10-QPeriod: Q3 FY2010

FIFTH THIRD BANCORP Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 8, 2010For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported a significant turnaround in its third quarter and first nine months of 2010 compared to the same periods in 2009. For the third quarter of 2010, the Bancorp reported net income available to common shareholders of $175 million, or $0.22 per diluted share, a substantial improvement from a net loss of $159 million, or ($0.20) per diluted share, in the prior year's third quarter. This positive performance was driven by a substantial decrease in the provision for loan and lease losses, which fell by 52% year-over-year for the quarter, reflecting moderating credit trends. Net interest income also saw a healthy increase of 5% for the quarter, aided by a favorable shift in funding mix towards lower-cost deposits and an improved interest rate spread. While noninterest income decreased 3% overall, this was largely due to the absence of a significant gain on Visa shares in the prior year, with core mortgage banking revenue showing strong growth. The Bancorp's capital ratios remain robust, exceeding regulatory well-capitalized guidelines.

Financial Highlights

36 data points
Beta

Net Income

$238.00M

EPS (Diluted)

$0.22

Total Assets

$112.32B

Free Cash Flow

$987.00M

Financial Statements
Beta
Interest Expense$214.00M
Net Income$238.00M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)791.00M
Shares Outstanding (Diluted)6.00M

Key Highlights

  • 1Net income available to common shareholders improved significantly, turning from a net loss of $159 million in Q3 2009 to a profit of $175 million in Q3 2010.
  • 2Provision for loan and lease losses decreased by 52% to $457 million for Q3 2010 compared to $952 million in Q3 2009, indicating improving credit quality.
  • 3Net interest income increased by 5% to $916 million for Q3 2010, driven by a wider interest rate spread and a favorable shift in funding mix to lower-cost deposits.
  • 4Mortgage banking net revenue saw a strong increase of 66% to $232 million in Q3 2010, benefiting from higher refinance originations and margins.
  • 5Nonperforming assets as a percentage of total assets, including OREO and nonaccrual loans held for sale, decreased to 3.51% at September 30, 2010, down from 4.34% at September 30, 2009.
  • 6Tier 1 capital ratio remained strong at 13.85%, and Tier 1 leverage ratio was 12.54% as of September 30, 2010, well above regulatory requirements.

Frequently Asked Questions

Fifth Third Bancorp showed a significant improvement in profitability. Net income available to common shareholders for Q3 2010 was $175 million, or $0.22 per diluted share, a substantial turnaround from the net loss of $159 million, or ($0.20) per diluted share, in Q3 2009. This trend was also observed over the first nine months of the year, with net income available to common shareholders of $233 million, or $0.29 per diluted share in 2010, compared to $670 million, or $0.91 per diluted share in 2009, reflecting a decrease in profitability but still a net positive result in 2010.

The provision for loan and lease losses decreased significantly by 52% to $457 million for Q3 2010 compared to $952 million for Q3 2009. This reduction suggests an improvement in credit quality and a more stable economic environment, as the Bancorp appears to be experiencing fewer credit issues and requiring less allocation for potential future losses.

Net interest income increased by 5% to $916 million in Q3 2010. This growth was primarily attributed to an increase in the interest rate spread, which benefited from a mix shift from higher-cost term deposits to lower-cost deposit products and a decrease in average interest-bearing liabilities. This indicates improved net interest margin management.

Total noninterest income decreased by 3% to $827 million in Q3 2010 compared to $851 million in Q3 2009. The decrease was largely due to the absence of a $244 million gain from the sale of Visa shares in the prior year. Excluding significant items, noninterest income increased by 11%, primarily driven by strong growth in mortgage banking net revenue, which rose 66% to $232 million, reflecting higher refinance originations and margins.

The Bancorp's capital position remains strong. As of September 30, 2010, the Tier 1 capital ratio was 13.85%, the Tier 1 leverage ratio was 12.54%, and the total risk-based capital ratio was 18.28%. These ratios exceed the 'well-capitalized' guidelines defined by the Board of Governors of the Federal Reserve System. The Bancorp also highlights its Tier 1 common equity ratio of 7.34%, which is a non-GAAP measure, demonstrating a solid capital buffer.