10-QPeriod: Q1 FY2019

FIFTH THIRD BANCORP Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 10, 2019For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported a strong first quarter of 2019, highlighted by significant growth in both net interest income and noninterest income, leading to a 15% increase in total revenue compared to the prior year. Net income available to common shareholders grew 11% year-over-year, reaching $760 million, or $1.12 per diluted share. A major event during the quarter was the successful acquisition of MB Financial, Inc. on March 22, 2019, valued at approximately $3.6 billion, which is expected to enhance the company's presence in the Chicago market and its core deposit funding base. Additionally, the company recognized a substantial $562 million gain from the sale of Worldpay, Inc. shares. The Bancorp also actively managed its capital by entering into a $913 million accelerated share repurchase transaction. Credit quality metrics showed improvement, with net charge-offs as a percentage of average portfolio loans decreasing, although nonperforming assets saw a slight increase. Capital ratios remained robust and well above regulatory requirements.

Financial Highlights

38 data points
Beta

Revenue

$131.00M

Net Income

$775.00M

591.6% Net Margin

EPS (Diluted)

$1.12

Total Assets

$167.85B

Free Cash Flow

$477.00M

Financial Statements
Beta
Revenue$131.00M
Interest Expense$351.00M
Net Income$775.00M
EPS (Basic)$1.14
EPS (Diluted)$1.12
Shares Outstanding (Basic)661.06M
Shares Outstanding (Diluted)670.69M

Key Highlights

  • 1Total revenue increased by 15% to $2.187 billion for Q1 2019 compared to Q1 2018.
  • 2Net income available to common shareholders rose 11% to $760 million ($1.12 per diluted share) in Q1 2019.
  • 3Completed the acquisition of MB Financial, Inc. for approximately $3.6 billion.
  • 4Recognized a significant gain of $562 million from the sale of Worldpay, Inc. shares.
  • 5Entered into an accelerated share repurchase transaction for $913 million.
  • 6Net interest income (FTE) increased 9% to $1.086 billion, driven by higher loan yields and increased commercial and industrial loans.
  • 7Provision for credit losses increased significantly to $90 million from $13 million in the prior year's quarter.

Frequently Asked Questions

The acquisition of MB Financial, Inc., completed on March 22, 2019, contributed to Fifth Third Bancorp's asset and deposit growth. The acquisition added $13.5 billion in total loans and leases and $14.5 billion in commercial and consumer deposits. While the acquisition did incur $76 million in merger-related expenses, the immediate financial impact on net income was positive, with the company expecting the deal to enhance its Chicago market presence and core deposit funding.

The sale of Worldpay, Inc. shares resulted in a significant one-time gain of $562 million, which was recognized in 'Other noninterest income' for the first quarter of 2019. This gain was a primary driver for the substantial 21% increase in total noninterest income compared to the prior year's quarter.

Credit quality metrics showed mixed signals. While net losses charged off as a percentage of average portfolio loans and leases decreased to 0.32% from 0.36% in the prior year, nonperforming portfolio assets as a percentage of portfolio loans and leases and OREO increased slightly to 0.45% from 0.41% at the end of the previous year. The provision for credit losses saw a significant increase to $90 million from $13 million, primarily due to an increase in total loan balances and a lower reserve percentage in the prior year's comparable quarter, indicating a more cautious stance on potential future credit losses.

Fifth Third Bancorp demonstrated strong capital management. Its capital ratios, including CET1, Tier I risk-based, and Total risk-based capital, remained well above the 'well-capitalized' regulatory guidelines. The company also actively engaged in capital return to shareholders by declaring common stock dividends and repurchasing shares through an accelerated share repurchase program valued at $913 million.