10-QPeriod: Q2 FY2007

FIFTH THIRD BANCORP Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 9, 2007For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported its second quarter 2007 financial results, showing a slight decrease in net income to $376 million ($0.69 per diluted share) compared to $382 million ($0.69 per diluted share) in the prior year's second quarter. Despite the dip in net income, total revenue saw a 6% increase year-over-year to $1.45 billion, driven by a 4% rise in net interest income and an 8% increase in noninterest income. The company is actively managing its balance sheet, having completed significant actions in the fourth quarter of 2006 to improve its asset/liability profile. Loan growth remains a key driver, with total loans and leases up 5% year-over-year, particularly in commercial and credit card segments, though this growth is being funded in part by a reduction in securities and an increase in wholesale funding. Credit quality metrics showed some signs of pressure, with net charge-offs increasing significantly to 0.55% of average loans and leases from 0.37% in the prior year, primarily concentrated in commercial, commercial mortgage, and home equity loans. Nonperforming assets also rose to 0.70% of total assets, up from 0.49% in the prior year. The company continues to expand its physical footprint, opening 11 net new banking centers in the quarter. Fifth Third Bancorp's capital ratios remain strong, exceeding regulatory requirements, providing flexibility for future growth and strategic initiatives, including the announced acquisition of R-G Crown Bank expected in Q4 2007.

Key Highlights

  • 1Net income for the quarter was $376 million, a 2% decrease year-over-year, with diluted EPS remaining flat at $0.69.
  • 2Total revenue increased 6% to $1.45 billion, driven by a 4% increase in net interest income and an 8% increase in noninterest income.
  • 3Net interest margin improved significantly year-over-year to 3.37% from 3.01%, attributed to balance sheet actions taken in Q4 2006.
  • 4Provision for loan and lease losses increased 70% to $121 million due to loan growth and deteriorating credit conditions.
  • 5Net charge-offs as a percentage of average loans and leases increased to 0.55% from 0.37% in the prior year's quarter, with concentrations in real estate and construction.
  • 6Nonperforming assets as a percentage of total loans, leases and other assets rose to 0.70% from 0.49% in the prior year's quarter.
  • 7The Bancorp repurchased approximately 8 million shares in the second quarter under a new 30 million share authorization, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

Fifth Third Bancorp reported net income of $376 million, or $0.69 per diluted share, for the second quarter of 2007. This represents a slight decrease of 2% compared to $382 million, or $0.69 per diluted share, for the same period in the prior year.

Total revenue increased by 6% to $1.45 billion, driven by a 4% increase in net interest income and an 8% increase in noninterest income. The net interest margin expanded to 3.37% from 3.01% in the prior year's second quarter, primarily due to balance sheet actions taken in late 2006.

Credit quality showed signs of weakening. The provision for loan and lease losses increased by 70% to $121 million. Net charge-offs rose to 0.55% of average loans and leases, up from 0.37% in the prior year's quarter, with increases concentrated in commercial, commercial mortgage, and home equity loans. Nonperforming assets also increased to 0.70% of total loans and assets.

Fifth Third Bancorp's capital ratios remained strong, exceeding regulatory requirements. The company is actively returning value to shareholders through its common stock repurchase program, buying back approximately 8 million shares in the second quarter under a new authorization, and maintained its quarterly dividend at $0.42 per share.