10-QPeriod: Q3 FY2022

FIFTH THIRD BANCORP Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 8, 2022For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) reported solid performance in its Q3 2022 10-Q filing, demonstrating resilience amidst a challenging economic environment characterized by rising interest rates and persistent inflation. The company saw a significant increase in net interest income, driven by higher market interest rates and growth in average commercial loans and leases. This was partially offset by increased deposit costs and higher FHLB advances. While noninterest income saw a decrease, primarily due to lower mortgage banking net revenue and leasing business revenue, the company managed noninterest expenses effectively, resulting in a slight decrease year-over-year. The provision for credit losses increased, reflecting higher loan balances and deteriorating macroeconomic forecasts, which is a key area for investors to monitor. Capital ratios remained strong, exceeding regulatory requirements, and the company continued its return of capital to shareholders through dividends and share repurchases.

Financial Highlights

41 data points
Beta

Revenue

$143.00M

Net Income

$653.00M

456.6% Net Margin

EPS (Diluted)

$0.91

Total Assets

$205.46B

Cash & Equivalents

$3.07B

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$143.00M
Interest Expense$262.00M
Net Income$653.00M
EPS (Basic)$0.91
EPS (Diluted)$0.91
Shares Outstanding (Basic)689.28M
Shares Outstanding (Diluted)694.59M

Key Highlights

  • 1Net interest income (FTE basis) increased by 26% year-over-year for the three months ended September 30, 2022, driven by higher market interest rates and increased average commercial loans and leases.
  • 2Noninterest income decreased by 20% year-over-year for the three months ended September 30, 2022, primarily due to declines in mortgage banking net revenue and leasing business revenue.
  • 3Provision for credit losses increased significantly to $158 million for the three months ended September 30, 2022, compared to a benefit of $42 million in the prior year, reflecting higher loan balances and a weaker macroeconomic outlook.
  • 4Noninterest expense decreased slightly by 1% year-over-year for the nine months ended September 30, 2022, showing effective cost management.
  • 5Diluted earnings per share (EPS) were $0.91 for the third quarter of 2022, a decrease from $0.97 in the prior year.
  • 6Total loans and leases, including loans held for sale, increased by 5% from December 31, 2021, driven by an 8% increase in commercial loans and leases.
  • 7Capital ratios remained strong, with a CET1 capital ratio of 9.14% as of September 30, 2022, well above regulatory minimums.

Frequently Asked Questions

The rising interest rate environment positively impacted Fifth Third Bancorp's net interest income. Net interest income on an FTE basis increased by 26% for the three months ended September 30, 2022, compared to the prior year. This was driven by higher yields on loans and leases and investment securities, reflecting the increase in market interest rates. However, this benefit was partially offset by increased rates paid on deposits and higher FHLB advances.

The provision for credit losses increased significantly due to higher period-end loan and lease balances and a deterioration in forecasted macroeconomic conditions. For the nine months ended September 30, 2022, the provision was also impacted by the initial recognition of provision expense on loans acquired as part of a business acquisition in the second quarter of 2022.

Core deposits decreased by 6% from December 31, 2021, primarily due to decreases in demand deposits, interest checking deposits, and money market deposits. This was partly attributed to a deliberate runoff of higher-cost commercial deposits in the second quarter of 2022 and balance migration. Savings deposits saw an increase. The company's deposit beta (the responsiveness of deposit rates to changes in market rates) has been slower than in prior cycles, which has helped to support net interest income.

Total loans and leases, including those held for sale, increased by 5% from the end of 2021, primarily driven by an 8% increase in commercial loans and leases. Commercial and industrial loans saw significant growth, along with commercial mortgage and construction loans. Consumer loans experienced a slight decrease. The company continues to monitor economic conditions and their impact on borrowers.