Fifth Third Bancorp
) fourth-quarter 2013 earnings per share came in at 43 cents, in
line with both the Zacks Consensus Estimate and the prior-year
For 2013, earnings per share came in at $2.02, which beat the
Zacks Consensus Estimate of $2.00 and was up from $1.66 in 2012.
Lower expenses and improved provisions for loan losses primarily
drove Fifth Third's results. Moreover, increase in loans and
deposits reflected the company's organic growth. However, fall in
the top line remained a concern.
Net income for the quarter available to common shareholders was
$383 million, down from $390 million in the year-ago quarter.
Results included a benefit from the mortgage repurchase provision
of $28.0 million primarily related to Fifth Third's settlement
with Freddie Mac and certain other non-recurring items.
For 2013, net income available to common shareholders was $1.8
billion, up 17% from the previous year.
Total revenue for the quarter came in at $1.6 billion, which was
ahead of the Zacks Consensus Estimate of $1.5 billion. However,
revenues were down 10% year over year owing to higher net
For 2013, revenues were $6.8 billion, up 3% year over year.
Further, it surpassed the Zacks Consensus Estimate of $6.5
Quarter in Detail
Fifth Third's net interest income came in at $905 million, up
marginally year over year. However, net interest margin was
3.21%, down 28 basis points (bps) from the prior-year quarter due
to lower asset yields. This was, however, partially offset by
rise in average loan balances, lower long-term debt expense
resulting from reduction in higher cost average long-term debt
and run-off in higher-priced CDs.
Non-interest income decreased 20% year over year to $703 million.
The decline was largely owing to fall in mortgage banking net
revenue and other non-interest income.
Non-interest expenses declined 15% from the prior-year quarter to
$989 million. Expenses included $69 million in charges to
increase litigation reserves, $8 million of debt extinguishment
costs related to the redemption of Fifth Third Capital Trust IV,
an $8 million contribution to Fifth Third Foundation and $8
million in severance expense.
Looking back, fourth-quarter 2012 expenses had included $134
million of debt extinguishment costs pertaining to the
termination of $1 billion of FHLB debt, charges of $13 million to
increase litigation reserves and $3 million in severance
Excluding these items, the year-over-year decline reflected
lower credit-related costs, including the benefit of a reduction
in the mortgage representation and warranty reserve in the fourth
quarter and decreases in compensation-related expense and
benefits expense (primarily in the mortgage business) - as well
as marketing-related expense.
Fifth Third's credit metrics generally improved in the reported
quarter. Net charge-offs were $148 million or 67 bps of average
loans and leases on an annualized basis, compared with $147
million or 70 bps in the prior-year quarter.
Moreover, provision for loans and leases decreased 30% year
over year to $53 million. Total nonperforming assets including
loans held for sale was $1.0 billion, down from $1.3 billion from
the year-ago quarter.
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Fifth Third's capital ratios were a mixed bag. Its Tier 1 common
equity ratio decreased 13 bps year over year to 9.38%.
Further, the Tier 1 risk-based capital ratio fell 30 bps from the
year-earlier quarter to 10.35%. Additionally, on a year-over-year
basis, the leverage ratio declined 41 bps to 9.64% while the
total risk-based capital ratio decreased 35 bps to 14.07% in the
Excluding loans held-for-sale, average loan and lease balances
increased 5% year over year to $87.9 billion. Average total
deposits rose 11% from the prior-year quarter to $96.7 billion.
Capital Deployment Activity
Fifth Third entered into a share repurchase agreement with a
counterparty on Nov 13, 2013, according to which the bank is to
purchase approximately $200 million of its outstanding common
stock. For the quarter, this transaction reduced Fifth Third's
share count by 8.5 million shares on the initial transaction
date. The company expects the settlement of the forward contract
to occur on or before Feb 28, 2014.
Additionally, Fifth Third entered into another share repurchase
agreement with a counterparty on Dec 10, 2013, whereby the bank
is to purchase approximately $456 million of its outstanding
common stock. For the quarter, this transaction reduced Fifth
Third's share count by 19.1 million shares on the initial
transaction date. The bank expects the settlement of the forward
contract to occur on or before Mar 26, 2014.
Moreover, the settlement of the forward contract related to the
May 21, 2013 share repurchase agreement occurred on Oct 1, 2013,
and an additional 4.3 million shares were bought back upon
completion of the agreement.
Among other banking giants,
JPMorgan Chase & Co.
Wells Fargo & Co.
) reported better-than-expected fourth-quarter results, upholding
the image of the banking sector.
Going forward, with a diversified traditional banking platform,
Fifth Third remains well poised to benefit from a recovery in the
economy of regions where it has a footprint. Moreover, the bank's
traditional commercial banking franchise, diverse revenue mix,
decline in nonperforming assets and enhanced capital position
will serve as catalysts for growth. Further, we believe that
Fifth Third's capital deployment activities will boost
However, a low interest-rate environment, regulatory issues as
well as competitive pressure remain matters of concern.
Currently, Fifth Third carries a Zacks Rank #2 (Buy).