Fifth Third Announces First Quarter 2013 Net Income to Common Shareholders of $413 Million or $0.46

Fifth Third Announces First Quarter 2013 Net Income to Common Shareholders of $413 Million or $0.46 Per Share

  • 1Q13 net income available to common shareholders of $413 million, or $0.46 per diluted common share, vs. $390 million or $0.43 per share in 4Q12, up 7% and $421 million or $0.45 per share in 1Q12, up 2%
  • 1Q13 results included a benefit of $34 million pre-tax (~$22 million after-tax, or ~$0.02 per share) on the valuation of the warrant Fifth Third holds in Vantiv
    • Significant items in 4Q12 included a positive net pre-tax impact related to Vantiv shares and warrants of $138 million (~$90 million after tax, or ~$0.10 per share) and pre-tax expense for FHLB debt extinguishment of $134 million (~$87 million after-tax, or ~$0.09 per share); significant 1Q12 items included a positive net pre-tax impact related to Vantiv shares and warrants of $127 million (~$83 million after-tax, or ~$0.09 per share)
    • Excluding these items, earnings per diluted common share of $0.44^ increased $0.08, or 22%, from 1Q12
  • 1Q13 return on assets (ROA) of 1.41%; return on average common equity of 12.5%; return on average tangible common equity** of 15.4%
  • Pre-provision net revenue (PPNR)** of $653 million in 1Q13
    • Net interest income (FTE) of $893 million, down 1% sequentially due primarily to lower day count; net interest margin 3.42%; average portfolio loans up 2% sequentially driven by 6% sequential growth in C&I loans
    • Noninterest income of $743 million included $34 million gain on Vantiv warrant and $17 million in investment securities gains; compared with $880 million in prior quarter which included net gains of $138 million related to Vantiv shares and warrant
    • Noninterest expense of $978 million, down 16% from 4Q12 which included FHLB debt termination charge
  • 1Q13 effective tax rate of 30.4% compared with 26.8% in 4Q12 and 28.6% in 1Q12; 1Q13 income taxes included seasonal increase of $12 million related to expiration of stock options; 4Q12 income taxes included $10 million benefit from the termination of certain leases
  • Credit trends remain favorable
    • 1Q13 net charge-offs of $133 million (0.63% of loans and leases) vs. 4Q12 NCOs of $147 million and 1Q12 NCOs of $220 million; lowest NCO level since 2Q07; 1Q13 provision expense of $62 million compared with 4Q12 provision of $76 million and 1Q12 provision of $91 million
    • Loan loss allowance decreased $71 million sequentially reflecting continued improvement in credit trends; allowance to loan ratio of 2.08%, 147% of nonperforming assets, 187% of nonperforming loans and leases, and 3.3 times 1Q13 annualized net charge-offs
    • Total nonperforming assets (NPAs) of $1.2 billion including loans held-for-sale (HFS) declined $86 million, or 7%, sequentially; portfolio NPA ratio of 1.41% down 8 bps from 4Q12, NPL ratio of 1.11% down 8 bps from 4Q12
    • Total delinquencies (includes loans 30-89 days past due and over 90 days past due) at lowest levels since 1Q01
  • Strong capital ratios*
    • Tier 1 common ratio 9.70%**, up 19 bps sequentially (Basel III pro forma estimate of ~8.9%)
    • Tier 1 capital ratio 10.83%, Total capital ratio 14.35%, Leverage ratio 10.03%
    • Tangible common equity ratio** of 9.03% excluding unrealized gains/losses; 9.28% including them
    • Repurchased ~8 million common shares in 1Q13; average share count reduced by 14 million shares including impact from 4Q12 and 1Q13 share repurchases; new 100 million share repurchase authorization in March
  • Book value per share of $15.42; tangible book value per share** of $12.62 up 2% from 4Q12 and 8% from 1Q12

* 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 the three draft Federal Register notices proposing enhancements to regulatory capital requirements published in June 2012. The actual impact to the Bancorp's Tier I common equity ratio may change significantly due to revisions to the agencies' final rules. See pp.15-16 in Exhibit 99.1 of 8-k filing dated 4/18/13 for more information.
** Non-GAAP measure; see Reg. G reconciliation on page 33 in Exhibit 99.1 of 8-k filing dated 4/18/13.
^ Non-GAAP measure. This measure has been included herein to facilitate a greater understanding of the Bancorp's financial condition.

CINCINNATI--(BUSINESS WIRE)-- Fifth Third Bancorp (NAS: FITB) today reported first quarter 2013 net income of $422 million, compared with net income of $399 million in the fourth quarter of 2012 and net income of $430 million in the first quarter of 2012. After preferred dividends, first quarter 2013 net income available to common shareholders was $413 million, or $0.46 per diluted share, compared with fourth quarter net income of $390 million, or $0.43 per diluted share, and net income of $421 million, or $0.45 per diluted share, in the first quarter of 2012.


First quarter 2013 noninterest income results 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 2013 noninterest expense results included a $9 million benefit from the sale of affordable housing investments and $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.

Fourth quarter 2012 noninterest income included a $157 million gain on the sale of Vantiv shares; a $19 million negative valuation adjustment on the Vantiv warrant; and a $15 million charge related to the valuation of the Visa total return swap. Net gains on investment securities were $2 million. Fourth quarter noninterest expense included $134 million of debt extinguishment costs associated with the termination of Federal Home Loan Bank (FHLB) debt and $13 million in charges to increase litigation reserves. Results also included an additional $29 million of charges to increase the mortgage representation and warranty reserve due to new Freddie Mac guidance for potential 2004-2006 repurchase claims. Fourth quarter 2012 taxes were reduced by approximately $10 million due to the termination of certain leases.

First quarter 2012 results included $115 million in pre-tax gains on the initial public offering of Vantiv, Inc., $46 million in positive valuation adjustments on the Vantiv warrant and put option, as well as $34 million of charges recorded in equity method earnings in other noninterest income related to Vantiv's bank debt refinancing and debt termination charges. First quarter 2012 results also included $23 million in income from an agreement reached on certain outstanding disputes for non-income tax related assessments in noninterest expense; a $19 million charge to noninterest income related to the Visa total return swap, additions to litigation reserves of $13 million, debt termination charges of $9 million, and severance expense of $6 million. Net gains on investment securities were $9 million.

Earnings Highlights                
                                         

For the Three Months Ended

    % Change
March December September June March
2013   2012   2012   2012   2012   Seq   Yr/Yr
Earnings ($ in millions)
Net income attributable to Bancorp $ 422 $ 399 $ 363 $ 385 $ 430 6 % (2 %)
Net income available to common shareholders $ 413 $ 390 $ 354 $ 376 $ 421 6 % (2 %)
 
Common Share Data
Earnings per share, basic 0.47 0.44 0.39 0.41 0.46 7 % 2 %
Earnings per share, diluted 0.46 0.43 0.38 0.40 0.45 7 % 2 %
Cash dividends per common share 0.11 0.10 0.10 0.08 0.08 10 % 38 %
 
Financial Ratios
Return on average assets 1.41 % 1.33 % 1.23 % 1.32 % 1.49 % 6 % (5 %)
Return on average common equity 12.5 11.5 10.4 11.4 13.1 9 % (4 %)
Return on average tangible common equity 15.4 14.1 12.8 14.1 16.2 9 % (5 %)
Tier I capital 10.83 10.65 10.85 12.31 12.20 2 % (11 %)
Tier I common equity 9.70 9.51 9.67 9.77 9.64 2 % 1 %
Net interest margin(a) 3.42 3.49 3.56 3.56 3.61 (2 %) (5 %)
Efficiency(a) 59.8 65.2 63.7 59.4 58.3 (8 %) 3 %
 
Common shares outstanding (in thousands) 874,645 882,152 897,467 918,913 920,056 (1 %) (5 %)
Average common shares outstanding
(in thousands):
Basic 870,923 884,676 904,475 913,541 915,226 (2 %) (5 %)
Diluted 913,163 925,585 944,821 954,622 957,416 (1 %) (5 %)
 
(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.
 

"First quarter earnings results demonstrated continued strong momentum for Fifth Third," said Kevin Kabat, CEO of Fifth Third Bancorp. "Net income to common shareholders of $413 million was among the best results in company history. Return on average assets was 1.41 percent and return on average tangible common equity* was 15.4 percent.

"Loan growth remained strong and net interest income results were higher than expected. Average loans increased 2 percent sequentially, driven by 4 percent growth in average commercial loans with continued strength in C&I lending, up 6 percent from the fourth quarter. Residential mortgage lending also remained strong. Fee income results were solid despite the negative effects of seasonality in the first quarter.

"Credit trends continued to be favorable, with net charge-offs declining 10 percent, to 0.63 percent of average loans and leases, the lowest level since the second quarter of 2007. Nonperforming assets declined 7 percent. Loan loss reserve levels and coverage ratios remain strong at 2.08 percent of loans and 187 percent of nonperforming portfolio loans.

"We completed our repurchase activity related to our 2012 capital plan in early April. Total repurchases in 2012 and the first quarter of 2013 were 50 million shares, including those related to after-tax gains on the sale of Vantiv shares. Period end shares have declined 5 percent since year-end 2011. Despite these actions, our strong common equity capital ratios have increased 35 basis points over this period. Additionally, in March, we announced a 10 percent increase in the quarterly common stock dividend, to $0.11. Given our capacity for internal capital generation, we would expect to continue to return capital to shareholders in a responsible manner, absent unforeseen developments."

* Non-GAAP measure; see Reg. G reconciliation on page 33 in Exhibit 99.1 of 8-k filing dated 4/18/13.

Income Statement Highlights                                
                                               

For the Three Months Ended

    % Change
March December September June March
2013     2012     2012     2012     2012     Seq     Yr/Yr
Condensed Statements of Income ($ in millions)
Net interest income (taxable equivalent) $ 893 $ 903 $ 907 $ 899 $ 903 (1 %) (1 %)
Provision for loan and lease losses 62 76 65 71 91 (18 %) (31 %)
Total noninterest income 743 880 671 678 769 (16 %) (3 %)
Total noninterest expense           978         1,163         1,006       937       973     (16 %)     -  
Income before income taxes (taxable equivalent)           596         544         507       569       608     10 %     (2 %)
 
Taxable equivalent adjustment 5 4 4 4 5 4 % 1 %
Applicable income taxes           179         144         139       180       173     24 %     4 %
Net income 412 396 364 385 430 4 % (4 %)
Less: Net income attributable to noncontrolling interest           (10 )       (3 )       1       -       -     NM     NM
Net income attributable to Bancorp 422 399 363 385 430 6 % (2 %)
Dividends on preferred stock           9         9         9       9       9     -       -  
Net income available to common shareholders           413         390  

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