Fifth Third Bancorp · NASDAQ:FITB
Fifth Third Bancorp — Q4 2019 Earnings Presentation
24 slides from Fifth Third Bancorp's earnings presentation, Jan 22, 2020
Slide 1: Fifth Third Bancorp 4Q19 Earnings Presentation
Fifth Third Bancorp 4Q19 Earnings Presentation January 22, 2020 Refer to earnings release dated January 22, 2020 for further information. Exhibit 99.2
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: Strategic priorities
Strategic priorities 1 2 Maintain credit, expense and capital discipline Invest to drive organic growth and profitability 3 Expand market share in key geographies 4 Leverage technology capabilities to accelerate digital transformation
Slide 4: 4Q19 highlights
Record full year net income of $2.5 billion Net interest income, NIM, noninterest income, and expense performance all in-line with or better than prior guidance Effectively managed interest-bearing core deposit costs better than prior guidance, while continuing to grow core deposits Generated record
Slide 5: Balance sheet
Commercial Balance sheet Securities1 and short-term investments Loan & lease balances Core deposit balances Securities1 Short-term investments Commercial Consumer Total IB core deposit rate Note: Totals shown above may not foot due to rounding 1Available-for-sale debt and other securities at amortiz
Slide 6: Net interest income
Net interest income1 4Q19 vs. 4Q18 Current outlook (excludes purchase accounting accretion) 4Q19 vs. 3Q19 Adjusted NII1 up $129 million, or 12%; Adjusted NIM1 down 7 bps Primary drivers: Increase in interest-earning assets including the impact from MB Financial Partially offset by the declining rate
Slide 7: Noninterest income
Adjusted noninterest income (excl. securities (gains)/losses)1 Noninterest income 4Q19 vs. 4Q18 Current outlook 4Q19 vs. 3Q19 Adjusted noninterest income1 down $22 million, or 3% (down $17 million, or 2%, including securities gains) Primary drivers: Mortgage banking revenue (down 23%) Corporate bank
Slide 8: Noninterest expense
Adjusted noninterest expense (excl. intangible amortization) 1 Noninterest expense 4Q19 vs. 4Q18 4Q19 vs. 3Q19 Adjusted noninterest expense1 flat Primary drivers: Compensation and benefits (up 1%) Continued benefits from the MB Financial expense synergies FY20: Up 2-3% from adjusted FY19 (of $4.372
Slide 9: Credit quality overview
Credit quality overview 1Excludes HFS loans; 2Commercial criticized assets as a percentage of total commercial loans excluding HFS NPA ratio of 0.62% included a 10 bps unfavorable impact due to the accounting policy changes related to the OCC conversion NCOs of 0.41% included a 4 bps unfavorable imp
Slide 10: Strong capital position
CET1 ratio of 9.7%, down ~49 bps compared to the year-ago quarter, and up 19 bps compared to the prior quarter Returned approximately 95% of earnings to shareholders through dividends and repurchase ($300 million in share repurchases, which decreased common shares outstanding by ~10 million shares)
Slide 11: Current Outlook
Current Outlook 1Non-GAAP measure: see forward-looking statements on page 2 of this presentation regarding forward-looking non-GAAP measures and use of non-GAAP measures on pages 27-29 of the earnings release. (average balances, incl. HFS) Outlook as of January 22, 2020; please see cautionary statem
Slide 12: Strategic priorities
Strategic priorities Focused on top quartile through-the-cycle performance to create long-term shareholder value 1 3 2 4 Leverage technology capabilities to accelerate digital transformation Maintain credit, expense and capital discipline Expand market share in key geographies Invest to drive organi
Slide 13: Appendix
Appendix
Slide 14: Successful monetization of TRA transaction
Estimated potential GAAP income recognition6 Successful monetization of TRA transaction 1Options can either be executed by FIS or Fifth Third and generate payments to Fifth Third; 2Projections assume put/call options are exercised for each 1 year option (3 options - 2020, 2021, & 2023); 3Balance exc
Slide 15: Expected impacts of MB purchase accounting
Expected impacts of MB purchase accounting1 1Q20 ($ in millions) Reflects purchase accounting impacts exclusively related to the MB Financial acquisition Projected purchase accounting accretion from the non-PCI loan portfolio represents scheduled amortization, and does not include impact of any acce
Slide 16: Proactive balance sheet management
Proactive balance sheet management Best YoY NIM performance compared to peers, and 2020 outlook calling for relative NIM stability Hedge portfolio to provide protection against lower rates for another 5 years even without adding additional hedges Cash flow hedges ($ in billions) Focused on proactive
Slide 17: Efficiency ratio trend and pre-provision net revenue
Efficiency ratio trend1 Pre-provision net revenue1 4Q19 vs. 4Q18 4Q19 vs. 3Q19 Adjusted PPNR down $21 million, or 2% Decline driven by decreased NII and noninterest income, primarily due to lower mortgage banking and corporate banking revenue Decline partially offset by decrease in noninterest expen
Slide 18: Strong liquidity profile
Strong liquidity profile $ millions – excl. Retail Brokered & Institutional CDs Unsecured debt maturities Heavily core funded Holding company: Holding Company cash as of December 31, 2019: $4.1B Cash currently sufficient to satisfy all fixed obligations in a stressed environment for ~26 months (debt
Slide 19: Balance sheet positioning
100% Fix | 0% Variable 76% Fix | 24% Variable Balance sheet positioning Investment portfolio $18.8B fixed | $51.3B variable 1,2,3 Commercial loans1,2,3 Consumer loans1 Long-term debt4 $30.5B fixed | $10.4B variable 1 $11.0B fix | $4.0B variable 4 1ML based: 60%6 3ML based: 6%6 Prime based: 6%6 Other
Slide 20: 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 1 Effective duration of the taxable available for sale portfolio; 2Re-pricing percentage or “beta”
Slide 21: NPL rollforward
NPL rollforward1 1Loan balances exclude nonaccrual loans HFS Commercial Consumer Total NPL $ millions $ millions $ millions
Slide 22: Balance and credit loss trends
Balance and credit loss trends1 Commercial & industrial Residential mortgage Commercial mortgage Home equity Indirect secured consumer loans Average Portfolio Balance NCOs as a % of average portfolio loans 1All balances are in billions 4Q18 4Q19 1Q19 2Q19 3Q19 Commercial construction NCOs as a % of
Slide 23: Regulation G non-GAAP reconciliation
See pages 27-29 of the earnings release for a discussion on the use of non-GAAP financial measures; 1Pre-tax items: for all periods assume a 23% tax rate, except for 1Q19 non-deductible merger-related items Regulation G non-GAAP reconciliation Fifth Third Bancorp and Subsidiaries Regulation G Non-GA
Slide 24: Regulation G non-GAAP reconciliation
Regulation G non-GAAP reconciliation See pages 27-29 of the earnings release for a discussion on the use of non-GAAP financial measures Fifth Third Bancorp and Subsidiaries Regulation G Non-GAAP Reconciliation $ and shares in millions December September June March December (unaudited) 2019 2019 2019