Business Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segments

Business Segments

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Wealth and Asset Management. Results of the Bancorp’s business segments are presented based on its management structure and management accounting practices. The structure and accounting practices are specific to the Bancorp; therefore, the financial results of the Bancorp’s business segments are not necessarily comparable with similar information for other financial institutions. The Bancorp refines its methodologies from time to time as management’s accounting practices and businesses change.

The Bancorp manages interest rate risk centrally at the corporate level. By employing an FTP methodology, the business segments are insulated from most benchmark interest rate volatility, enabling them to focus on serving customers through the origination of loans and acceptance of deposits. The FTP methodology assigns charge and credit rates to classes of assets and liabilities, respectively, based on the estimated amount and timing of the cash flows for each transaction. Assigning the FTP rate based on matching the duration of cash flows allocates interest income and interest expense to each business segment so its resulting net interest income is insulated from future changes in benchmark interest rates. The Bancorp’s FTP methodology also allocates the contribution to net interest income of the asset-generating and deposit-providing businesses on a duration-adjusted basis to better attribute the driver of the performance. As the asset and liability durations are not perfectly matched, the residual impact of the FTP methodology is captured in General Corporate and Other. The charge and credit rates are determined using the FTP rate curve, which is based on an estimate of Fifth Third’s marginal borrowing cost in the wholesale funding markets. The FTP curve is constructed using the U.S. swap curve, brokered CD pricing and unsecured debt pricing.

The Bancorp adjusts the FTP charge and credit rates as dictated by changes in interest rates for various interest-earning assets and interest-bearing liabilities and by the review of behavioral assumptions, such as prepayment rates on interest-earning assets and the estimated durations for indeterminate-lived deposits. Key assumptions, including the credit rates provided for deposit accounts, are reviewed annually. Credit rates for deposit products and charge rates for loan products may be reset more frequently in response to changes in market conditions. In general, the charge rates on assets have declined since December 31, 2019 as they were affected by the prevailing level of interest rates and by the duration and repricing characteristics of the portfolio. The credit rates for deposit products also declined due to lower interest rates and modified assumptions. Thus, net interest income for asset-generating business segments improved while deposit-providing business segments were negatively impacted during the nine months ended September 30, 2020.

The Bancorp’s methodology for allocating provision for credit losses expense to the business segments includes charges or benefits associated with changes in criticized commercial loan levels in addition to actual net charge-offs experienced by the loans and leases owned by each business segment. Provision for credit losses expense attributable to loan and lease growth and changes in ALLL factors is captured in General Corporate and Other. The financial results of the business segments include allocations for shared services and headquarters expenses. Additionally, the business segments form synergies by taking advantage of cross-sell opportunities and funding operations by accessing the capital markets as a collective unit.

The following is a description of each of the Bancorp’s business segments and the products and services they provide to their respective client bases.

Commercial Banking offers credit intermediation, cash management and financial services to large and middle-market businesses and government and professional customers. In addition to the traditional lending and depository offerings, Commercial Banking products and services include global cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing and syndicated finance.

Branch Banking provides a full range of deposit and loan and lease products to individuals and small businesses through 1,122 full-service banking centers. Branch Banking offers depository and loan products, such as checking and savings accounts, home equity loans and lines of credit, credit cards and loans for automobiles and other personal financing needs, as well as products designed to meet the specific needs of small businesses, including cash management services.

Consumer Lending includes the Bancorp’s residential mortgage, automobile and other indirect lending activities. Residential mortgage activities within Consumer Lending include the origination, retention and servicing of residential mortgage loans, sales and securitizations of those loans and all associated hedging activities. Residential mortgages are primarily originated through a dedicated sales force and through third-party correspondent lenders. Automobile and other indirect lending activities include extending loans to consumers through automobile dealers, motorcycle dealers, powersport dealers, recreational vehicle dealers and marine dealers.

Wealth and Asset Management provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Wealth and Asset Management is made up of four main businesses: FTS, an indirect wholly-owned subsidiary of the Bancorp; Fifth Third Insurance Agency; Fifth Third Private Bank; and Fifth Third Institutional Services. FTS offers full service retail brokerage services to individual clients and broker-dealer services to the institutional marketplace. Fifth Third Insurance Agency assists clients with their financial and risk management needs. Fifth Third Private Bank offers wealth management strategies to high net worth and ultra-high net worth clients through wealth planning, investment management, banking, insurance, trust and estate services. Fifth Third Institutional Services provides advisory services for institutional clients, including middle market businesses, nonprofits, states and municipalities.

The following tables present the results of operations and assets by business segment for the three months ended:

September 30, 2020 ($ in millions)	Commercial Banking		Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	432	355	98	28	257		—		1,170
(Benefit from) provision for credit losses	337		68	2	—	(422)		—		(15)
Net interest income after (benefit from) provision for credit losses	95		287	96	28	679		—		1,185
Noninterest income:
Service charges on deposits	91		53	—	—	—		—		144
Wealth and asset management revenue	1		44	—	126	—		(39)	(a)	132
Commercial banking revenue	125		1	—	—	(1)		—		125
Mortgage banking net revenue	—		2	72	2	—		—		76
Card and processing revenue	13		76	—	—	3		—		92
Leasing business revenue	77		—	—	—	—		—		77
Other noninterest income(b)	11		16	2	4	(7)		—		26
Securities gains, net	—		—	—	—	51		—		51
Securities losses, net – non-qualifying hedges on MSRs	—		—	(1)	—	—		—		(1)
Total noninterest income	318		192	73	132	46		(39)		722
Noninterest expense:
Compensation and benefits	127		162	57	54	237		—		637
Technology and communications	3		1	2	—	83		—		89
Net occupancy expense(d)	8		44	2	3	33		—		90
Leasing business expense	35		—	—	—	—		—		35
Equipment expense	6		10	—	—	17		—		33
Card and processing expense	2		28	—	—	(1)		—		29
Marketing expense	2		6	1	—	14		—		23
Other noninterest expense	228		209	75	76	(324)		(39)		225
Total noninterest expense	411		460	137	133	59		(39)		1,161
Income before income taxes	2		19	32	27	666		—		746
Applicable income tax expense (benefit)	(10)		4	7	6	158		—		165
Net income	12		15	25	21	508		—		581
Total goodwill	$	1,961	2,047	—	253	—		—		4,261
Total assets	$	72,025	77,018	27,869	11,520	13,564	(c)	—		201,996

(a)Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of $11 for branches and land. For more information, refer to Note 8 and Note 24.

(c)Includes bank premises and equipment of $45 classified as held for sale. For more information, refer to Note 8.

(d)Includes impairment losses and termination charges of $1 for ROU assets related to certain operating leases. For more information, refer to Note 10.

September 30, 2019 ($ in millions)	Commercial Banking		Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	623	598	88	44	(111)		—		1,242
Provision for credit losses	54		58	14	—	8		—		134
Net interest income after provision for credit losses	569		540	74	44	(119)		—		1,108
Noninterest income:
Service charges on deposits	79		65	—	—	(1)		—		143
Wealth and asset management revenue	1		41	—	119	—		(37)	(a)	124
Commercial banking revenue	122		1	—	—	—		—		123
Mortgage banking net revenue	—		2	92	1	—		—		95
Card and processing revenue	16		74	—	1	3		—		94
Leasing business revenue	92		—	—	—	—		—		92
Other noninterest income(b)	25		21	4	4	10		—		64
Securities gains, net	—		—	—	—	5		—		5
Securities gains, net – non-qualifying hedges on MSRs	—		—	—	—	—		—		—
Total noninterest income	335		204	96	125	17		(37)		740
Noninterest expense:
Compensation and benefits	118		148	48	51	219		—		584
Technology and communications	3		1	2	—	94		—		100
Net occupancy expense	7		44	3	3	27		—		84
Leasing business expense	40		—	—	—	—		—		40
Equipment expense	7		12	—	—	14		—		33
Card and processing expense	2		32	—	—	(1)		—		33
Marketing expense	3		17	1	1	18		—		40
Other noninterest expense	245		215	60	74	(312)		(37)		245
Total noninterest expense	425		469	114	129	59		(37)		1,159
Income (loss) before income taxes	479		275	56	40	(161)		—		689
Applicable income tax expense (benefit)	86		58	12	8	(24)		—		140
Net income (loss)	393		217	44	32	(137)		—		549
Total goodwill	$	1,982	2,054	—	254	—		—		4,290
Total assets	$	75,143	69,021	26,171	9,961	(9,217)	(c)	—		171,079

(a)Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of $5 for branches and land. For more information, refer to Note 8 and Note 24.

(c)Includes bank premises and equipment of $87 classified as held for sale. For more information, refer to Note 8.

The following tables present the results of operations and assets by business segment for the nine months ended:

September 30, 2020 ($ in millions)	Commercial Banking			Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,512		1,372	279	116	321		—		3,600
Provision for credit losses	839			182	25	—	64		—		1,110
Net interest income after provision for credit losses	673			1,190	254	116	257		—		2,490
Noninterest income:
Service charges on deposits	253			160	—	1	—		—		414
Wealth and asset management revenue	2			128	—	371	—		(114)	(a)	387
Commercial banking revenue	386			3	—	1	(3)		—		387
Mortgage banking net revenue	—			6	286	3	—		—		295
Card and processing revenue	40			209	—	1	10		—		260
Leasing business revenue	207		(c)	—	—	—	—		—		207
Other noninterest income(b)	9			49	8	13	(37)		—		42
Securities gains, net	—			—	—	—	48		—		48
Securities gains, net – non-qualifying hedges on MSRs	—			—	3	—	—		—		3
Total noninterest income	897			555	297	390	18		(114)		2,043
Noninterest expense:
Compensation and benefits	405			491	162	165	688		—		1,911
Technology and communications	10			2	6	1	253		—		272
Net occupancy expense(e)	23			131	7	9	84		—		254
Leasing business expense	103			—	—	—	—		—		103
Equipment expense	20			31	—	—	46		—		97
Card and processing expense	6			86	—	—	(3)		—		89
Marketing expense	5			23	3	2	41		—		74
Other noninterest expense	722			635	204	223	(988)		(114)		682
Total noninterest expense	1,294			1,399	382	400	121		(114)		3,482
Income before income taxes	276			346	169	106	154		—		1,051
Applicable income tax expense	27			73	35	22	71		—		228
Net income	249			273	134	84	83		—		823
Total goodwill	$	1,961		2,047	—	253	—		—		4,261
Total assets	$	72,025		77,018	27,869	11,520	13,564	(d)	—		201,996

(a)Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of $25 for branches and land. For more information, refer to Note 8 and Note 24.

(c)Includes impairment charges of $3 for operating lease equipment. For more information, refer to Note 9 and Note 24.

(d)Includes bank premises and equipment of $45 classified as held for sale. For more information, refer to Note 8.

(e)Includes impairment losses and termination charges of $6 for ROU assets related to certain operating leases. For more information, refer to Note 10.

September 30, 2019 ($ in millions)	Commercial Banking		Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,761	1,802	234	141	(369)		—		3,569
Provision for credit losses	100		164	34	—	12		—		310
Net interest income after provision for credit losses	1,661		1,638	200	141	(381)		—		3,259
Noninterest income:
Service charges on deposits	227		191	—	1	(2)		—		417
Wealth and asset management revenue	2		117	—	345	—		(106)	(a)	358
Commercial banking revenue	329		3	—	1	—		—		333
Mortgage banking net revenue	—		4	209	1	—		—		214
Card and processing revenue	49		212	—	2	3		—		266
Leasing business revenue	199		—	—	—	—		—		199
Other noninterest income(b)	55		63	10	9	542		—		679
Securities gains, net	—		—	—	—	30		—		30
Securities gains, net – non-qualifying hedges on MSRs	—		—	5	—	—		—		5
Total noninterest income	861		590	224	359	573		(106)		2,501
Noninterest expense:
Compensation and benefits	346		444	146	165	742		—		1,843
Technology and communications	8		3	6	1	301		—		319
Net occupancy expense	21		130	8	10	79		—		248
Leasing business expense	97		—	—	—	—		—		97
Equipment expense	18		35	—	1	42		—		96
Card and processing expense	6		92	—	1	(1)		—		98
Marketing expense	6		49	3	3	56		—		117
Other noninterest expense	696		622	172	216	(919)		(106)		681
Total noninterest expense	1,198		1,375	335	397	300		(106)		3,499
Income (loss) before income taxes	1,324		853	89	103	(108)		—		2,261
Applicable income tax expense	242		179	19	22	21		—		483
Net income (loss)	1,082		674	70	81	(129)		—		1,778
Total goodwill	$	1,982	2,054	—	254	—		—		4,290
Total assets	$	75,143	69,021	26,171	9,961	(9,217)	(c)	—		171,079

(a)Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of $27 for branches and land. For more information, refer to Note 8 and Note 24.

(c)Includes bank premises and equipment of $87 classified as held for sale. For more information, refer to Note 8.