Business Segments

3 Months Ended

Mar. 31, 2021

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.

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 relationship depth 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 1,098 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 wealth management services for individuals, companies and not-for-profit organizations. Wealth and Asset Management is made up of three main businesses: FTS, an indirect wholly-owned subsidiary of the Bancorp; 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 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, non-profits, states and municipalities.

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

March 31, 2021 ($ in millions)	Commercial Banking			Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	365		295	128	21	367		—		1,176
(Benefit from) provision for credit losses	(76)			41	8	(1)	(145)		—		(173)
Net interest income after (benefit from) provision for credit losses	441			254	120	22	512		—		1,349
Noninterest income:
Commercial banking revenue	151			2	—	—	—		—		153
Service charges on deposits	90			54	—	—	—		—		144
Wealth and asset management revenue	1			49	—	136	—		(43)	(a)	143
Card and processing revenue	14			77	—	—	3		—		94
Leasing business revenue	87		(c)	—	—	—	—		—		87
Mortgage banking net revenue	—			2	82	1	—		—		85
Other noninterest income(b)	12			20	2	1	7		—		42
Securities gains (losses), net	6			—	—	—	(3)		—		3
Securities losses, net – non-qualifying hedges on MSRs	—			—	(2)	—	—		—		(2)
Total noninterest income	361			204	82	138	7		(43)		749
Noninterest expense:
Compensation and benefits	156			170	66	53	261		—		706
Technology and communications	4			1	2	—	86		—		93
Net occupancy expense	8			47	3	4	17		—		79
Leasing business expense	35			—	—	—	—		—		35
Equipment expense	6			10	—	—	18		—		34
Card and processing expense	1			30	—	—	(1)		—		30
Marketing expense	1			8	—	—	14		—		23
Other noninterest expense	209			223	90	78	(342)		(43)		215
Total noninterest expense	420			489	161	135	53		(43)		1,215
Income (loss) before income taxes	382			(31)	41	25	466		—		883
Applicable income tax expense (benefit)	70			(7)	9	5	112		—		189
Net income (loss)	312			(24)	32	20	354		—		694
Total goodwill	$	1,980		2,047	—	232	—		—		4,259
Total assets	$	68,645		87,645	31,873	11,654	7,082	(d)	—		206,899

(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 $2 for branches and land. For more information, refer to Note 7 and Note 21.

(c)Includes impairment charges of $25 for operating lease equipment. For more information, refer to Note 8 and Note 21.

(d)Includes bank premises and equipment of $27 classified as held for sale. For more information, refer to Note 7.

March 31, 2020 ($ in millions)	Commercial Banking			Branch Banking	Consumer Lending	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	507		505	89	37	91		—		1,229
Provision for credit losses	45			62	13	1	519		—		640
Net interest income after provision for credit losses	462			443	76	36	(428)		—		589
Noninterest income:
Commercial banking revenue	124			1	—	—	(1)		—		124
Service charges on deposits	84			65	—	—	(1)		—		148
Wealth and asset management revenue	1			44	—	129	—		(40)	(a)	134
Card and processing revenue	16			67	—	—	3		—		86
Leasing business revenue	73		(c)	—	—	—	—		—		73
Mortgage banking net revenue	—			2	117	1	—		—		120
Other noninterest income(b)	(11)			19	4	5	(10)		—		7
Securities losses, net	—			—	—	—	(24)		—		(24)
Securities gains, net – non-qualifying hedges on MSRs	—			—	3	—	—		—		3
Total noninterest income	287			198	124	135	(33)		(40)		671
Noninterest expense:
Compensation and benefits	150			168	51	61	217		—		647
Technology and communications	3			1	2	—	87		—		93
Net occupancy expense(e)	7			44	2	3	26		—		82
Leasing business expense	35			—	—	—	—		—		35
Equipment expense	7			11	—	—	14		—		32
Card and processing expense	2			30	—	—	(1)		—		31
Marketing expense	2			13	1	1	14		—		31
Other noninterest expense	274			221	66	78	(350)		(40)		249
Total noninterest expense	480			488	122	143	7		(40)		1,200
Income (loss) before income taxes	269			153	78	28	(468)		—		60
Applicable income tax expense (benefit)	45			32	17	6	(86)		—		14
Net income (loss)	224			121	61	22	(382)		—		46
Total goodwill	$	1,961		2,047	—	253	—		—		4,261
Total assets	$	84,576		70,283	27,132	11,653	(8,253)	(d)	—		185,391

(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 $3 for branches and land. For more information, refer to Note 7 and Note 21.

(c)Includes impairment charges of $3 for operating lease equipment. For more information refer to Note 8 and Note 21.

(d)Includes bank premises and equipment of $36 classified as held for sale. For more information, refer to Note 7.

(e)Includes impairment losses and termination charges of $2 for ROU assets related to certain operating leases. For more information refer to Note 9.