Fifth Third Bancorp (NASDAQ:FITB) Q3 2016 Earnings Conference Call - Final Transcript

Oct 20, 2016 • 09:00 am ET

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Fifth Third Bancorp (NASDAQ:FITB) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. My name is Shelby and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bank's Third Quarter 2016 Earnings Conference Call. [Operator Instructions]

Thank you. Sameer Gokhale, Head of Investor Relations, you may begin your conference.

Executive
Sameer Shripad Gokhale

Thank you, Shelby. Good morning and thank you for joining us. Today, we'll be discussing our financial results for the third quarter of 2016. This discussion may contain certain forward-looking statements about Fifth Third pertaining to our financial condition, results of operations, plans, and objectives. These statements involve risks and uncertainties that could cause results to differ materially from historical performance and these statements.

We've identified some of these factors in our forward-looking cautionary statement at the end of our earnings release and in other materials, and we encourage you to review them. Fifth Third undertakes no obligation and would not expect to update any such forward-looking statements after the date of this call. Additionally reconciliations of non-GAAP financial measures we reference to in today's conference call are included in our earnings release along with other information regarding the use of non-GAAP financial measures. A copy of our most recent quarterly earnings release can be accessed by the public in the Investor Relation section of our corporate website www.53.com.

This morning, I'm joined on the call by our President and CEO, Greg Carmichael; CFO, Tayfun Tuzun; Chief Operating Officer, Lars Anderson; Chief Risk Officer, Frank Forrest; and Treasurer, Jamie Leonard. Following prepared remarks by Greg and Tayfun, we will open the call up to questions.

Let me turn the call over now to Greg for his comments.

Executive
Greg D. Carmichael

Thanks, Sameer, and thank all of you for joining us this morning. As you can see on Page 3 of the presentation, we reported third quarter net income to common shareholders of $501 million and earnings per diluted share of $0.65. During the quarter some notable items resulted in a net positive $0.22 reported earnings per share. Tayfun will provide further details in his opening comments.

During the quarter we continue to focus on North Star Initiative. Our Q3 results provided further evidence of the progress we were making. Our net interest margin was well managed and stable sequentially, reflecting our focus on higher quality customer relationships.

Adjusted fee income excluding MSR valuation adjustments was up 4% year-over-year and the growth rate has accelerated since the beginning of the year. Expenses were down 1% this quarter, compared to second quarter of 2016. During the quarter credit quality remained stable with a decrease in both non-performing and criticized asset levels for the second quarter in a row. The slight elevation in our charge-offs primarily reflects quarterly volatility in the low levels we've been experiencing. We expect the benign credit environment to continue for the foreseeable future.

Production metrics continue to be strong with mortgage volume up $2.9 billion, up 7% sequentially and up 27% from last year. Q3 volume represented the highest level of quality originations