10-QPeriod: Q3 FY2016

FIFTH THIRD BANCORP Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 9, 2016For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported a strong third quarter of 2016, with net income available to common shareholders rising to $501 million, or $0.65 per diluted share, a significant increase from $366 million, or $0.45 per diluted share, in the same period last year. This growth was driven by an 18% increase in noninterest income, largely due to substantial gains from the termination and settlement of Tax Receivable Agreements (TRAs) with Vantiv, Inc., which contributed $280 million in other noninterest income. The company also saw a 43% increase in diluted earnings per share year-over-year. Operationally, the bank maintained a stable net interest margin of 2.88% on an FTE basis. The provision for loan and lease losses decreased by 49% year-over-year for the quarter, reflecting improved credit quality, with net losses charged off as a percentage of average portfolio loans and leases falling to 0.45%. Capital ratios remained robust, with a Common Equity Tier 1 (CET1) capital ratio of 10.17% as of September 30, 2016, well above regulatory requirements. The company also announced favorable results from its 2016 CCAR submission, with the Federal Reserve not objecting to its proposed capital actions, including a potential dividend increase and significant share repurchases.

Financial Highlights

37 data points
Beta

Net Income

$516.00M

EPS (Diluted)

$0.65

Total Assets

$143.28B

Free Cash Flow

$437.00M

Financial Statements
Beta
Interest Expense$150.00M
Net Income$516.00M
EPS (Basic)$0.66
EPS (Diluted)$0.65
Shares Outstanding (Basic)750.89M
Shares Outstanding (Diluted)757.86M

Key Highlights

  • 1Net income available to common shareholders increased by 37% to $501 million for the three months ended September 30, 2016, compared to $366 million in the prior year.
  • 2Diluted earnings per share rose by 44% to $0.65 for the three months ended September 30, 2016, from $0.45 in the prior year.
  • 3Noninterest income increased by 18% to $840 million for the three months ended September 30, 2016, primarily driven by a $280 million gain from Vantiv, Inc. TRA termination and settlement.
  • 4The provision for loan and lease losses decreased by 49% to $80 million for the three months ended September 30, 2016, reflecting improved credit quality.
  • 5Net losses charged off as a percentage of average portfolio loans and leases decreased to 0.45% for the three months ended September 30, 2016, down from 0.80% in the prior year.
  • 6Capital ratios remained strong, with CET1 capital ratio at 10.17% as of September 30, 2016.
  • 7The company received a non-objection from the Federal Reserve on its capital plan (CCAR 2016), allowing for potential dividend increases and share repurchases.

Frequently Asked Questions

The substantial 18% increase in noninterest income was primarily driven by a $280 million pre-tax gain recognized in the third quarter of 2016 from the termination and settlement of Tax Receivable Agreements (TRAs) with Vantiv, Inc. This gain significantly boosted the 'Other noninterest income' category.

Credit quality showed improvement. The provision for loan and lease losses decreased by 49% year-over-year to $80 million for the quarter. Furthermore, net losses charged off as a percentage of average portfolio loans and leases decreased to 0.45%, down from 0.80% in the prior year's third quarter, indicating a reduction in net loan charge-offs.

Fifth Third Bancorp maintained strong capital ratios, with its CET1 capital ratio at 10.17% as of September 30, 2016, exceeding regulatory requirements. The successful CCAR submission, which received a non-objection from the Federal Reserve, signals regulatory confidence and supports the company's ability to return capital to shareholders through potential dividend increases and share repurchases, which is generally viewed positively by investors.

The net interest margin on a Fully Taxable Equivalent (FTE) basis remained stable at 2.88% for both the three and nine months ended September 30, 2016, compared to 2.89% and 2.88% respectively, in the prior year periods. This indicates a consistent performance in the core lending and deposit-taking activities.