8-KOther Events

FIFTH THIRD BANCORP 8-K Report, Corporate Update (Jan 5, 2012)

Filed January 5, 2012For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) has filed an 8-K report on January 5, 2012, detailing an expected financial impact stemming from Visa Inc.'s December 23, 2011, announcement. Visa planned to deposit $1.565 billion into a litigation escrow account, which, under its retrospective responsibility plan, would adjust the value of its Class B shares by reducing the Class B shareholders' as-converted share count. As a result of these anticipated changes, Fifth Third expects to make a payment of approximately $64 million to its swap counterparty during the first quarter of 2012. This action will lead to an increase in the fair value of a related swap liability by approximately $54 million (impacting noninterest income) and an increase in litigation reserves by approximately $14 million (impacting noninterest expense) for the fourth quarter of 2011. The net effect is an expected reduction to income before taxes of approximately $68 million for the quarter ended December 31, 2011.

Key Highlights

  • 1Fifth Third Bancorp is reporting an expected financial impact due to Visa Inc.'s litigation escrow deposit.
  • 2Visa announced a $1.565 billion deposit into its litigation escrow account, affecting Class B share value.
  • 3Fifth Third entered into a total return swap related to its 2009 sale of Visa Class B shares.
  • 4The company anticipates a payment of approximately $64 million to its swap counterparty in Q1 2012.
  • 5For Q4 2011, Fifth Third expects to increase its swap liability fair value by $54 million (reducing noninterest income).
  • 6Litigation reserves are expected to increase by approximately $14 million (increasing noninterest expense) for Q4 2011.
  • 7The total expected reduction to income before taxes for Q4 2011 is approximately $68 million.

Frequently Asked Questions

This 8-K filing is to inform investors about an anticipated financial impact on Fifth Third Bancorp resulting from Visa Inc.'s decision to fund a litigation escrow account, which affects the valuation of Visa's Class B shares and related derivative contracts held by Fifth Third.

Fifth Third Bancorp expects a reduction to income before taxes of approximately $68 million for the quarter ended December 31, 2011. This is composed of an increase in the fair value of a swap liability ($54 million) and an increase in litigation reserves ($14 million).

Fifth Third Bancorp expects to make the payment of approximately $64 million to the swap counterparty during the quarter ending March 31, 2012.

The company has a total return swap related to its sale of Visa Class B shares in 2009. Under this swap, Fifth Third must make payments to the counterparty if the Class B conversion rate decreases, which is anticipated due to Visa's escrow deposit.