity position
Strong capital and liquidity position 1Current period regulatory capital ratio is estimated Common Equity Tier 1 ratio (Basel III)1 Modified LCR CET1 ratio of 10.9%, up 9 bps sequentially and up 28 bps YoY; Worldpay sale increased CET1 by 16 bps Continue to expect migration towards 9.5% CET1 ratio I
Slide 11: Thoughtful reduction in Worldpay stake
Thoughtful reduction in Worldpay stake 49% ~$6BN Worldpay TRA revenue forecast1 Vantiv/Worldpay ownership and monetized gains 1Assumes Worldpay has sufficient U.S. taxable income to utilized the TRA-related deductions, and assumes a 21% federal tax rate 2Assumes remaining units are exchanged at $82.
Slide 12: Current outlook
Current outlook Loans & leases Noninterest expense Effective tax rate Noninterest income NII (FTE)1 NIM (FTE)1 Credit items 1Non-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 31 and 32 of
Slide 13: NorthStar initiatives and long-term targets
ROTCE: 18%+ ROA: 1.55 – 1.65% Efficiency: low 50s NorthStar work to be substantially complete by 4Q18 Wealth & Asset Management Balance Sheet Optimization Household Growth Mortgage Enhanced marketing analytics Virtual advisor Focus Already completed or launched… Personal Lending GreenSky Consumer cr
Slide 14: Branch network optimization and expense management
Leveraged geospatial information sciences to evaluate our branch network Planning closures in slower-growth areas and openings in higher-growth markets ~100-125 openings and ~100-125 closings over next 36 months No meaningful expense savings expected from closures; benefits expected to be realized t
Slide 15: MB acquisition financial update
MB acquisition financial update Excluding revenue synergies, transaction expected to improve: ROA by ~12 bps ROTCE by ~200 bps Efficiency by ~400 bps TBVPS dilution of $1.43 or 7.7% IRR improves 150 – 200 bps with revenue synergies 1.450 FITB shares and $5.54 of cash per MBFI share $49.39 of total c
Slide 16: Merger integration update
Merger integration update Board committee tasked with integration oversight and extensive senior management involved to ensure seamless integration Dedicated functional integration teams Best-of-blend approach with a “better together” mindset Inclusive communication between companies Focused on crea
Slide 17: Appendix
Appendix
Slide 18: PPNR and efficiency ratio trends
PPNR and efficiency ratio trends1 1NII and Efficiency ratio are on a fully-taxable equivalent basis; non-GAAP measures: See reconciliation on pages 25 and 26 of this presentation and use of non-GAAP measures on pages 31 and 32 of the earnings release; 2Prior quarters include similar adjustments PPNR
Slide 19: Strong liquidity profile
Strong liquidity profile $ millions – excl. Retail Brokered & Institutional CDs Unsecured debt maturities Heavily core funded Holding company: Modified LCR of 116% Holding Company cash as of June 30, 2018: $3.2B Cash currently sufficient to satisfy all fixed obligations in a stressed environment for
Slide 20: Balance sheet positioning
Balance sheet positioning Investment portfolio $13.1B fix | $42.8B float 1,2,3 Commercial loans1,2,3 Consumer loans1 Long-term debt4 $25.9B fix | $10.2B float 1 $9.4B fix | $4.9B float 4 57% allocation to bullet/ locked-out cash flow securities Yield: 3.20% Effective duration of 5.25 Net unrealized
Slide 21: Interest rate risk management
Interest rate risk management Estimated NII sensitivity profile and ALCO policy limits Estimated NII sensitivity with deposit beta changes Estimated NII sensitivity with demand deposit balance changes NII benefits from asset rate reset in rising rate environment: 58% of total loans are floating rate
Slide 22: Mortgage banking results
Mortgage banking results $ billions Mortgage banking net revenue $ billions Mortgage originations and gain-on-sale margin1 1Gain-on-sale margin represents gains on all loans originated for sale $2.1B in originations, up 35% sequentially and down 7% YoY; 73% purchase volume 2Q18 mortgage banking driv
Slide 23: NPL rollforward
NPL rollforward1 1Loan balances exclude nonaccrual loans HFS Commercial $ millions Consumer $ millions Total NPL $ millions
Slide 24: Credit trends
Credit trends Commercial & industrial $ millions Residential mortgage $ millions Commercial mortgage $ millions Commercial construction $ millions $ millions Home equity $ millions Automobile * Excludes loans HFS
Slide 25: Regulation G non-GAAP reconciliation
Regulation G non-GAAP reconciliation See pages 31 and 32 of the earnings release for a discussion on the use of non-GAAP financial measures 1Pre-tax items: for 2Q18 and 1Q18 assumes a 21% tax rate, for 4Q17 and prior periods assumes at 35% tax rate HL to check #
Slide 26: Regulation G non-GAAP reconciliation
Regulation G non-GAAP reconciliation See pages 31 and 32 of the earnings release for a discussion on the use of non-GAAP financial measures HL to check #