10-QPeriod: Q2 FY2018

FIFTH THIRD BANCORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 8, 2018For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp's (FITB) Q2 2018 filing shows strong financial performance with significant year-over-year growth in net income and earnings per share, driven by increased net interest income and a substantial boost from noninterest income, largely due to gains from the sale of Worldpay, Inc. shares. The company demonstrated improved profitability metrics like return on average assets and return on average common equity. Net interest income benefited from higher loan yields and increased average securities balances, partly offset by rising deposit and debt costs. Noninterest expense saw an increase, primarily in personnel and technology costs, but the efficiency ratio improved year-over-year, indicating better cost management. Credit quality remains a focus, with a decrease in provision for loan and lease losses and a slight increase in net charge-offs as a percentage of loans. Capital ratios remain robust and well above regulatory requirements. The company also detailed its branch optimization plan, involving closing and opening branches in mature and growth markets, respectively, and provided updates on its investment portfolio and capital actions, including share repurchases and dividends.

Financial Highlights

38 data points
Beta

Revenue

$137.00M

Net Income

$602.00M

439.4% Net Margin

EPS (Diluted)

$0.82

Total Assets

$140.59B

Free Cash Flow

$978.00M

Financial Statements
Beta
Revenue$137.00M
Interest Expense$249.00M
Net Income$602.00M
EPS (Basic)$0.84
EPS (Diluted)$0.82
Shares Outstanding (Basic)683.34M
Shares Outstanding (Diluted)696.21M

Key Highlights

  • 1Net income available to common shareholders increased by 64% to $563 million for the second quarter of 2018 compared to $344 million in the prior year's quarter.
  • 2Diluted earnings per share grew by 78% to $0.80 in Q2 2018 from $0.45 in Q2 2017.
  • 3Total revenue increased by 17% year-over-year, reaching $1.77 billion in Q2 2018.
  • 4Noninterest income saw a significant boost of 32% to $743 million, driven by a $205 million gain on the sale of Worldpay, Inc. shares.
  • 5Net interest income (FTE) increased by 8% to $1.02 billion, reflecting higher yields on loans and securities, supported by FOMC rate hikes.
  • 6The provision for loan and lease losses decreased by 37% to $33 million, indicating improved credit quality or a lower outlook for loan losses.
  • 7Common Equity Tier 1 (CET1) capital ratio was strong at 10.91% as of June 30, 2018, exceeding regulatory 'well-capitalized' guidelines.

Frequently Asked Questions

Fifth Third Bancorp's profitability in Q2 2018 was primarily driven by a significant increase in net interest income due to higher loan yields and security balances, coupled with a substantial rise in noninterest income. The latter was significantly boosted by a $205 million gain from the sale of Worldpay, Inc. shares, alongside growth in corporate banking revenue. Improved efficiency ratios also contributed to the enhanced profitability.

Credit quality showed mixed but generally positive trends. The provision for loan and lease losses decreased significantly by 37% compared to the prior year's quarter, suggesting a more favorable credit outlook. While net losses charged off as a percentage of average portfolio loans and leases increased slightly, nonperforming assets as a percentage of loans and leases and OREO decreased to 0.52%.

Fifth Third Bancorp is executing a '2018 Branch Optimization Plan' which involves closing between 100-125 branches in more mature markets and opening a similar number of new branches in higher growth markets over the next 2-3 years. This strategy aims to optimize profitability and growth potential by adapting to changing customer behavior and leveraging new analytical tools.

Key events include the sale of Worldpay, Inc. shares which generated a $205 million gain, the launch of GreenSky, Inc.'s IPO impacting their investment value, and the announcement of accelerated share repurchase transactions. The company also issued senior notes and provided details on its branch optimization plan. Furthermore, a significant event was the announcement of the pending acquisition of MB Financial, Inc.