Fifth Third Announces Third Quarter 2020 Results

Rhea-AI Summary

Fifth Third Bancorp (FITB) reported strong Q3 2020 results with net income of $581 million, up 198% sequentially. The net charge-off (NCO) ratio was 0.35%, the lowest since Q2 2019. Adjusted net interest income (NII) fell 2% to $1.160 billion, affected by low market rates. Noninterest income increased 11% from the previous quarter, driven by service charges and securities gains. The CET1 ratio rose to 10.14%, above target levels, reflecting robust capital and liquidity. Earnings per share (EPS) reached $0.78, a 239% increase from Q2 2020, showcasing the bank's resilience amid market challenges.

Positive

• Net income available to common shareholders increased by 245% QoQ to $562 million.
• EPS rose 239% sequentially to $0.78, reflecting strong financial recovery.
• CET1 capital ratio improved to 10.14%, indicating strong capital position.
• Noninterest income grew by 11% QoQ, driven by service charges and securities gains.
• NCO ratio dropped to 0.35%, indicating improved credit quality.

Negative

• Adjusted net interest income decreased by 2% from the previous quarter.
• NIM decreased by 17 bps QoQ, negatively impacted by excess liquidity and low market rates.
• Commercial loans down 7% QoQ, impacting overall loan growth.

CINCINNATI--(BUSINESS WIRE)--Fifth Third Bancorp (FITB):

Key Highlights

• Very strong reported and adjusted return metrics, reflecting strong operating results
• Credit losses well below previous expectations with a NCO ratio of 0.35%, the lowest level since 2Q19
• PPNR^(a) exceeded previous guidance, led by strong fees and better-than-expected NII performance (interest-bearing core deposit costs down 14 bps, more than previous guidance)
• 3Q20 NIM was negatively impacted ~48 bps due to excess liquidity and Paycheck Protection Program (PPP) loans
• Strong balance sheet; CET1 ratio of 10.14% well above target range, with record balance sheet liquidity
• Grew tangible book value per share for six consecutive quarters

Key Financial Data
$ millions for all balance sheet and income statement items
	3Q20		2Q20		3Q19
Income Statement Data
Net income available to common shareholders	$562		$163		$530
Net interest income (U.S. GAAP)	1,170		1,200		1,242
Net interest income (FTE)(a)	1,173		1,203		1,246
Noninterest income	722		650		740
Noninterest expense	1,161		1,121		1,159
Per Share Data
Earnings per share, basic	$0.78		$0.23		$0.72
Earnings per share, diluted	0.78		0.23		0.71
Book value per share	29.25		28.88		27.32
Tangible book value per share(a)	23.06		22.66		21.06
Balance Sheet & Credit Quality
Average portfolio loans and leases	$113,362		$118,506		$109,541
Average deposits	155,911		150,598		125,206
Net charge-off ratio(b)	0.35	%	0.44	%	0.36	%
Nonperforming asset ratio(c)	0.84		0.65		0.47
Financial Ratios
Return on average assets	1.14	%	0.40	%	1.28	%
Return on average common equity	10.7		3.2		10.7
Return on average tangible common equity(a)	13.8		4.3		14.2
CET1 capital(d)(e)	10.14		9.72		9.56
Net interest margin(a)	2.58		2.75		3.32
Efficiency(a)	61.3		60.5		58.4
Other than the Quarterly Financial Review tables beginning on page 13 of the earnings release, commentary is on a fully taxable-equivalent (FTE) basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a taxable-equivalent basis, net interest income, net interest margin, net interest rate spread, total revenue and the efficiency ratio are provided on an FTE basis.

CEO Commentary

"Our third quarter results were very strong despite the challenging operating dynamics. We remain intently focused on taking appropriate actions for our customers, our employees, and our communities during these uncertain times. I am very proud of the way our employees have responded to support our customers and each other.

Our financial performance once again highlighted the strength of our franchise and our ability to navigate the current environment. Our already strong capital and liquidity levels further improved this quarter, and our credit performance was better than previous expectations, indicative of our balance sheet strength which will serve us well throughout this challenging environment.

We have consistently communicated our through-the-cycle principles of disciplined client selection, conservative underwriting, and an overall balance sheet management approach focused on long-term performance. We have also executed numerous strategic actions over the last several years in anticipation of an eventual downturn in the economy.

Given the anticipated revenue headwinds, we are very focused on optimizing our expense base to maintain healthy levels of returns. To that end, we took proactive measures during the quarter to ensure Fifth Third continues to generate sustainable, long-term value for shareholders. We continue to believe we are well-positioned to emerge from the pandemic as a top performing regional bank."

-Greg D. Carmichael, Chairman, President and CEO

	Income Statement Highlights
	($ in millions, except per share data)	For the Three Months Ended									% Change
		September			June			September
		2020			2020			2019			Seq		Yr/Yr
	Condensed Statements of Income
	Net interest income (NII)(a)	$1,173			$1,203			$1,246			(2)%		(6)%
	(Benefit from) provision for credit losses	(15)			485			134			NM		NM
	Noninterest income	722			650			740			11%		(2)%
	Noninterest expense	1,161			1,121			1,159			4%		—
	Income before income taxes(a)	$749			$247			$693			203%		8%
	Taxable equivalent adjustment	$3			$3			$4			—		(25)%
	Applicable income tax expense	165			49			140			237%		18%
	Net income	$581			$195			$549			198%		6%
	Dividends on preferred stock	19			32			19			(41)%		—
	Net income available to common shareholders	$562			$163			$530			245%		6%
	Earnings per share, diluted	$0.78			$0.23			$0.71			239%		10%

Fifth Third Bancorp (NASDAQ^®: FITB) today reported third quarter 2020 net income of $581 million compared to net income of $195 million in the prior quarter and $549 million in the year-ago quarter. Net income available to common shareholders in the current quarter was $562 million, or $0.78 per diluted share, compared to $163 million, or $0.23 per diluted share, in the prior quarter and $530 million, or $0.71 per diluted share, in the year-ago quarter.

		Diluted earnings per share impact of certain items - 3Q20
		(after-tax impacts(f); $ in millions, except per share data)
		Valuation of Visa total return swap within other noninterest income	$(17)
		Restructuring charges:
		Severance expense within compensation and benefits expense	(15)
		Branch and non-branch real estate charges within other noninterest income	(8)
		Rent impairment charges within net occupancy expense	(7)
		COVID-19-related expenses(g)	(4)
		After-tax impact(f) of certain items	$(51)
		Diluted earnings per share impact of certain items	$(0.07)
		Diluted earnings per share impact reflect 718.894 million average diluted shares outstanding

	Net Interest Income
	(FTE; $ in millions)(a)	For the Three Months Ended												% Change
		September				June				September
		2020				2020				2019				Seq		Yr/Yr
	Interest Income
	Interest income	$1,332				$1,406				$1,629				(5)%		(18)%
	Interest expense	159				203				383				(22)%		(58)%
	Net interest income (NII)	$1,173				$1,203				$1,246				(2)%		(6)%
	Adjusted NII(a)	$1,160				$1,188				$1,218				(2)%		(5)%
	Average Yield/Rate Analysis													bps Change
	Yield on interest-earning assets	2.93	%			3.21	%			4.34	%			(28)		(141)
	Rate paid on interest-bearing liabilities	0.51	%			0.66	%			1.41	%			(15)		(90)
	Ratios
	Net interest rate spread	2.42	%			2.55	%			2.93	%			(13)		(51)
	Net interest margin (NIM)	2.58	%			2.75	%			3.32	%			(17)		(74)
	Adjusted NIM(a)	2.55	%			2.71	%			3.25	%			(16)		(70)

Compared to the prior quarter, reported NII decreased $30 million, or 2%. Excluding purchase accounting accretion of $13 million in the current quarter and $15 million in the prior quarter, adjusted NII decreased $28 million, or 2%. The decrease was primarily attributable to a decline in commercial and industrial (C&I) loans and the impact of lower market rates. These impacts were partially offset by the actions taken to reduce deposit costs, the full-quarter impact of PPP loans, the favorable impact of previously executed cash flow hedges, and day count. Compared to the prior quarter, reported and adjusted NIM decreased 17 bps and 16 bps, respectively, driven by the unfavorable impacts from elevated cash balances (approximately 15 bps drag on NIM compared to the prior quarter), lower market rates, and lower C&I loan balances, partially offset by benefits from lower deposit costs and previously executed cash flow hedges. NIM was negatively impacted approximately 48 bps due to PPP loans and excess liquidity compared to historical balances.

Compared to the year-ago quarter, reported NII decreased $73 million, or 6%. Excluding purchase accounting accretion, adjusted NII decreased $58 million, or 5%, primarily reflecting lower market rates and lower commercial loan balances, partially offset by reduced deposit costs and the favorable impact of previously executed cash flow hedges, as well as growth in both the indirect secured consumer (predominantly indirect automobile) and lower-yielding PPP portfolios. Compared to the year-ago quarter, reported NIM decreased 74 bps. Adjusted NIM, which excludes purchase accounting accretion, decreased 70 bps, primarily reflecting the impact of elevated cash balances and lower market rates, partially offset by benefits from lower deposit costs and previously executed cash flow hedges.

	Noninterest Income
	($ in millions)	For the Three Months Ended						% Change
		September		June		September
		2020		2020		2019		Seq		Yr/Yr
	Noninterest Income
	Service charges on deposits	$144		$122		$143		18%		1%
	Commercial banking revenue	125		137		123		(9)%		2%
	Mortgage banking net revenue	76		99		95		(23)%		(20)%
	Wealth and asset management revenue	132		120		124		10%		6%
	Card and processing revenue	92		82		94		12%		(2)%
	Leasing business revenue	77		57		92		35%		(16)%
	Other noninterest income	26		12		64		117%		(59)%
	Securities gains, net	51		21		5		143%		920%
	Securities losses, net - non-qualifying hedges
	on mortgage servicing rights	(1)		—		—		NM		NM
	Total noninterest income	$722		$650		$740		11%		(2)%

Reported noninterest income increased $72 million, or 11%, from the prior quarter, and decreased $18 million, or 2%, from the year-ago quarter. The reported results reflect the impact of certain items in the table below. Reported results in the current quarter include securities gains, including approximately $5 million attributable to mark-to-market impacts related to non-qualified deferred compensation assets, which were offset in noninterest expense, resulting in an immaterial impact to pre-tax income.

	Noninterest Income excluding certain items
	($ in millions)	For the Three Months Ended
		September			June			September
		2020			2020			2019
	Noninterest Income excluding certain items
	Noninterest income (U.S. GAAP)	$722			$650			$740
	Valuation of Visa total return swap	22			29			11
	Branch and non-branch real estate charges	10			12			—
	Securities gains, net	(51)			(21)			(5)
	Noninterest income excluding certain items(a)	$703			$670			$746

Compared to the prior quarter, noninterest income excluding certain items increased $33 million, or 5%. Compared to the year-ago quarter, noninterest income excluding certain items decreased $43 million, or 6%.

Compared to the prior quarter, service charges on deposits increased $22 million, or 18%, with improving commercial deposit fees reflecting a partial normalization of treasury management service volumes and lower earnings credits, as well as elevated consumer deposit fees compared to the prior quarter which included hardship-related fee waivers. Commercial banking revenue decreased $12 million, or 9%, primarily reflecting a decrease from the record high capital markets revenue in the prior quarter. Mortgage banking net revenue decreased $23 million, or 23%, primarily driven by an unfavorable MSR net valuation adjustment and an increase in MSR decay resulting from higher prepayment speeds. Current quarter mortgage originations of $4.5 billion increased 32% compared to the prior quarter. Wealth and asset management revenue increased $12 million, or 10%, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue increased $10 million, or 12%, reflecting increases in credit and debit transaction volumes. Leasing business revenue increased $20 million, or 35%, primarily driven by an increase in business solutions revenue.

Compared to the year-ago quarter, service charges on deposits increased $1 million, or 1%, as increased commercial deposit fees were partially offset by a decline in consumer deposit fees. Commercial banking revenue increased $2 million, or 2%, reflecting increases in both debt and equity capital markets revenue, partially offset by lower M&A advisory fees and financial risk management revenue. Mortgage banking net revenue decreased $19 million, or 20%, primarily driven by an unfavorable MSR net valuation adjustment and an increase in MSR decay resulting from higher prepayment speeds, partially offset by improved gain on sale margin and higher mortgage originations. Wealth and asset management revenue increased $8 million, or 6%, primarily driven by higher personal asset management revenue and brokerage fees. Card and processing revenue decreased by $2 million, or 2%, primarily reflecting lower commercial card transaction volumes, partially offset by elevated debit transaction volumes and lower rewards. Leasing business revenue decreased $15 million, or 16% primarily reflecting lower lease remarketing revenue.

	Noninterest Expense
	($ in millions)	For the Three Months Ended									% Change
		September			June			September
		2020			2020			2019			Seq		Yr/Yr
	Noninterest Expense
	Compensation and benefits	$637			$627			$584			2%		9%
	Net occupancy expense	90			82			84			10%		7%
	Technology and communications	89			90			100			(1)%		(11)%
	Equipment expense	33			32			33			3%		—
	Card and processing expense	29			29			33			—		(12)%
	Leasing business expense	35			33			40			6%		(13)%
	Marketing expense	23			20			40			15%		(43)%
	Intangible amortization expense	12			12			14			—		(14)%
	Other noninterest expense	213			196			231			9%		(8)%
	Total noninterest expense	$1,161			$1,121			$1,159			4%		—

Reported noninterest expense increased $40 million, or 4%, from the prior quarter, and increased $2 million from the year-ago quarter. The reported results reflect the impact of certain items in the table below.

	Noninterest Expense excluding certain items
	($ in millions)	For the Three Months Ended
		September			June			September
		2020			2020			2019
	Noninterest Expense excluding certain items
	Noninterest expense (U.S. GAAP)	$1,161			$1,121			$1,159
	Restructuring severance expense	(19)			—			—
	Intangible amortization expense	(12)			(12)			(14)
	Rent impairment charges	(9)			—			—
	COVID-19 related expenses(g)	(5)			(12)			—
	Merger-related expenses	—			(9)			(28)
	FHLB debt extinguishment charge	—			(6)			—
	Noninterest expense excluding certain items(a)	$1,116			$1,082			$1,117

Compared to the prior quarter, noninterest expense excluding certain items increased $34 million, or 3%, primarily reflecting an increase in other noninterest expense and marketing expense, partially offset by lower compensation and benefits expense (which included approximately $7 million in non-qualified deferred compensation expense in the current quarter compared to a $22 million expense in the prior quarter). Compared to the year-ago quarter, noninterest expense excluding certain items decreased $1 million, primarily reflecting lower marketing expense and other noninterest expense, partially offset by an increase in compensation and benefits expense.

	Average Interest-Earning Assets
	($ in millions)	For the Three Months Ended									% Change
		September			June			September
		2020			2020			2019			Seq		Yr/Yr
	Average Portfolio Loans and Leases
	Commercial loans and leases:
	Commercial and industrial loans	$54,004			$59,040			$51,241			(9)%		5%
	Commercial mortgage loans	11,069			11,222			10,692			(1)%		4%
	Commercial construction loans	5,534			5,548			5,267			—		5%
	Commercial leases	2,966			3,056			3,562			(3)%		(17)%
	Total commercial loans and leases	$73,573			$78,866			$70,762			(7)%		4%
	Consumer loans:
	Residential mortgage loans	$16,618			$16,561			$16,736			—		(1)%
	Home equity	5,581			5,820			6,267			(4)%		(11)%
	Indirect secured consumer loans	12,599			12,124			10,707			4%		18%
	Credit card	2,134			2,248			2,448			(5)%		(13)%
	Other consumer loans	2,857			2,887			2,621			(1)%		9%
	Total consumer loans	$39,789			$39,640			$38,779			—		3%
	Total average portfolio loans and leases	$113,362			$118,506			$109,541			(4)%		3%
	Average Loans and Leases Held for Sale
	Commercial loans and leases held for sale	$55			$68			$127			(19)%		(57)%
	Consumer loans held for sale	1,196			844			998			42%		20%
	Total average loans and leases held for sale	$1,251			$912			$1,125			37%		11%
	Securities and other short-term investments	$66,091			$56,806			$38,188			16%		73%
	Total average interest-earning assets	$180,704			$176,224			$148,854			3%		21%

Compared to the prior quarter, total average portfolio loans and leases decreased 4%, primarily driven by a decline in C&I loans, partially offset by an increase in indirect secured consumer loans (predominantly indirect automobile). Average commercial portfolio loans and leases decreased 7%, reflecting lower C&I revolving line of credit utilization and a decline in commercial mortgage loans, partially offset by the full-quarter impact of PPP loans. Average consumer portfolio loans were flat, as higher indirect secured consumer loans were offset by lower home equity and credit card balances.

Compared to the year-ago quarter, total average portfolio loans and leases increased 3%, reflecting growth in C&I loans as well as continued growth in indirect secured consumer loans. Average commercial portfolio loans and leases increased 4%, reflecting elevated C&I balances predominantly from PPP loans and growth in commercial mortgage loans, partially offset by the expected decline in commercial leases. Average consumer portfolio loans increased 3%, as higher indirect secured consumer loans were partially offset by lower home equity and credit card balances.

Total period-end commercial portfolio loans and leases of $71 billion (including $5.2 billion in PPP loan balances) decreased $4 billion, or 6%, from the prior quarter, and increased $1 billion, or 1%, from the year-ago quarter. The sequential decline reflected lower revolving line utilization throughout the current quarter. Period-end commercial revolving line utilization was 33%, compared to 38% in the prior quarter and 36% in the year-ago quarter.

Average available-for-sale debt and other securities of $35.4 billion (amortized cost) decreased 2% compared to the prior quarter and increased 2% compared to the year-ago quarter. Average other short-term investments (which includes interest-bearing cash) of $29.8 billion increased $10 billion compared to the prior quarter and increased $27.3 billion compared to the year-ago quarter.

Average Deposits
	($ in millions)	For the Three Months Ended									% Change
		September			June			September
		2020			2020			2019			Seq		Yr/Yr
	Average Deposits
	Demand	$50,414			$45,761			$35,223			10%		43%
	Interest checking	49,800			49,760			37,729			—		32%
	Savings	17,013			16,354			14,405			4%		18%
	Money market	31,151			30,022			26,962			4%		16%
	Foreign office(h)	189			182			222			4%		(15)%
	Total transaction deposits	$148,567			$142,079			$114,541			5%		30%
	Other time	3,711			4,421			5,823			(16)%		(36)%
	Total core deposits	$152,278			$146,500			$120,364			4%		27%
	Certificates - $100,000 and over	3,633			4,067			4,795			(11)%		(24)%
	Other deposits	—			31			47			(100)%		(100)%
	Total average deposits	$155,911			$150,598			$125,206			4%		25%

Compared to the prior quarter, average core deposits increased 4%, with growth in all deposit captions except other time deposits. Average demand deposits represented 33% of total core deposits in the current quarter compared to 31% in the prior quarter. Average commercial transaction deposits increased 6% and average consumer transaction deposits increased 3%.

Compared to the year-ago quarter, average core deposits increased 27%, reflecting double-digit growth in all deposit captions except other time and foreign office deposits. Average commercial transaction deposits increased 47% and average consumer transaction deposits increased 14%.

The period end loan-to-core deposit ratio was 72% in the current quarter, compared to 75% in the prior quarter and 91% in the year-ago quarter. Excluding PPP loans, the period end loan-to-core deposit ratio was 69% in the current quarter, compared to 72% in the prior quarter.

Average Wholesale Funding
	($ in millions)	For the Three Months Ended									% Change
		September			June			September
		2020			2020			2019			Seq		Yr/Yr
	Average Wholesale Funding
	Certificates - $100,000 and over	$3,633			$4,067			$4,795			(11)%		(24)%
	Other deposits	—			31			47			(100)%		(100)%
	Federal funds purchased	273			309			739			(12)%		(63)%
	Other short-term borrowings	1,626			2,377			1,278			(32)%		27%
	Long-term debt	16,230			16,955			15,633			(4)%		4%
	Total average wholesale funding	$21,762			$23,739			$22,492			(8)%		(3)%

Compared to the prior quarter, average wholesale funding decreased 8%, driven by a reduction in other short-term borrowings reflecting lower FHLB advances, lower jumbo CD balances, as well as the full-quarter impact of a debt redemption that occurred at the end of the second quarter. Compared to the year-ago quarter, average wholesale funding decreased 3%, reflecting decreases in jumbo CD balances, federal funds borrowings and other deposits, partially offset by increases in long-term debt and other short-term borrowings.

Credit Quality Summary
($ in millions)	As of and For the Three Months Ended
	September				June				March				December				September
	2020				2020				2020				2019				2019
Total nonaccrual portfolio loans and leases (NPLs)	$891				$700				$647				$618				$482
Repossessed property	7				4				10				10				9
OREO	33				43				52				52				28
Total nonperforming portfolio loans and leases and OREO (NPAs)	$931				$747				$709				$680				$519
NPL ratio(i)	0.80	%			0.61	%			0.55	%			0.56	%			0.44	%
NPA ratio(c)	0.84	%			0.65	%			0.60	%			0.62	%			0.47	%
Total loans and leases 30-89 days past due (accrual)	$323				$381				$409				$364				$402
Total loans and leases 90 days past due (accrual)	139				136				151				130				132
Allowance for loan and lease losses (ALLL), beginning	$2,696				$2,348				$1,202				$1,143				$1,115
Impact of CECL adoption	—				—				643				—				—
Total net losses charged-off	(101)				(130)				(122)				(113)				(99)
(Benefit from) provision for loan and lease losses	(21)				478				625				172				127
ALLL, ending	$2,574				$2,696				$2,348				$1,202				$1,143
Reserve for unfunded commitments, beginning	$176				$169				$144				$154				$147
Impact of CECL adoption	—				—				10				—				—
Provision for (benefit from) the reserve for unfunded commitments	6				7				15				(10)				7
Reserve for unfunded commitments, ending	$182				$176				$169				$144				$154
Total allowance for credit losses (ACL)	$2,756				$2,872				$2,517				$1,346				$1,297
ACL ratios:
As a % of portfolio loans and leases	2.49	%			2.50	%			2.13	%			1.23	%			1.19	%
As a % of nonperforming portfolio loans and leases	309	%			410	%			389	%			218	%			269	%
As a % of nonperforming portfolio assets	296	%			385	%			355	%			198	%			250	%
ALLL as a % of portfolio loans and leases	2.32	%			2.34	%			1.99	%			1.10	%			1.04	%
Total losses charged-off	$(135)				$(163)				$(159)				$(152)				$(130)
Total recoveries of losses previously charged-off	34				33				37				39				31
Total net losses charged-off	$(101)				$(130)				$(122)				$(113)				$(99)
Net charge-off ratio (NCO ratio)(b)	0.35	%			0.44	%			0.44	%			0.41	%			0.36	%
Commercial NCO ratio	0.33	%			0.40	%			0.32	%			0.20	%			0.18	%
Consumer NCO ratio	0.40	%			0.52	%			0.66	%			0.78	%			0.68	%

Nonperforming portfolio loans and leases were $891 million in the current quarter, with the resulting NPL ratio of 0.80%. Compared to the prior quarter, NPLs increased $191 million with the NPL ratio increasing 19 bps. Compared to the year-ago quarter, NPLs increased $409 million with the NPL ratio increasing 36 bps.

Nonperforming portfolio assets were $931 million in the current quarter, with the resulting NPA ratio of 0.84%. Compared to the prior quarter, NPAs increased $184 million with the NPA ratio increasing 19 bps. Compared to the year-ago quarter, NPAs increased $412 million with the NPA ratio increasing 37 bps.

The benefit from credit losses totaled $15 million in the current quarter. The allowance for credit loss ratio represented 2.49% of total portfolio loans and leases in the current quarter, compared with 2.50% in the prior quarter and 1.19% in the year-ago quarter (under the incurred loss methodology). In the current quarter, the allowance for credit losses represented 309% of nonperforming portfolio loans and leases and 296% of nonperforming portfolio assets. The allowance for loan and lease losses ratio represented 2.32% of total portfolio loans and leases in the current quarter.

Net charge-offs were $101 million in the current quarter, with the resulting NCO ratio of 0.35%. Compared to the prior quarter, net charge-offs decreased $29 million and the NCO ratio decreased 9 bps. Compared to the year-ago quarter, net charge-offs increased $2 million and the NCO ratio decreased 1 bp.

	Capital Position
				As of and For the Three Months Ended
				September				June				March			December		September
				2020				2020				2020			2019		2019
	Capital Position
	Average total Bancorp shareholders' equity as a % of average assets			11.33	%			11.30	%			12.63%			12.58%		12.43%
	Tangible equity(a)			8.09	%			7.68	%			8.41%			9.52%		9.29%
	Tangible common equity (excluding AOCI)(a)			6.99	%			6.77	%			7.41%			8.44%		8.21%
	Tangible common equity (including AOCI)(a)			8.31	%			8.13	%			8.65%			9.08%		9.09%
	Regulatory Capital Ratios(e)
	CET1 capital(d)			10.14	%			9.72	%			9.37%			9.75%		9.56%
	Tier I risk-based capital(d)			11.64	%			10.96	%			10.56%			10.99%		10.81%
	Total risk-based capital(d)			14.93	%			14.24	%			13.59%			13.84%		13.68%
	Tier I leverage			8.37	%			8.16	%			9.37%			9.54%		9.36%

Capital ratios remained strong and grew during the quarter. The CET1 capital ratio was 10.14%, the tangible common equity to tangible assets ratio was 6.99% excluding AOCI, and 8.31% including AOCI. The Tier I risk-based capital ratio was 11.64%, the Total risk-based capital ratio was 14.93%, and the Tier I leverage ratio was 8.37%. 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 growth in 0% risk-weighted assets resulting from an increase in interest-bearing cash as well as PPP loans.

On September 17, 2020, the Federal Reserve released its hypothetical scenarios for its second round of stress tests under the Comprehensive Capital Analysis and Review (CCAR) process due to continued uncertainty from COVID-19. Fifth Third will be resubmitting its own base and stress scenario projections to the Federal Reserve by November 2, 2020. Additionally, on September 30, 2020, the Federal Reserve announced it has extended for an additional quarter several measures to ensure that large banks such as Fifth Third maintain a high level of capital resilience, including prohibiting share repurchases through at least the fourth quarter of 2020, as well as capping dividend payments tied to a formula based on recent income.

Tax Rate

The effective tax rate was 22.1% compared with 19.9% in the prior quarter and 20.2% 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.

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, 2020, the Company had $202 billion in assets and operates 1,122 full-service Banking Centers, and 2,414 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, 2020, had $422 billion in assets under care, of which it managed $53 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

1. Non-GAAP measure; see discussion of non-GAAP and Reg. G reconciliation beginning on page 26 of the earnings release.
2. Net losses charged-off as a percent of average portfolio loans and leases.
3. Nonperforming portfolio assets as a percent of portfolio loans and leases and OREO.
4. Under the U.S. banking agencies' Basel III Final Rule, assets and credit equivalent amounts of off-balance sheet exposures are calculated according to the standardized approach for risk-weighted assets. The resulting values are added together resulting in the Bancorp’s total risk-weighted assets.
5. Current period regulatory capital ratios are estimated.
6. Assumes a 23% tax rate.
7. COVID-19 related expenses include incremental costs incurred for enhanced cleaning measures, personal protective equipment, one-time employee bonuses (entirely in 2Q20), and other supplies in response to the COVID-19 pandemic
8. Includes commercial customer Eurodollar sweep balances for which the Bank pays rates comparable to other commercial deposit accounts.
9. Nonperforming portfolio loans and leases as a percent of portfolio loans and leases and OREO.

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. These statements relate to our financial condition, results of operations, plans, objectives, future performance 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 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; and (43) the impact of reputational risk created by these or other developments on such matters as business generation and retention, funding and liquidity.

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.