Fifth Third Announces Second Quarter 2013 Net Income to Common Shareholders of $594 Million or $0.66

Fifth Third Announces Second Quarter 2013 Net Income to Common Shareholders of $594 Million or $0.66 Per Diluted Share

  • 2Q13 net income available to common shareholders of $594 million, or $0.66 per diluted common share, vs. $413 million or $0.46 per share in 1Q13, up 43%, and $376 million or $0.40 per share in 2Q12, up 65%
  • 2Q13 results included a benefit of $242 million pre-tax (~$157 million after-tax, or ~$0.17 per share) on the sale of shares of Vantiv and $76 million pre-tax (~$49 million after-tax, or ~$0.05 per share) on the valuation of the warrant Fifth Third holds in Vantiv
    • In 1Q13 and 2Q12, the benefit of the valuation of the warrant Fifth Third holds in Vantiv was $34 million pre-tax (~$22 million after-tax, or ~$0.02 per share) and $56 million pre-tax (~$36 million after-tax, or ~$0.04 per share), respectively
  • 2Q13 return on assets (ROA) of 1.98%; return on average common equity of 17.6%; return on average tangible common equity** of 21.6%
  • Pre-provision net revenue (PPNR)** of $923 million in 2Q13
    • Net interest income (FTE) of $885 million, down 1% sequentially; net interest margin 3.33%; average portfolio loans up 1% sequentially (includes impact from 1Q13 securitization of auto loans); period end loans up 2%
    • Noninterest income of $1.1 billion compared with $743 million in prior quarter; increase largely driven by sale of Vantiv shares. Excluding Vantiv, noninterest income of $742 million up 5% from $709 million in 1Q13
    • Noninterest expense of $1.0 billion, up 4% from 1Q13; largely driven by increase in litigation reserves
  • 2Q13 effective tax rate of 29.8% compared with 30.4% in 1Q13 and 31.8% in 2Q12
  • Credit trends remain favorable
    • 2Q13 net charge-offs of $112 million (0.51% of loans and leases) vs. 1Q13 NCOs of $133 million (0.63% of loans and leases) and 2Q12 NCOs of $181 million (0.88% of loans and leases)
    • 2Q13 provision expense of $64 million vs. provision of $62 million in 1Q13 and $71 million in 2Q12
    • Loan loss allowance decreased $48 million sequentially reflecting continued improvement in credit trends; allowance to loan ratio of 1.99%, 151% of nonperforming assets, 191% of nonperforming loans and leases
    • Total nonperforming assets (NPAs) of $1.2 billion, including loans held-for-sale (HFS), declined $64 million, or 5%, sequentially; portfolio NPA ratio of 1.32% down 9 bps from 1Q13, NPL ratio of 1.04% down 7 bps from 1Q13
  • Strong capital ratios*
    • Tier 1 common ratio 9.44%**, down 26 bps sequentially, largely due to repurchases of ~$539 million in common shares announced during the quarter (Basel III pro forma estimate of ~9.10%)
    • Tier 1 capital ratio 11.07%, Total capital ratio 14.35%, Leverage ratio 10.41%
    • Tangible common equity ratio** of 8.83% excluding unrealized gains/losses; 8.95% including them
    • Repurchased ~26 million common shares in 2Q13; average diluted share count reduced by 13 million shares including impact from 1Q13 and 2Q13 share repurchases
  • Book value per share of $15.57; tangible book value per share** of $12.71 up 1% from 1Q13 and 7% from 2Q12

* Capital ratios estimated; presented under current U.S. capital regulations.The pro forma Basel III Tier I common equity ratio is management's estimate based upon its current interpretation of recent prospective regulatory capital requirements approved in July 2013. See "Capital Position" section for more information.
** Non-GAAP measure; see Reg. G reconciliation on page 34 in Exhibit 99.1 of 8-k filing dated 7/18/13.

CINCINNATI--(BUSINESS WIRE)-- Fifth Third Bancorp (NAS: FITB) today reported second quarter 2013 net income of $603 million, compared with net income of $422 million in the first quarter of 2013 and net income of $385 million in the second quarter of 2012. After preferred dividends, second quarter 2013 net income available to common shareholders was $594 million, or $0.66 per diluted share, compared with first quarter net income to common shareholders of $413 million, or $0.46 per diluted share, and net income to common shareholders of $376 million, or $0.40 per diluted share, in the second quarter of 2012.


Second quarter 2013 noninterest income results included a $242 million gain on the sale of Vantiv shares; a $76 million positive valuation adjustment on the Vantiv warrant; a pre-tax benefit of $10 million resulting from a settlement related to a previously surrendered bank-owned life insurance (BOLI) policy; and a $5 million charge related to the valuation of the Visa total return swap. Second quarter noninterest expense included $33 million in charges to increase litigation reserves.

First quarter 2013 noninterest income included a $34 million positive valuation adjustment on the Vantiv warrant; a $7 million gain on the sale of certain Fifth Third Asset Management (FTAM) advisory contracts; and a $7 million charge related to the valuation of the Visa total return swap. Net gains on investment securities were $17 million. First quarter noninterest expense included $9 million in charges to increase litigation reserves. First quarter income tax expense was higher by $12 million due to the seasonal expiration of employee stock options.

Second quarter 2012 results included a $56 million positive valuation adjustment on the Vantiv warrant; a $17 million negative valuation adjustment associated with bank premises held-for-sale; and an $11 million charge related to the valuation of the Visa total return swap. Net gains on investment securities were $3 million. Second quarter 2012 noninterest expense included a $9 million reduction to FDIC insurance expense.

    

 

  

 

Earnings Highlights

          
                        

For the Three Months Ended

  

% Change

JuneMarchDecemberSeptemberJune
2013  2013  2012  2012  2012  Seq  Yr/Yr
Earnings ($ in millions)
Net income attributable to Bancorp$603$422$399$363$38543%57%
Net income available to common shareholders$594$413$390$354$37644%58%
 
Common Share Data
Earnings per share, basic0.690.470.440.390.4147%68%
Earnings per share, diluted0.660.460.430.380.4043%65%
Cash dividends per common share0.120.110.100.100.089%50%
 
Financial Ratios
Return on average assets1.98%1.41%1.33%1.23%1.32%40%50%
Return on average common equity17.612.511.510.411.441%54%
Return on average tangible common equity21.615.414.112.814.140%53%
Tier I capital11.0710.8310.6510.8512.312%(10%)
Tier I common equity9.449.709.519.679.77(3%)(3%)
Net interest margin(a)3.333.423.493.563.56(3%)(6%)
Efficiency(a)52.359.865.263.759.4(12%)(12%)
 
ommon shares outstanding (in thousands)851,474874,645882,152897,467918,913(3%)(7%)

Average common shares outstanding (in thousands):

Basic858,583870,923884,676904,475913,541(1%)(6%)
Diluted900,625913,163925,585944,821954,622(1%)(6%)
 
(a) Presented on a fully taxable equivalent basis
The percentages in all of the tables in this earning release are calculated on actual dollar amounts not the rounded dollar amounts.
 

"Second quarter results were again strong for Fifth Third," said Kevin T. Kabat, CEO of Fifth Third Bancorp. "The Company reported $594 million in net income to common shareholders. Return on assets was 1.98 percent and return on average tangible common equity* was 21.6 percent for the quarter including Vantiv-related gains, and were 1.30 percent and 14.1 percent, respectively, excluding them.

"We posted our tenth consecutive quarter of sequential average portfolio loan growth, driven by C&I loan growth of 3 percent. Nearly all fee income categories increased quarter-over-quarter, highlighted by mortgage banking net revenue and corporate banking revenue, which grew 6 and 7 percent, respectively. All major fee categories showed mid-single digit growth year-over-year.

"Credit trends continued to improve as net charge-offs declined 16 percent to $112 million, or 51 basis points of loans, and we saw continued, broad based improvement in nearly every key credit metric.

"During the quarter, we entered into an agreement to repurchase $539 million of common shares. We have approximately $600 million of repurchase capacity remaining under our current CCAR plan extending through March 31, 2014, excluding any potential gains from Vantiv share sales in the future. At the beginning of the third quarter, we converted our Series G preferred stock into common stock, although those shares were already included in our fully diluted share count. Regulatory approval of final capital rules for U.S. banks provides welcome clarity for our management of capital, and our capital position under those rules would remain strong with an estimated pro forma Tier 1 common equity ratio* of 9.1 percent under the new final rules compared with 9.4 percent under current rules."

* Non-GAAP measure; see Reg. G reconciliation on page 34 in Exhibit 99.1 of 8-k filing dated 7/18/13.

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Income Statement Highlights

          
                         
 

For the Three Months Ended

  

% Change

JuneMarchDecemberSeptemberJune
 2013  2013  2012  2012  2012  Seq  Yr/Yr
Condensed Statements of Income ($ in millions)
Net interest income (taxable equivalent)$885$893$903$907$899(1%)(2%)
Provision for loan and lease losses

64

 

62

76

65

 

71

 

2%(11%)
Total noninterest income1,06074388067167843%56%
Total noninterest expense     1,017   978   1,163   1,006   937   4%  9%
Income before income taxes (taxable equivalent)     864   596   544   507   569   45%  52%
 
Taxable equivalent adjustment554445%8%
Applicable income taxes     256   179   144   139   180   42%  42%
Net income60341239636438546%56%
Less: Net income attributable to noncontrolling interest     -   

(10

)

  (3)  1   -   

NM 

  10%
Net income attributable to Bancorp60342239936338543%57%
Dividends on preferred stock     9   9   9   9   9   2%  2%
Net income available to common shareholders     594   413   390   354   376   44%  58%
Earnings per share, diluted