FIFTH THIRD BANCORP (FITB) Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 delivered sequential improvement in net interest income and margin, with NII (FTE) up to $1.393B and NIM rising to 2.88%, driven by fixed-rate asset repricing and moderating deposit costs .
• Diluted EPS was $0.81; adjusted EPS was $0.86 after excluding Visa TRS valuation, FDIC assessment and legal items. Efficiency ratio improved to 58.5% (adjusted 56.8%) as expenses fell seasonally and remained disciplined .
• Credit metrics were stable-to-mixed: net charge-offs rose to 0.49% on two idiosyncratic commercial credits, while NPAs fell sequentially to 0.55%; ACL remained robust at 2.08% of loans .
• Capital strengthened (CET1 10.60%) and buybacks resumed ($125M in Q2); management plans $200M per quarter repurchases in H2, contingent on stable conditions .
• Outlook: management reaffirmed FY24 NII down 2–4% y/y, expects Q3 NII +2% q/q, and targets positive operating leverage in Q4; deposit betas and rate cuts are a potential tailwind for 2025 record NII .

What Went Well and What Went Wrong

What Went Well

• First sequential NII growth since 2022 and second consecutive quarter of NIM expansion as fixed-rate assets reprice and deposit cost pressures slow .
• Fee growth remained resilient in scale businesses: commercial payments +12% y/y and wealth & asset management +11% y/y; consumer households +3% y/y (Southeast +6%) .
• Capital and liquidity strong; CET1 rose to 10.6% while maintaining full Category 1 LCR compliance and executing $125M repurchases. “Our strong profitability allowed us to resume share repurchases…while also increasing our CET1 ratio to 10.6%” — CEO Tim Spence .

What Went Wrong

• Net charge-offs increased to 0.49% (commercial NCO 0.45%), reflecting two idiosyncratic commercial credits; consumer NCOs eased to 0.57% .
• Noninterest income declined 4% y/y (adjusted -4% y/y) due to lower market-sensitive businesses (mortgage, hedging) and lapping 2023 private equity gains; mortgage revenue -15% y/y .
• Average commercial loans -1% q/q on muted corporate credit demand; management remains cautious on H2 loan growth despite middle market pipeline improvement .

Financial Results

Segment net income (Q2 2024):

Key KPIs:

Note: No estimate columns included due to S&P Global access limits (see Estimates Context).

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our focus on stability, profitability and growth in that order have produced consistent predictable results… The second quarter marked the first sequential growth in NII since 2022, and NIM improved for the second consecutive quarter” — Tim Spence .
• “We expect NII and NIM growth to continue in both the third and fourth quarter… interest-bearing core deposit costs…to increase just 4 basis points sequentially, if we see no rate cuts” — CFO Bryan Preston .
• “We believe rate cuts are positive for Fifth Third… about 64% of our book…we’re going to be able to reprice down” — CFO Bryan Preston .
• “We will remain disciplined and will not chase loan growth at the expense of our return targets” — Tim Spence .
• On CFPB settlement: “These were old issues…we elected to close these things out…You shouldn’t expect any incremental ongoing expense” — Tim Spence ; settlement details: $15M sales practices fine and $5M auto servicing fine .

Q&A Highlights

• Deposit betas and rate-cut sensitivity: Management outlined deposit mix (~64% high-beta) and confidence in mid-50s to low-60s downside betas; cuts are positive for NII .
• Loan growth catalysts: Activity expected around ~4.5% Fed funds “meridian”; will not stretch into unfamiliar categories; focus on proven strategies and selective fixed-rate origination .
• Fee trajectory: Expect modest q/q recovery in Q3 across payments, wealth, consumer spend; seasonal MSR tailwinds in Q4 .
• Credit outlook: NCOs 40–45 bps for Q3; improvements in delinquencies and NPAs; criticized assets stabilizing .
• CRE risk: Minimal SASB exposure; non-agency CMBS position super-senior AAA with ~40% enhancement; portfolios performing well .
• Dividend Finance reputation: Tightened installer panel; bank completes jobs if installer fails; super-prime focus .

Estimates Context

• Analyst consensus (S&P Global) could not be retrieved due to data access limits; as a result, we cannot assess beat/miss vs Wall Street EPS and revenue estimates for Q2 2024. Values retrieved from S&P Global were unavailable due to request limit exceeded.
• Management did state adjusted EPS of $0.86 exceeded prior guidance, and guided Q3 NII up ~2% sequentially, implying estimate adjustments may trend upward for NII-sensitive models .

Key Takeaways for Investors

• Sequential NII/NIM improvement with Q3 guidance for further NII growth is a positive earnings trajectory driver; liability sensitivity to rate cuts supports 2025 record NII setup .
• Expense discipline and efficiency improvements (58.5% FTE; adj 56.8%) provide operating leverage into Q4; fee scale in payments/wealth remains a diversifying offset to rate-sensitive lines .
• Credit normalization is controlled and idiosyncratic; early-stage delinquencies at decade-low levels, NPAs down q/q, and ACL coverage strong at 2.08% of loans .
• Strong capital (CET1 10.6%) and planned $200M/quarter buybacks in H2 2024 add capital return catalysts; dividend capacity intact .
• Deposit franchise quality and analytics-driven pricing suggest moderating cost pressure; DDA mix expected ~24% by Q3, manageable within modeling .
• Reputational/legal overhang addressed via CFPB settlement of legacy issues with limited scope; no incremental run-rate expense expected, reducing headline risk .
• Maintain focus on middle market and Southeast expansion; pipelines improving while preserving return thresholds—expect “slow and steady” loan growth rather than aggressive chasing .