10-QPeriod: Q3 FY2020

FIFTH THIRD BANCORP Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 5, 2020For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp's (FITB) third quarter 2020 results showed resilience amidst the ongoing COVID-19 pandemic, though the economic impact was evident in several areas. Net income available to common shareholders increased year-over-year to $562 million, or $0.78 per diluted share, up from $530 million, or $0.71 per share, in the prior year's quarter. However, for the year-to-date period, net income was significantly lower at $754 million ($1.04 per diluted share) compared to $1.7 billion ($2.37 per diluted share) in the first nine months of 2019. This decline was largely attributable to a substantial increase in the provision for credit losses, which rose to $1.1 billion for the nine months ended September 30, 2020, reflecting the challenging macroeconomic environment driven by the pandemic. The bank's net interest income experienced a decline in the third quarter compared to the prior year, primarily due to lower yields on interest-earning assets, influenced by the Federal Reserve's low interest rate policy. This was partially offset by a decrease in rates paid on interest-bearing liabilities. Noninterest income also saw a notable decrease, driven by lower other noninterest income and a decline in mortgage banking net revenue, although wealth and asset management revenue showed growth. The Bancorp maintained strong capital ratios, with a CET1 capital ratio of 10.14% as of September 30, 2020, exceeding regulatory requirements. Deposit growth was robust, increasing by 24% from the prior year-end, reflecting higher liquidity levels in the economy.

Financial Highlights

41 data points
Beta

Revenue

$144.00M

Net Income

$581.00M

403.5% Net Margin

EPS (Diluted)

$0.78

Total Assets

$202.00B

Cash & Equivalents

$3.00B

Free Cash Flow

-$39.00M

Financial Statements
Beta
Revenue$144.00M
Interest Expense$159.00M
Net Income$581.00M
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)715.10M
Shares Outstanding (Diluted)718.89M

Key Highlights

  • 1Net income available to common shareholders increased to $562 million ($0.78/share) for Q3 2020, up from $530 million ($0.71/share) in Q3 2019.
  • 2Provision for credit losses increased significantly to $1.1 billion for the first nine months of 2020, compared to $310 million in the same period of 2019, driven by pandemic-related economic deterioration.
  • 3Net interest income on an FTE basis decreased by $73 million year-over-year in Q3 2020, impacted by lower yields on interest-earning assets due to the low-rate environment.
  • 4Total deposits grew by a substantial 24% from December 31, 2019, to $156.7 billion as of September 30, 2020, driven by increased liquidity in the economy.
  • 5The CET1 capital ratio remained strong at 10.14% as of September 30, 2020, comfortably exceeding regulatory minimums.
  • 6Noninterest income decreased by $18 million in Q3 2020 compared to Q3 2019, primarily due to declines in other noninterest income and mortgage banking net revenue.
  • 7The Bancorp suspended share repurchases and capped dividend payments in response to Federal Reserve guidance related to the COVID-19 pandemic.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Fifth Third Bancorp's financial performance, primarily through an increased provision for credit losses ($1.1 billion for the nine months ended Sept 30, 2020) reflecting macroeconomic deterioration. While net income available to common shareholders improved in the third quarter compared to the prior year ($562 million vs. $530 million), the year-to-date income was substantially lower due to these higher credit loss provisions. The low-interest-rate environment also compressed net interest income.

Fifth Third Bancorp maintained a strong capital position. As of September 30, 2020, the Common Equity Tier 1 (CET1) capital ratio was 10.14%, the Tier I risk-based capital ratio was 11.64%, and the Total risk-based capital ratio was 14.93%. These ratios comfortably exceeded regulatory requirements, including the capital conservation buffer.

Deposit growth was very strong. Total deposits increased by $30 billion, or 24%, from December 31, 2019, to $156.7 billion as of September 30, 2020. This growth was primarily driven by increases in demand deposits, interest checking deposits, and money market deposits, attributed to higher liquidity levels in the economy due to fiscal stimulus and decreased consumer spending amidst pandemic uncertainty.

Net interest income on an FTE basis decreased by $73 million in Q3 2020 compared to Q3 2019. This was mainly due to a 141 basis point decrease in yields on average interest-earning assets, driven by lower rates on loans and leases. However, this was partially offset by a 90 basis point decrease in rates paid on average interest-bearing liabilities.

In response to Federal Reserve guidance and heightened uncertainty due to the COVID-19 pandemic, Fifth Third Bancorp temporarily suspended share repurchases during the first three quarters of 2020. Dividend payments were also capped based on recent income and regulatory limitations.