FIFTH THIRD BANCORP quarterly report, Q1 FY2013

完整文档

Fifth Third Bancorp — Q1 2013 Form 10-Q

Reporting period: Three months ended March 31, 2013; filed May 9, 2013. Fifth Third is a diversified U.S. bank headquartered in Cincinnati, with four reported business segments and a 33% interest in Vantiv Holding, LLC at quarter-end.

Financial performance

  • Revenue: $1.636 billion on a fully taxable-equivalent (FTE) basis, down 2% from Q1 2012. FTE net interest income was $893 million, down 1%; noninterest income was $743 million, down 3%.
  • Profit: GAAP net income was $412 million, compared with $430 million. Net income attributable to Fifth Third was $422 million; income available to common shareholders was $413 million, or $0.46 diluted EPS, versus $421 million and $0.45 a year earlier. The filing reports a 1.41% return on assets and 12.5% return on average common equity.
  • Margins and expenses: Net interest margin fell to 3.42% from 3.61%, reflecting lower asset yields, partly offset by loan growth and reduced funding costs. Noninterest expense was $978 million, essentially flat; the efficiency ratio worsened to 59.8% from 58.3%.
  • Credit: Provision for loan and lease losses declined to $62 million from $91 million. Net charge-offs were $133 million, or 0.63% of average portfolio loans and leases, versus $220 million and 1.08%. Nonperforming assets were $1.210 billion, down from $1.286 billion at year-end 2012; the reported ratio was 1.41% versus 1.49%.
  • Cash flow: Operating activities provided $1.225 billion, compared with $1.895 billion. Investing activities used $316 million (versus $1.988 billion used); financing activities used $1.164 billion (versus $335 million used). Cash and due from banks decreased $255 million to $2.186 billion.

Balance sheet, funding and capital

  • Assets were $121.382 billion, down from $121.894 billion at December 31, 2012. Portfolio loans and leases were $85.676 billion; average loans and leases, including held-for-sale loans, rose 6% year over year to $88.880 billion.
  • Deposits totaled $91.624 billion, up from $89.517 billion at year-end; core deposits were $86.152 billion, approximately unchanged. Borrowings declined $3.121 billion to $11.145 billion, primarily from lower short-term FHLB borrowings, while long-term debt increased after a $1.3 billion senior-note issuance.
  • Reported regulatory capital ratios included Tier I risk-based capital of 10.83%, total risk-based capital of 14.35%, Tier I leverage of 10.03%, and Tier I common equity of 9.70%. Management’s preliminary estimate under proposed Basel III rules was an 8.91% Tier I common equity ratio; the rules were not final.
  • Liquidity sources included approximately $38.6 billion of secured borrowing capacity and $5.6 billion of debt or securities available under the shelf registration, subject to market access and other conditions.

Changes, outlook and notable items

  • Lower interest-earning-asset yields and the absence of the prior-year $115 million Vantiv IPO gain weighed on year-over-year results. Improved credit trends reduced provision expense and charge-offs. Average C&I and residential mortgage lending grew, while total loans at quarter-end were slightly lower than year-end.
  • Mortgage banking revenue increased to $220 million from $204 million, including a $49 million recovery of temporary MSR impairment. Results remain sensitive to interest rates, prepayment assumptions and mortgage volumes.
  • The Federal Reserve did not object to a capital plan for April 2013–March 2014 that could permit a quarterly common dividend increase to $0.12 and specified share repurchases and preferred-stock actions. These actions remain subject to Board decisions, regulatory developments and market conditions. The Board also authorized repurchases of up to 100 million common shares; authorization is not a commitment to buy shares.
  • Subsequent event: Vantiv priced a secondary offering on May 7, including 15.6 million shares sold on Fifth Third’s behalf. The filing expected settlement May 15 and estimated a second-quarter pretax gain of approximately $225 million ($145 million after tax).
  • Risks and contingencies: Management identified continuing real-estate and credit stresses, particularly in Michigan and Florida, and sensitivity to interest rates, funding and liquidity, regulatory change, and mortgage servicing valuations. Mortgage representation-and-warranty reserves were $112 million, with reasonably possible losses estimated up to $89 million above reserves. Management estimated reasonably possible legal losses up to $73 million above reserves; outcomes and timing are uncertain. An SEC investigation concerns historical accounting and reporting for certain commercial loans sold or classified as held for sale in 2008.
  • Potential additional exposures include approximately $70 million of charge-offs if regulators adopt certain bankruptcy-related TDR guidance. The filing also describes April 2013 CFPB, OCC and FDIC developments concerning deposit-advance products; Fifth Third was evaluating possible effects and could not estimate any financial impact.
  • No formal earnings guidance is provided in the supplied filing text. Management described moderate economic improvement, ongoing expense-control efforts, and continued uncertainty from regulatory requirements. Disclosure controls were concluded effective, with no material change in internal control over financial reporting reported.

Important facts for investors to verify

  • Whether net interest margin pressure continues and how loan growth and funding costs affect future net interest income.
  • Whether credit improvement persists, especially in Michigan and Florida, and whether the allowance remains adequate as it declines.
  • The realized proceeds, gain, remaining ownership and accounting treatment for the Vantiv share sale.
  • Actual execution of proposed dividends and repurchases, and the effects of regulatory capital rules and stress testing.
  • Developments in mortgage repurchase demands, the SEC investigation, other legal matters, and regulatory review of deposit-advance products.
  • Cash-flow comparability: reported operating cash flow includes substantial mortgage loan originations and sales; assess it alongside balance-sheet and funding trends.