8-KOther Events

FIFTH THIRD BANCORP 8-K Report, Corporate Update (Dec 12, 2012)

Filed December 12, 2012For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) filed an 8-K on December 12, 2012, reporting on two significant financial events. First, the company announced the full exercise of the over-allotment option by underwriters for a secondary offering of Vantiv, Inc. Class A common stock. This resulted in Fifth Third affiliates selling a total of 13,700,000 shares, representing approximately 16.3% of their ownership in Vantiv (excluding a warrant). The transaction is expected to generate a pre-tax gain of approximately $155 million ($100 million after-tax) in the fourth quarter of 2012. Fifth Third still retains a significant economic interest in Vantiv, estimated at 33.0% of future earnings. Second, Fifth Third announced the prepayment of $1 billion in FHLB term debt that was due in January 2016. This action incurred a pre-tax prepayment charge of $134 million but is anticipated to result in approximately equivalent net interest savings through the original maturity date, contributing an estimated $40-45 million in annual net interest income benefit. The company also indicated plans to repurchase shares of its own common stock equivalent to the after-tax gains from the Vantiv sale.

Key Highlights

  • 1Fifth Third Bancorp's affiliates completed the sale of 13,700,000 shares of Vantiv, Inc. Class A common stock, including the full exercise of the over-allotment option.
  • 2The Vantiv share sale is expected to result in a pre-tax gain of approximately $155 million ($100 million after-tax) for Fifth Third Bancorp in Q4 2012.
  • 3Fifth Third Bancorp retains a substantial residual economic interest in Vantiv, estimated at 33.0% of future earnings.
  • 4The company prepaid $1 billion of FHLB term debt maturing in January 2016.
  • 5The debt prepayment incurred a pre-tax charge of $134 million.
  • 6Fifth Third Bancorp anticipates net interest savings from the prepayment to offset the charge, providing an estimated $40-45 million annual net interest income benefit.
  • 7Fifth Third Bancorp plans to repurchase its own common stock using the after-tax proceeds from the Vantiv sale.

Frequently Asked Questions

The sale of 13,700,000 shares of Vantiv Class A common stock by Fifth Third's affiliates generated a significant pre-tax gain of approximately $155 million and an after-tax gain of approximately $100 million for Fifth Third Bancorp in the fourth quarter of 2012. This event marks a reduction in their direct ownership stake in Vantiv.

Yes, Fifth Third Bancorp still holds a substantial interest in Vantiv. They continue to hold approximately 70.2 million Class B units of Vantiv Holding, LLC (which can be exchanged for Class A common stock) and a warrant for Vantiv Class A common stock. Their remaining economic interest in Vantiv's future earnings is estimated at approximately 33.0%.

Fifth Third Bancorp prepaid the $1 billion of FHLB term debt to generate net interest savings. Although it incurred a $134 million pre-tax prepayment charge, the company expects these savings to approximate the charge amount by the original maturity date (January 5, 2016), resulting in an estimated $40-45 million annual net interest income benefit and a positive impact on their net interest margin.

Fifth Third Bancorp announced plans to use the after-tax proceeds from the Vantiv transaction to repurchase shares of its own common stock shortly after the filing date.