Reported diluted earnings per share of $0.97

Reported results included a positive $0.03 impact from certain items on page 2 of the 3Q21 earnings release

Fifth Third Bancorp (NASDAQ ^®: FITB):

Key Highlights

Select Business Highlights:

• Closed acquisition of Provide, a leading fintech company serving healthcare practices
• Finalized HSA deposit sale, generating a pre-tax gain of $60 million (noninterest income)
• Made $15 million pre-tax contribution to accelerate racial equality, equity and inclusion in our communities
• Generated consumer household growth of 3% vs. 3Q20
• Commercial loan production increased 5% compared to 2Q21; strongest production quarter since 4Q19

Select Financial Highlights:

• ROTCE^(a) of 16.9%; adjusted ROTCE^(a) of 18.7% excl. AOCI
• PPNR^(a) increased 17% and adjusted PPNR^(a) increased 4% compared to 3Q20
• Period-end C&I loan growth of 1% (or 4% excl. impact of PPP loans) compared to 2Q21
• Historically low NCO ratio of 0.08% reflecting improvements in both commercial and consumer
• Repurchased shares totaling $550 million; capital plans support repurchase of shares totaling approximately $300 million in 4Q21; continue to target 9.5% CET1 by June 2022

CEO Commentary

"Fifth Third has continued to deliver strong and steady financial results throughout the pandemic while fully supporting our customers, communities, and employees. Our performance this quarter once again reflected strong business outcomes across our franchise, resulting in improved and diversified revenues. This was combined with disciplined balance sheet management, expense management, and yet another quarter of benign credit results. As a result of our continued momentum, we generated positive operating leverage on a year-over-year basis.

Excluding the impact of the Paycheck Protection Program (PPP), loan growth this quarter reflected robust production, with even better growth on an end-of-period basis. We expect this positive momentum to carry forward in the fourth quarter and beyond.

I am very proud that, in addition to producing strong financial results, we have also continued to take deliberate actions to improve the lives of our customers and the well-being of our communities. We made a $15 million contribution in the third quarter to accelerate racial equality, equity and inclusion in our communities.

We closed two transactions during the third quarter to improve growth and profitability. The acquisition of Provide – a leading fintech company serving healthcare practices – will further accelerate profitable relationship growth. Additionally, we finalized the sale of HSA deposits as part of our multi-year strategy to simplify the organization and prioritize investments in order to generate differentiated outcomes for customers and shareholders. We continue to focus on growing strong relationships and managing the balance sheet with a through-the-cycle perspective in order to generate sustainable long-term value."

-Greg D. Carmichael, Chairman and CEO

Fifth Third Bancorp (NASDAQ^®: FITB) today reported third quarter 2021 net income of $704 million compared to net income of $709 million in the prior quarter and $581 million in the year-ago quarter. Net income available to common shareholders in the current quarter was $684 million, or $0.97 per diluted share, compared to $674 million, or $0.94 per diluted share, in the prior quarter and $562 million, or $0.78 per diluted share, in the year-ago quarter.

Compared to the prior quarter, NII decreased $19 million, or 2%, primarily due to lower PPP-related income, lower yields on commercial loan balances (excluding PPP), and a reduction in prepayment penalties received in the investment portfolio, partially offset by higher day count and reductions in long-term debt. PPP-related interest income was $47 million compared to $53 million in the prior quarter. Compared to the prior quarter, NIM decreased 4 bps, primarily due to lower yields on commercial loan balances (excluding PPP), a reduction in prepayment penalties received in the investment portfolio, and higher day count, partially offset by reductions in long-term debt. Underlying NIM^(g) decreased 9 bps sequentially. Excess liquidity and PPP had a negative impact on reported NIM of approximately 44 bps in the current quarter, compared to 49 bps in the prior quarter.

Compared to the year-ago quarter, NII increased $19 million, or 2%, primarily reflecting the benefit of GNMA forbearance loan buyout purchases, lower deposit costs, a reduction in long-term debt, and higher interest income from PPP loans, partially offset by lower C&I, home equity, and credit card balances and the impact of lower market rates. Compared to the year-ago quarter, reported NIM increased 1 bp, primarily reflecting lower deposit costs, PPP-related income, and a reduction in long-term debt, partially offset by lower market rates, loan spread compression, and the impact of excess liquidity.

Reported noninterest income increased $95 million, or 13%, from the prior quarter, and increased $114 million, or 16%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below, including securities gains and losses.

Compared to the prior quarter, noninterest income excluding certain items increased $26 million, or 3%. Compared to the year-ago quarter, noninterest income excluding certain items increased $91 million, or 13%.

Compared to the prior quarter, service charges on deposits increased $3 million, or 2%, reflecting an increase in both commercial and consumer deposit fees. Commercial banking revenue decreased $8 million, or 5%, primarily driven by lower financial risk management revenue and corporate bond fees, partially offset by an increase in M&A advisory revenue. Mortgage banking net revenue increased $22 million, or 34%, reflecting an incremental $12 million favorable impact from MSR net valuation adjustments and a $9 million decrease in MSR asset decay reflecting slower prepayment speeds. This was partially offset by a $3 million decrease in origination fees and gains on loan sales. Current quarter mortgage originations of $5.0 billion were flat compared to the prior quarter. Wealth and asset management revenue increased $2 million, or 1%, driven primarily by higher personal asset management revenue. Leasing business revenue increased $17 million, or 28%, primarily driven by an increase in business solutions revenue and lease syndication revenue.

Compared to the year-ago quarter, service charges on deposits increased $8 million, or 6%, reflecting an increase in both commercial treasury management and consumer deposit fees. Commercial banking revenue increased $27 million, or 22%, primarily driven by increases in loan syndication revenue and M&A advisory revenue, partially offset by lower corporate bond fees. Mortgage banking net revenue increased $10 million, or 13%, reflecting an incremental $17 million favorable impact from MSR net valuation adjustments and an $11 million decrease in MSR asset decay reflecting slower prepayment speeds. This was partially offset by a $15 million decrease in origination fees and gains on loan sales. Wealth and asset management revenue increased $15 million, or 11%, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased $10 million, or 11%, primarily driven by higher spend volumes, partially offset by higher rewards. Leasing business revenue increased $1 million, or 1%, primarily reflecting increases in lease syndication revenue. Other noninterest income excluding certain items increased $19 million, primarily reflecting higher private equity income in the current quarter compared to the year-ago quarter.

Reported noninterest expense increased $19 million, or 2%, from the prior quarter, and increased $11 million, or 1%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below.

Compared to the prior quarter, noninterest expense excluding certain items increased $4 million, primarily reflecting an increase in marketing expense associated with Fifth Third Momentum Banking, and an increase in travel and entertainment expense. This was partially offset by a decrease in compensation and benefits expense, primarily reflecting a decline in full-time equivalent employees compared to the prior quarter.

Compared to the year-ago quarter, noninterest expense excluding certain items increased $24 million, or 2%, primarily driven by an increase in performance-based compensation expense reflecting strong business results, expenses associated with the aforementioned GNMA forbearance loan buyout purchases, and an increase in travel and entertainment expense. This was partially offset by lower card and processing expense due to contract renegotiations and lower net occupancy expense. Full-time equivalent employees declined 5% compared to the year-ago quarter.

Compared to the prior quarter, total average portfolio loans and leases decreased 1%, as a decline in commercial loan and lease balances (primarily due to PPP balance declines) was partially offset by an increase in consumer loans. Average commercial portfolio loans and leases decreased 2%, as a decline in PPP balances was partially offset by growth in C&I loans (excluding PPP). Average consumer portfolio loans increased 2%, as higher indirect secured consumer loans and residential mortgage loans were partially offset by lower home equity balances.

Compared to the year-ago quarter, total average portfolio loans and leases decreased 5%, as lower commercial loan and lease balances were partially offset by an increase in consumer loans. Average commercial portfolio loans and leases decreased 9% due to declines in C&I revolving line of credit utilization and term loan balances, PPP forgiveness, and lower commercial mortgage loans. Average consumer portfolio loans increased 3%, as higher indirect secured consumer loans were partially offset by lower home equity, residential mortgage, and credit card balances.

Average loans and leases held for sale were $6 billion in the current quarter compared to $6 billion in the prior quarter and $1 billion in the year-ago quarter. The increase from the year-ago quarter was primarily attributable to the aforementioned GNMA forbearance loan buyout purchases within consumer loans held for sale (approximately $4.0 billion purchased since December 2020, including $0.3 billion in September 2021).

Average securities (taxable and tax-exempt) of $37 billion in the current quarter increased $0.3 billion, or 1%, compared to the prior quarter and increased $1 billion, or 3%, compared to the year-ago quarter.

Average other short-term investments (including interest-bearing cash) of $32 billion in the current quarter decreased $1 billion, or 4%, compared to the prior quarter and increased $2 billion, or 8%, compared to the year-ago quarter.

Total period-end commercial portfolio loans and leases of $67 billion were flat compared to the prior quarter, as PPP forgiveness and lower construction loan balances were offset by an increase in C&I loan balances (excluding PPP). Compared to the year-ago quarter, total period-end commercial portfolio loans decreased $5 billion, or 6%, reflecting PPP forgiveness, lower C&I revolving line of credit utilization and term loan balances as well as lower commercial mortgage loans. Period-end commercial revolving line utilization was flat compared to the prior quarter at 31%, down from 33% in the year-ago quarter.

Period-end consumer portfolio loans of $41 billion increased 1% compared to the prior quarter, as continued growth in indirect secured consumer loans was partially offset by a decline in home equity balances. Compared to the year-ago quarter, total period-end consumer portfolio loans increased $2 billion, or 4%, reflecting higher indirect secured consumer loan balances, partially offset by lower home equity balances.

Compared to the prior quarter, average core deposits were flat, as increases in demand and savings deposit balances were offset by decreases in money market deposit balances and other time deposit balances. The HSA deposit sale was finalized near the end of the third quarter, and consisted of approximately $360 million in average interest checking balances for the third quarter of 2021. Average demand deposits represented 39% of total core deposits in the current quarter compared to 38% in the prior quarter. Average commercial transaction deposits were flat and average consumer transaction deposits increased 1%.

Compared to the year-ago quarter, average core deposits increased 6%, driven by the impacts of fiscal and monetary stimulus combined with success in generating consumer household growth. Average commercial transaction deposits increased 2% and average consumer transaction deposits increased 14%.

The period end portfolio loan-to-core deposit ratio was 66% in the current quarter, compared to 67% in the prior quarter and 72% in the year-ago quarter. Excluding the impact of PPP loans, the period end portfolio loan-to-core deposit ratio was 64% in the current quarter, compared to 64% in the prior quarter and 69% in the year-ago quarter.

Compared to the prior quarter, average wholesale funding decreased 13%, reflecting the impact of reductions in long-term debt over the past two quarters (including the retirement of $850 million in long-term debt in September 2021), as well as continued runoff in jumbo CD balances. Compared to the year-ago quarter, average wholesale funding decreased 34%, reflecting decreases in long-term debt, jumbo CD balances, and other short-term borrowings.

Nonperforming portfolio loans and leases were $528 million in the current quarter, with the resulting NPL ratio of 0.49%. Compared to the prior quarter, NPLs decreased $93 million with the NPL ratio decreasing 9 bps. Compared to the year-ago quarter, NPLs decreased $363 million with the NPL ratio decreasing 31 bps.

Nonperforming portfolio assets were $559 million in the current quarter, with the resulting NPA ratio of 0.52%. Compared to the prior quarter, NPAs decreased $98 million with the NPA ratio decreasing 9 bps. Compared to the year-ago quarter, NPAs decreased $372 million with the NPA ratio decreasing 32 bps.

The benefit from credit losses totaled $42 million in the current quarter. The allowance for credit loss ratio represented 2.00% of total portfolio loans and leases in the current quarter, compared with 2.06% in the prior quarter and 2.49% in the year-ago quarter. In the current quarter, the allowance for credit losses represented 409% of nonperforming portfolio loans and leases and 386% of nonperforming portfolio assets. The allowance for loan and lease losses ratio represented 1.81% of total portfolio loans and leases in the current quarter.

Net charge-offs were $21 million in the current quarter, with the resulting NCO ratio of 0.08%. Compared to the prior quarter, net charge-offs decreased $23 million and the NCO ratio decreased 8 bps, reflecting improvement in both commercial and consumer portfolios. Compared to the year-ago quarter, net charge-offs decreased $80 million and the NCO ratio decreased 27 bps.

Capital ratios remained strong this quarter. The CET1 capital ratio was 9.85%, the tangible common equity to tangible assets ratio was 7.01% excluding AOCI, and 7.74% including AOCI. The Tier I risk-based capital ratio was 11.27%, the Total risk-based capital ratio was 13.92%, and the Tier I leverage ratio was 8.35%. Certain capital ratios, including the Tier I leverage ratio, continued to be impacted by the increase in assets since the onset of the pandemic, predominantly from 0% risk-weighted assets resulting from interest-bearing cash as well as PPP loans.

During the third quarter of 2021, Fifth Third repurchased approximately $550 million of its outstanding stock, which reduced common shares by approximately 14.5 million at quarter end. Fifth Third also increased its quarterly cash dividend on its common shares $0.03, or 11%, to $0.30 per share for the third quarter of 2021.

Tax Rate

The effective tax rate was 21.3% compared with 22.1% in the prior quarter and 22.1% in the year-ago quarter.

Conference Call

Fifth Third will host a conference call to discuss these financial results at 9:00 a.m. (Eastern Time) today. This conference call will be webcast live and may be accessed through the Fifth Third Investor Relations website at www.53.com (click on “About Us” then “Investor Relations”). Those unable to listen to the live webcast may access a webcast replay through the Fifth Third Investor Relations website at the same web address, which will be available for 30 days.

Corporate Profile

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. As of September 30, 2021, the Company had $208 billion in assets and operates 1,100 full-service Banking Centers, and 2,336 Fifth Third branded ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina and South Carolina. In total, Fifth Third provides its customers with access to approximately 52,000 fee-free ATMs across the United States. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Wealth & Asset Management. Fifth Third is among the largest money managers in the Midwest and, as of September 30, 2021, had $541 billion in assets under care, of which it managed $61 billion for individuals, corporations and not-for-profit organizations through its Trust and Registered Investment Advisory businesses. Investor information and press releases can be viewed at www.53.com. Fifth Third’s common stock is traded on the NASDAQ® Global Select Market under the symbol “FITB.”

Earnings Release End Notes

FORWARD-LOOKING STATEMENTS

This release contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. All statements other than statements of historical fact are forward-looking statements. These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions or business. They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “potential,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K as updated by our filings with the U.S. Securities and Exchange Commission (“SEC”). When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us. We undertake no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this document.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) effects of the global COVID-19 pandemic; (2) deteriorating credit quality; (3) loan concentration by location or industry of borrowers or collateral; (4) problems encountered by other financial institutions; (5) inadequate sources of funding or liquidity; (6) unfavorable actions of rating agencies; (7) inability to maintain or grow deposits; (8) limitations on the ability to receive dividends from subsidiaries; (9) cyber-security risks; (10) Fifth Third’s ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks; (11) failures by third-party service providers; (12) inability to manage strategic initiatives and/or organizational changes; (13) inability to implement technology system enhancements; (14) failure of internal controls and other risk management systems; (15) losses related to fraud, theft, misappropriation or violence; (16) inability to attract and retain skilled personnel; (17) adverse impacts of government regulation; (18) governmental or regulatory changes or other actions; (19) failures to meet applicable capital requirements; (20) regulatory objections to Fifth Third’s capital plan; (21) regulation of Fifth Third’s derivatives activities; (22) deposit insurance premiums; (23) assessments for the orderly liquidation fund; (24) replacement of LIBOR; (25) weakness in the national or local economies; (26) global political and economic uncertainty or negative actions; (27) changes in interest rates; (28) changes and trends in capital markets; (29) fluctuation of Fifth Third’s stock price; (30) volatility in mortgage banking revenue; (31) litigation, investigations, and enforcement proceedings by governmental authorities; (32) breaches of contractual covenants, representations and warranties; (33) competition and changes in the financial services industry; (34) changing retail distribution strategies, customer preferences and behavior; (35) difficulties in identifying, acquiring or integrating suitable strategic partnerships, investments or acquisitions; (36) potential dilution from future acquisitions; (37) loss of income and/or difficulties encountered in the sale and separation of businesses, investments or other assets; (38) results of investments or acquired entities; (39) changes in accounting standards or interpretation or declines in the value of Fifth Third’s goodwill or other intangible assets; (40) inaccuracies or other failures from the use of models; (41) effects of critical accounting policies and judgments or the use of inaccurate estimates; (42) weather-related events, other natural disasters, or health emergencies (including pandemics); (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity; and (44) changes in law or requirements imposed by Fifth Third’s regulators impacting our capital actions, including dividend payments and stock repurchases.

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC,” for further information on other factors, which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this press release should be read as applying mutatis mutandis to every other instance of such information appearing herein.

Category: Earnings

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