10-QPeriod: Q2 FY2011

FIFTH THIRD BANCORP Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported solid financial performance for the second quarter and first half of 2011, demonstrating significant year-over-year improvements in profitability and a notable reduction in credit-related expenses. Net income available to common shareholders surged by 153% in Q2 and 231% for the first half of the year, driven by a substantial decrease in the provision for loan and lease losses, which fell by 65% and 69% respectively. This improvement in credit quality is reflected in lower net charge-offs and a decrease in nonperforming assets. The bank also saw positive momentum in its noninterest income, with a 6% increase in Q2, primarily from higher mortgage banking revenue and investment advisory fees, though service charges on deposits declined due to Regulation E. Expenses were managed effectively, with total noninterest expense decreasing by 4% for both periods. Capital ratios remain strong and exceed regulatory requirements, with Tier 1 common equity significantly improving. The Bancorp also took steps to strengthen its capital structure by redeeming trust preferred securities and repurchasing warrants.

Financial Highlights

37 data points
Beta

Net Income

$337.00M

EPS (Diluted)

$0.35

Total Assets

$110.81B

Free Cash Flow

$949.00M

Financial Statements
Beta
Interest Expense$181.00M
Net Income$337.00M
EPS (Basic)$0.36
EPS (Diluted)$0.35
Shares Outstanding (Basic)914.60M
Shares Outstanding (Diluted)955.48M

Key Highlights

  • 1Net income available to common shareholders increased by 153% year-over-year in Q2 2011 to $328 million, or $0.35 per diluted share.
  • 2Provision for loan and lease losses decreased significantly by 65% in Q2 2011 to $113 million, reflecting improved credit quality.
  • 3Noninterest income grew 6% in Q2 2011 to $656 million, primarily driven by higher mortgage banking net revenue and investment advisory revenue.
  • 4Total noninterest expense decreased by 4% in Q2 2011 to $901 million, demonstrating effective cost management.
  • 5Tier 1 common equity ratio improved to 9.20% as of June 30, 2011, up from 7.17% in the prior year.
  • 6The Bancorp redeemed $452 million in trust preferred securities and repurchased U.S. Treasury warrants, strengthening its capital position.

Frequently Asked Questions

The substantial increase in net income available to common shareholders was primarily driven by a significant reduction in the provision for loan and lease losses, which decreased by 65% in the second quarter of 2011 compared to the prior year. This indicates an improvement in the overall credit quality of the loan portfolio and a lower expected level of future credit losses.

Fifth Third Bancorp effectively managed its expenses, reporting a 4% decrease in total noninterest expense in the second quarter of 2011 compared to the prior year. This reduction was primarily due to lower FDIC insurance costs, a decrease in provisions for unfunded commitments and letters of credit, and reduced expenses related to representation and warranty reserves on sold mortgage loans.

Fifth Third Bancorp maintains a strong capital position, with its Tier 1 common equity ratio improving to 9.20% as of June 30, 2011, up from 7.17% a year prior. The Bancorp also undertook significant capital actions during the period, including redeeming $452 million of trust preferred securities and repurchasing U.S. Treasury warrants, which collectively strengthened its capital structure.

The Bancorp noted the impact of Regulation E, which led to a decrease in service charges on deposits. Additionally, changes in FDIC insurance assessment calculations due to the Dodd-Frank Act affected noninterest expense. The Bancorp also mentioned the potential substantial impact of the Dodd-Frank Act on its financial performance and growth opportunities.