10-QPeriod: Q3 FY2019

FIFTH THIRD BANCORP Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 8, 2019For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported solid results for the nine months ended September 30, 2019, demonstrating significant growth driven by strategic acquisitions and favorable market conditions. The acquisition of MB Financial, Inc. on March 22, 2019, was a key driver, contributing positively to net interest income, deposit growth, and expanding the bank's presence in the Chicago market. Net income available to common shareholders increased by 2% year-to-date to $1.7 billion, or $2.37 per diluted share, compared to $1.7 billion, or $2.41 per diluted share, for the same period in 2018. Total revenue saw a substantial 15% increase, fueled by a strong performance in both net interest income (up 17%) and noninterest income (up 13%), with significant contributions from corporate banking and mortgage banking. The company also managed its capital effectively, with all regulatory capital ratios exceeding "well-capitalized" guidelines. The Bancorp completed several capital actions, including accelerated share repurchases and preferred stock offerings, demonstrating a commitment to returning value to shareholders. Credit quality remained a focus, with net charge-offs as a percentage of average portfolio loans and leases showing a slight increase in the third quarter but remaining within management's expectations. The company highlighted its proactive approach to managing risks, including credit, market, and operational risks, and its ongoing integration of MB Financial, Inc. to ensure alignment with its risk appetite.

Financial Highlights

40 data points
Beta

Revenue

$143.00M

Net Income

$549.00M

383.9% Net Margin

EPS (Diluted)

$0.71

Total Assets

$171.08B

Cash & Equivalents

$3.26B

Free Cash Flow

-$424.00M

Financial Statements
Beta
Revenue$143.00M
Interest Expense$383.00M
Net Income$549.00M
EPS (Basic)$0.72
EPS (Diluted)$0.71
Shares Outstanding (Basic)726.72M
Shares Outstanding (Diluted)736.09M

Key Highlights

  • 1Net income available to common shareholders for the first nine months of 2019 increased by 2% to $1.7 billion, or $2.37 per diluted share.
  • 2Total revenue grew by 15% year-over-year, reaching $6.1 billion for the nine months ended September 30, 2019.
  • 3Net interest income (FTE basis) increased by 17% to $3.6 billion for the nine months ended September 30, 2019, driven by higher average loan balances and yields.
  • 4Noninterest income rose by 13% to $2.5 billion for the nine months ended September 30, 2019, with strong contributions from corporate banking and mortgage banking.
  • 5The company completed the acquisition of MB Financial, Inc. for approximately $3.6 billion, enhancing its Chicago market presence and deposit base.
  • 6All regulatory capital ratios remained strong, exceeding "well-capitalized" guidelines.
  • 7The provision for credit losses increased by 179% year-over-year to $310 million for the nine months ended September 30, 2019, reflecting higher loan balances and criticized assets.

Frequently Asked Questions

The acquisition of MB Financial, Inc., completed on March 22, 2019, significantly impacted Fifth Third Bancorp's financials. It contributed to an increase in total assets, loans, and deposits, particularly enhancing the bank's presence and deposit funding base in the Chicago market. The acquisition also led to increased net interest income, corporate banking revenue, and operating lease income, while also contributing to higher noninterest expenses due to merger-related costs and integration efforts.

Fifth Third Bancorp's net interest income on a FTE basis increased by 17% to $3.6 billion for the nine months ended September 30, 2019, compared to the same period in 2018. This growth was primarily driven by increases in average commercial and industrial loans and commercial mortgage loans, as well as higher yields on average loans and leases. The net interest margin on an FTE basis also improved to 3.32% from 3.20% in the prior year.

Fifth Third Bancorp reported an increase in the provision for credit losses to $310 million for the nine months ended September 30, 2019, compared to $111 million in the prior year. This increase was primarily attributed to higher loan balances and an increase in commercial criticized assets. While net losses charged off as a percentage of average portfolio loans and leases decreased year-over-year for the nine-month period to 0.32% from 0.36%, management is closely monitoring credit quality and managing risks through diversification and conservative lending practices.

Fifth Third Bancorp maintained strong capital ratios, exceeding regulatory "well-capitalized" guidelines throughout the period. The company demonstrated a commitment to returning value to shareholders through share repurchase programs and dividend declarations. During the first nine months of 2019, they entered into and settled accelerated share repurchase transactions totaling $913 million and also completed open market share repurchases. The company also issued preferred stock, including Series K preferred stock for net proceeds of approximately $242 million.