10-QPeriod: Q2 FY2014

FIFTH THIRD BANCORP Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 7, 2014For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported its second quarter 2014 financial results, highlighting a decrease in net income attributable to common shareholders to $416 million, or $0.49 per diluted share, down from $582 million, or $0.65 per diluted share, in the prior year's second quarter. This decline was primarily driven by a significant drop in noninterest income, particularly mortgage banking net revenue and a lower gain on the sale of Vantiv, Inc. shares. Despite a decrease in total revenue by 16% year-over-year to $1.64 billion, the Bancorp managed to reduce noninterest expense by 8% to $954 million, partly due to a decline in personnel costs. The provision for loan and lease losses increased by 20% to $76 million, reflecting an increase in certain impaired commercial loans. Credit quality showed improvement with a decrease in net charge-offs as a percentage of average portfolio loans and leases to 0.45% and a reduction in nonperforming assets to 0.92% of total assets. Capital ratios remained strong, exceeding regulatory "well-capitalized" guidelines.

Financial Highlights

36 data points
Beta

Net Income

$439.00M

EPS (Diluted)

$0.49

Total Assets

$132.56B

Free Cash Flow

$579.00M

Financial Statements
Beta
Interest Expense$108.00M
Net Income$439.00M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)838.49M
Shares Outstanding (Diluted)848.25M

Key Highlights

  • 1Net income available to common shareholders decreased by 28% to $416 million ($0.49/share) in Q2 2014 from $582 million ($0.65/share) in Q2 2013.
  • 2Total revenue declined 16% to $1.64 billion in Q2 2014 from $1.95 billion in Q2 2013, largely due to a 31% drop in noninterest income.
  • 3Noninterest expense decreased 8% to $954 million in Q2 2014, driven by lower personnel costs and a reduction in other noninterest expenses.
  • 4Provision for loan and lease losses increased 20% to $76 million in Q2 2014, primarily due to an increase in certain impaired commercial loans.
  • 5Net charge-offs as a percentage of average loans and leases decreased to 0.45% in Q2 2014, down from 0.51% in Q2 2013.
  • 6Nonperforming assets as a percentage of total assets, including OREO, decreased to 0.92% at June 30, 2014, from 1.32% at December 31, 2013.
  • 7Tier 1 risk-based capital ratio stood at 10.80% and Tier 1 leverage ratio at 9.86% as of June 30, 2014, exceeding well-capitalized regulatory levels.

Frequently Asked Questions

The primary driver for the decrease in net income available to common shareholders was a significant decline in noninterest income, down 31% in the quarter. This was largely due to a substantial decrease in mortgage banking net revenue and a lower gain on the sale of Vantiv, Inc. shares.

Fifth Third Bancorp managed to reduce its noninterest expense by 8% year-over-year to $954 million in the second quarter of 2014. This reduction was primarily achieved through lower total personnel costs, driven by decreased incentive compensation in the mortgage business and a decline in base compensation and employee benefits due to a reduction in full-time equivalent employees. Other noninterest expenses also decreased, partly due to lower provisions for representation and warranty claims and reduced loan closing and appraisal costs.

Credit quality showed signs of improvement. Net charge-offs as a percentage of average portfolio loans and leases decreased to 0.45% in the second quarter of 2014 compared to 0.51% in the prior year's quarter. Nonperforming assets as a percentage of total loans, leases, and other assets, including OREO, also decreased to 0.92% at June 30, 2014, from 1.10% at December 31, 2013. The allowance for loan and lease losses as a percentage of portfolio loans and leases decreased to 1.61% from 1.99% at year-end 2013.

Fifth Third Bancorp maintained strong capital ratios, exceeding the regulatory 'well-capitalized' guidelines. As of June 30, 2014, its Tier 1 risk-based capital ratio was 10.80%, the Tier 1 leverage ratio was 9.86%, and the Total risk-based capital ratio was 14.30%.