FIFTH THIRD BANCORP 
By CINCINNATI, Jan. 22 /PRNewswire-FirstCall/ --
-- Net loss of $2.2 billion ($3.82 per diluted common share) driven
primarily by goodwill impairment, credit actions, higher credit costs
and market valuation adjustments
-- Non-cash goodwill impairment charge of $965 million; no negative
effect on regulatory, other capital ratios
-- Securities other-than-temporary impairment (OTTI) of $0.05 per
share; estimated non-cash BOLI charge of $0.06 per share; changes in
loss estimates related to an indemnification obligation with Visa of
$0.01 per share (all per share figures after-tax)
-- Losses on loans sold or transferred to held-for-sale of $800 million
pre-tax; provision for loan losses $729 million in excess of loan
losses
-- Reported net interest income up 14 percent versus the fourth quarter
2007; up 4 percent excluding First Charter loan discount accretion
-- Average core deposits up 2 percent, average total deposits up 8
percent
-- Noninterest income increased 26 percent from the fourth quarter 2007,
or 4 percent excluding BOLI charges and OTTI charges
-- Payments processing revenue up 3 percent
-- Deposit service revenue up 2 percent
-- Corporate banking revenue growth of 14 percent
-- Completed the sale of approximately $3.4 billion in preferred shares to
U.S. Department of the Treasury under the Capital Purchase Program
-- Tier 1 capital ratio of 10.59 percent (target range 8-9 percent)
-- Total capital ratio of 14.79 percent (target range 11.5-12.5
percent)
-- Tangible equity ratio of 7.86 percent (target range 6-7 percent)
-- Allowance to loan ratio increased to 3.31 percent, allowance to
nonperforming loans ratio of 123 percent
Earnings Highlights
For the Three Months Ended
December September June March December
2008 2008 2008 2008 2007
Net income (loss) (in
millions) ($2,142) ($56) ($202) $286 $16
Net income (loss) available
to common shareholders ($2,184) ($81) ($202) $286 $16
Common Share Data
Earnings per share, basic (3.82) (0.14) (0.37) 0.54 0.03
Earnings per share, diluted (3.82) (0.14) (0.37) 0.54 0.03
Cash dividends per common
share 0.01 0.15 0.15 0.44 0.44
Financial Ratios
Return on average assets (7.16%) (.19%) (.72%) 1.03% 0.06%
Return on average equity (94.6) (3.3) (8.5) 12.3 0.7
Tier I capital 10.59 8.57 8.51 7.72 7.72
Net interest margin (a) 3.46 4.24 3.04 3.41 3.29
Efficiency (a) 131.3 54.2 58.6 42.3 72.6
Common shares outstanding
(in thousands) 577,387 577,487 577,530 532,106 532,672
Average common shares
outstanding
(in thousands):
Basic 571,809 571,705 540,030 528,498 529,120
Diluted 571,809 571,705 540,030 530,372 530,939
% Change
Seq Yr/Yr
Net income (loss) (in millions) NM NM
Net income (loss) available to
common shareholders NM NM
Common Share Data
Earnings per share, basic NM NM
Earnings per share, diluted NM NM
Cash dividends per common share (93%) (98%)
Financial Ratios
Return on average assets NM NM
Return on average equity NM NM
Tier I capital 24% 37%
Net interest margin (a) (18%) 5%
Efficiency (a) 142% 81%
Common shares outstanding (in thousands) - 8%
Average common shares outstanding
(in thousands):
Basic - 8%
Diluted - 8%
(a) Presented on a fully taxable equivalent basis
NM: not meaningful
Fifth Third Bancorp (Nasdaq: FITB) today reported a full year 2008 net
loss of
Fourth quarter results included a non-cash charge of
Fourth quarter results also included the effect of actions taken to
address areas of the loan portfolio exhibiting the most significant credit
deterioration. During the fourth quarter, the Bank sold or transferred to
held-for-sale loans with contractual balances of
Reported results for the fourth quarter also included
During the quarter, Fifth Third Bancorp sold
"Economic conditions have deteriorated across our footprint and have
placed both our consumer and commercial loan portfolios under significant
stress, as evident in our bottom line results for the year," said
Our underlying business results continue to be solid. We produced growth
in both consumer and commercial deposit accounts of 4%, excluding
acquisitions. Our Everyday Great Rates strategy helped us expand our customer
base despite the extremely aggressive deposit competition we saw in 2008.
Additionally, corporate banking fees were
Since the beginning of the current credit cycle in the second half of
2007, we have been aggressively addressing our loan portfolio exposure to the
geographies and industries most affected by this credit downturn. Actions
we've taken include suspending originations of residential homebuilder and
developer loans and commercial non-owner occupied real estate loans,
discontinuing all brokered home equity products, and implementing more
stringent underwriting standards. We have significantly increased our reserves
by over
During the fourth quarter, we took actions that resulted in the recording
of significant losses. We sold or transferred to held-for-sale of
During 2008, we raised a combined
Income Statement Highlights
For the Three Months Ended % Change
Dec. Sept. June March Dec.
2008 2008 2008 2008 2007 Seq Yr/Yr
Condensed Statements
of Income ($ in
millions)
Net interest income
(taxable equivalent) $897 $1,068 $744 $826 $785 (16%) 14%
Provision for loan and
lease losses 2,356 941 719 544 284 151% 729%
Total noninterest
income 642 717 722 864 509 (11%) 26%
Total noninterest
expense 2,022 967 858 715 940 109% 115%
Income (loss) before
income taxes (taxable
equivalent) (2,839) (123) (111) 431 70 NM NM
Taxable equivalent
adjustment 5 5 6 6 6 - (17%)
Applicable income
taxes (702) (72) 85 139 48 NM NM
Net income (loss) (2,142) (56) (202) 286 16 NM NM
Dividends on preferred
stock 42 25 - - - 68% NM
Net income (loss)
available to common
shareholders (2,184) (81) (202) 286 16 NM NM
Earnings per share,
diluted ($3.82) ($0.14) ($0.37) $0.54 $0.03 NM NM
NM: not meaningful
Net Interest Income
For the Three Months Ended
December September June March December
2008 2008 2008 2008 2007
Interest Income ($ in
millions)
Total interest income
(taxable equivalent) $1,411 $1,553 $1,213 $1,453 $1,556
Total interest expense 514 485 469 627 771
Net interest income (taxable
equivalent) $897 $1,068 $744 $826 $785
Average Yield
Yield on interest-earning
assets 5.44% 6.16% 4.95% 5.99% 6.52%
Yield on interest-bearing
liabilities 2.28% 2.25% 2.23% 2.99% 3.78%
Net interest rate spread
(taxable equivalent) 3.16% 3.91% 2.72% 3.00% 2.74%
Net interest margin
(taxable equivalent) 3.46% 4.24% 3.04% 3.41% 3.29%
Average Balances ($ in
millions)
Loans and leases, including
held for sale $87,426 $85,772 $85,212 $84,912 $82,172
Total securities and other
short-term investments 15,683 14,515 13,363 12,597 12,506
Total interest-bearing
liabilities 89,440 85,990 84,417 84,353 80,977
Shareholders' equity 10,291 10,843 9,629 9,379 9,446
% Change
Seq Yr/Yr
Interest Income ($ in millions)
Total interest income (taxable equivalent) (9%) (9%)
Total interest expense 6% (33%)
Net interest income (taxable equivalent) (16%) 14%
Average Yield
Yield on interest-earning assets (12%) (17%)
Yield on interest-bearing liabilities 1% (40%)
Net interest rate spread (taxable
equivalent) (19%) 15%
Net interest margin (taxable
equivalent) (18%) 5%
Average Balances ($ in millions)
Loans and leases, including held for sale 2% 6%
Total securities and other short-
term investments 8% 25%
Total interest-bearing liabilities 4% 10%
Shareholders' equity (5%) 9%
Net interest income of
The reported net interest margin was 3.46 percent, down 78 bps from 4.24 percent in the third quarter of 2008. The decrease was primarily due to a 54 bps reduction in the impact of purchase accounting adjustments for First Charter loan discount accretion, which contributed 31 bps to the fourth quarter margin versus 85 bps of benefit to the third quarter margin. Excluding this impact, the net interest margin would have been 3.15 percent, a decline of 24 bps from the previous quarter. This decline was driven by the change in mix of deposits, deposit costs declining less than asset yields, higher interest reversals, and the addition of assets due to customer use of contingent liquidity facilities related to certain off-balance sheet programs. These items were partially offset by wider loans spreads.
Compared with the fourth quarter of 2007, net interest income increased
Average Loans
For the Three Months Ended
December September June March December
2008 2008 2008 2008 2007
Average Portfolio Loans and
Leases ($ in millions)
Commercial:
Commercial loans $30,227 $28,284 $28,299 $25,367 $23,650
Commercial mortgage 13,189 13,257 12,590 12,016 11,497
Commercial construction 5,990 6,110 5,700 5,577 5,544
Commercial leases 3,610 3,641 3,747 3,723 3,692
Subtotal - commercial loans
and leases 53,016 51,292 50,336 46,683 44,383
Consumer:
Residential mortgage
loans 9,335 9,681 9,922 10,395 9,943
Home equity 12,677 12,534 12,012 11,846 11,843
Automobile loans 8,428 8,303 8,439 9,278 9,445
Credit card 1,748 1,720 1,703 1,660 1,461
Other consumer loans and
leases 1,165 1,165 1,125 1,083 1,099
Subtotal - consumer loans
and leases 33,353 33,403 33,201 34,262 33,791
Total average loans and
leases (excluding held for
sale) $86,369 $84,695 $83,537 $80,945 $78,174
Average loans held for sale 1,057 1,077 1,676 3,967 3,998
% Change
Seq Yr/Yr
Average Portfolio Loans and Leases
($ in millions)
Commercial:
Commercial loans 7% 28%
Commercial mortgage (1%) 15%
Commercial construction (2%) 8%
Commercial leases (1%) (2%)
Subtotal - commercial loans and leases 3% 19%
Consumer:
Residential mortgage loans (4%) (6%)
Home equity 1% 7%
Automobile loans 2% (11%)
Credit card 2% 20%
Other consumer loans and leases - 6%
Subtotal - consumer loans and leases - (1%)
Total average loans and leases
(excluding held for sale) 2% 10%
Average loans held for sale (2%) (74%)
Average portfolio loan and lease balances increased 2 percent sequentially and were up 10 percent from the fourth quarter of 2007. Acquisitions had no impact on sequential growth and accounted for 3 percent of average loan growth on a year-over-year basis.
Average commercial loan and lease balances grew 3 percent sequentially and
19 percent compared with the previous year. During the fourth quarter,
commercial and industrial (C&I) average loans grew by approximately
Consumer loan and lease balances were flat sequentially and declined 1
percent from the fourth quarter of 2007. Excluding acquisitions, consumer loan
balances declined 5 percent from the previous year, which included a decline
in auto loans as a result of $2.7 billion in securitizations in the first
quarter of 2008. Sequentially, modest home equity loan growth, a result of
lower pay-downs in the quarter, along with credit card and auto loan growth
was offset by declines in residential mortgage loans. On a year-over-year
basis, growth in home equity and credit card loans was more than offset by a
reduction in residential mortgage and auto loan balances. Excluding
acquisitions, residential mortgage loans declined 14 percent from the previous
year.
Average Deposits
For the Three Months Ended
December September June March December
2008 2008 2008 2008 2007
Average Deposits ($ in
millions)
Demand deposits $14,602 $14,225 $14,023 $13,208 $13,345
Interest checking 13,315 13,843 14,396 14,836 14,394
Savings 15,960 16,154 16,583 16,075 15,616
Money market 4,983 6,051 6,592 6,896 6,363
Foreign office (a) 1,876 2,126 2,169 2,443 2,249
Subtotal - Transaction
deposits 50,736 52,399 53,763 53,458 51,967
Other time 13,337 10,780 9,517 10,884 11,011
Subtotal - Core deposits 64,073 63,179 63,280 64,342 62,978
Certificates - $100,000
and over 12,468 11,623 8,143 5,835 6,613
Other 1,473 395 2,948 3,861 2,464
Total deposits $78,014 $75,197 $74,371 $74,038 $72,055
% Change
Seq Yr/Yr
Average Deposits ($ in millions)
Demand deposits 3% 9%
Interest checking (4%) (7%)
Savings (1%) 2%
Money market (18%) (22%)
Foreign office (a) (12%) (17%)
Subtotal - Transaction deposits (3%) (2%)
Other time 24% 21%
Subtotal - Core deposits 1% 2%
Certificates - $100,000 and over 7% 89%
Other 273% (40%)
Total deposits 4% 8%
(a) Includes commercial customer Eurodollar sweep balances for
which the Bancorp pays rates comparable to other commercial deposit
accounts.
Average core deposits increased 1 percent sequentially and were up 2 percent from the fourth quarter of 2007. Acquisitions had no effect on sequential core deposit growth and a 4 percent positive effect compared with the same quarter last year. Sequential growth in average demand deposit (DDA) and consumer CD balances was partially offset by lower interest checking, savings and money market deposits, and foreign office commercial sweep deposits. On a year-over-year basis, growth in DDA, savings, and consumer CD balances more than offset lower interest checking, money market, and foreign office commercial sweep deposits. Average transaction deposits (excluding consumer time deposits) were down 3 percent from the third quarter and declined 2 percent from a year ago. The decline was driven by lower average balances resulting from weaker economic conditions, as well as the migration of savings balances to higher rate CDs.
Retail average core deposits increased 4 percent both sequentially and
from the fourth quarter of 2007. Strong sequential growth in consumer CD
balances was partially offset by lower interest checking balances, a result of
lower average balances during the quarter. DDA and savings balances were
consistent with the previous quarter as lower average balances offset net new
account growth. Commercial core deposits decreased 5 percent sequentially and
were down 6 percent from the previous year as lower market rates led customers
to carry lower balances and to substitute fees for compensating balances in
payment for treasury management services. Sequential growth in DDA and
interest checking account balances was driven by customers shifting balances
into DDA products given the increased FDIC insurance limits, and was more than
offset by lower savings and money market account balances. The sequential
increase in CDs
Noninterest Income
For the Three Months Ended % Change
Dec. Sept. June March Dec.
2008 2008 2008 2008 2007 Seq Yr/Yr
Noninterest Income ($ in
millions)
Electronic payment processing
revenue $230 $235 $235 $213 $223 (2%) 3%
Service charges on deposits 162 172 159 147 160 (6%) 2%
Investment advisory revenue 78 90 92 93 94 (13%) (17%)
Corporate banking revenue 121 104 111 107 106 16% 14%
Mortgage banking net revenue (29) 45 86 97 2 NM NM
Other noninterest income 24 112 49 177 (113) (79%) NM
Securities gains (losses), net (40) (63) (10) 27 7 (37%) NM
Securities gains, net - non-
qualifying hedges on mortgage
servicing rights 96 22 - 3 6 345% 1583%
Total noninterest income $642 $717 $722 $864 $509 (11%) 26%
Noninterest income of
Electronic payment processing (EPP) revenue of
Service charges on deposits of
Corporate banking revenue of
Investment advisory revenue of
Mortgage banking net revenue was a net loss of
Net securities gains on non-qualifying hedges on MSRs were
Net losses on investment securities were
Other noninterest income totaled
Noninterest Expense
For the Three Months Ended % Change
Dec. Sept. June March Dec.
2008 2008 2008 2008 2007 Seq Yr/Yr
Noninterest Expense ($ in
millions)
Salaries, wages and incentives $337 $321 $331 $347 $328 5% 3%
Employee benefits 61 72 60 85 56 (14%) 10%
Payment processing expense 70 70 67 66 68 1% 3%
Net occupancy expense 77 77 73 72 70 1% 11%
Technology and communications 48 47 49 47 47 3% 3%
Equipment expense 35 34 31 31 32 3% 7%
Other noninterest expense 1,394 346 247 67 339 303% 311%
Total noninterest expense $2,022 $967 $858 $715 $940 109% 115%
Noninterest expense of
Credit Quality
For the Three Months Ended
Dec. Sept. June March Dec.
2008 2008 2008 2008 2007
Total net losses charged off
($ in millions)
Commercial loans ($422) ($85) ($107) ($36) ($48)
Commercial mortgage loans (465) (94) (21) (33) (15)
Commercial construction loans (539) (88) (49) (72) (12)
Commercial leases - - - - -
Residential mortgage loans (68) (77) (63) (34) (18)
Home equity (54) (55) (54) (41) (32)
Automobile loans (43) (32) (26) (35) (30)
Credit card (30) (24) (21) (20) (15)
Other consumer loans and leases (6) (8) (3) (5) (4)
Total net losses charged off (1,627) (463) (344) (276) (174)
Total losses (1,652) (481) (365) (293) (193)
Total recoveries 25 18 21 17 19
Total net losses charged off ($1,627) ($463) ($344) ($276) ($174)
Ratios
Net losses charged off as a percent
of average loans and leases
(excluding held for sale) 7.50% 2.17% 1.66% 1.37% 0.89%
Commercial 10.70% 2.07% 1.41% 1.21% 0.66%
Consumer 2.40% 2.33% 2.04% 1.58% 1.18%
Net charge-offs totaled
Commercial net charge-offs were
Excluding losses from loans sold or transferred to held-for-sale,
commercial net charge-offs on portfolio loans were
Consumer net charge-offs of
For the Three Months Ended
Dec. Sept. June March Dec.
2008 2008 2008 2008 2007
Allowance for Credit Losses ($ in
millions)
Allowance for loan and lease
losses, beginning $2,058 $1,580 $1,205 $937 $827
Total net losses charged off (1,627) (463) (344) (276) (174)
Provision for loan and lease
losses 2,356 941 719 544 284
Allowance for loan and lease
losses, ending 2,787 2,058 1,580 1,205 937
Reserve for unfunded commitments,
beginning 132 115 103 95 79
Provision for unfunded
commitments 63 17 10 8 13
Acquisitions - - 2 - 3
Reserve for unfunded commitments,
ending 195 132 115 103 95
Components of allowance for
credit losses:
Allowance for loan and lease
losses 2,787 2,058 1,580 1,205 937
Reserve for unfunded
commitments 195 132 115 103 95
Total allowance for credit losses $2,982 $2,190 $1,695 $1,308 $1,032
Allowance for loan and lease
losses ratio
As a percent of loans and
leases 3.31% 2.41% 1.85% 1.49% 1.17%
As a percent of nonperforming
loans and leases (a) 123% 79% 79% 87% 105%
As a percent of nonperforming
assets (a) 111% 73% 72% 76% 88%
(a) excludes nonaccrual loans and leases in loans held for sale
Provision for loan and lease losses totaled
The allowance for loan and lease losses represented 3.31 percent of total loans and leases outstanding as of quarter end, compared with 2.41 percent last quarter, and represented 123 percent of nonperforming loans, up from 79 percent the previous quarter.
As of
Nonperforming Assets and Dec. Sept. June March Dec.
Delinquency ($ in millions) 2008 2008 2008 2008 2007
Nonaccrual loans and leases:
Commercial loans $541 $550 $407 $300 $175
Commercial mortgage 482 724 524 312 243
Commercial construction 362 636 537 408 249
Commercial leases 21 23 18 11 5
Residential mortgage 259 216 142 138 92
Home equity 26 27 35 42 45
Automobile 5 3 7 13 3
Other consumer loans and
leases - - - - 1
Total nonaccrual
loans and leases $1,696 $2,179 $1,670 $1,224 $813
Restructured loans and
leases 574 427 318 164 80
Total nonperforming
loans and leases $2,270 $2,606 $1,988 $1,388 $893
Repossessed personal
property 24 24 22 22 21
Other real estate owned (a) 206 198 190 182 150
Total nonperforming
assets (b) $2,500 $2,828 $2,200 $1,592 $1,064
Nonaccrual loans held for
sale 473 - - - -
Total nonperforming
assets including
loans held for sale $2,973 $2,828 $2,200 $1,592 $1,064
Total loans and leases 90
days past due $662 $671 $608 $539 $491
Nonperforming loans and
leases as a percent of
portfolio loans, leases and
other assets, including
other real estate owned (b) 2.69% 3.04% 2.32% 1.71% 1.11%
Nonperforming assets as a
percent of portfolio loans,
leases and other assets,
including other real estate
owned (b) 2.96% 3.30% 2.57% 1.96% 1.32%
a) Excludes government insured advances.
b) Does not include nonaccrual loans held for sale.
Nonperforming assets (NPAs) at quarter end were
Excluding NPAs in held-for-sale, commercial NPAs of
Consumer NPAs of
Loans still accruing over 90 days past due were
Capital Position
For the Three Months Ended
December September June March December
2008 (a) 2008 2008 2008 2007
Capital Position
Tangible equity 7.86% 6.19% 6.37% 6.19% 6.14%
Tangible common equity 4.23% 5.23% 5.40% 6.19% 6.14%
Regulatory capital ratios:
Tier I capital 10.59% 8.57% 8.51% 7.72% 7.72%
Total risk-based capital 14.79% 12.30% 12.15% 11.34% 10.16%
Tier I leverage 10.27% 8.77% 9.08% 8.28% 8.50%
Book value 13.57 16.65 16.75 17.56 17.18
Tangible book value 8.74 10.10 10.16 12.66 12.27
(a) Current period regulatory capital data and ratios are estimated
Regulatory capital ratios and the tangible equity ratio increased
significantly during the quarter. The tangible equity ratio increased 167 bps
to 7.86 percent, the Tier 1 capital ratio increased 202 bps to 10.59 percent,
and the total capital ratio increased 249 bps to 14.79. These ratios were
higher in the fourth quarter as the issuance of
Fifth Third's tangible equity to tangible assets ratio target is 6 to 7 percent; the Tier 1 capital ratio target is 8 to 9 percent; and the total capital ratio target is 11.5 to 12.5 percent.
Other
During the fourth quarter of 2008, Fifth Third acquired approximately
During the fourth quarter, Fifth Third reduced its common dividend due to
the outlook for a continued negative credit environment. The reduction is
expected to conserve approximately
Conference Call
Fifth Third will host a conference call to discuss these financial results
at
Those unable to listen to the live webcast may access a webcast replay or
podcast through the Fifth Third Investor Relations website at the same web
address. Additionally, a telephone replay of the conference call will be
available beginning approximately two hours after the conference call until
Corporate Profile
Fifth Third Bancorp is a diversified financial services company
headquartered in
FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements about Fifth Third Bancorp within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Rule 175 promulg
