Business Segments

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Business Segments

Business Segments

The Bancorp reports on three business segments: Commercial Banking, Consumer & Small Business Banking 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 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 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.

Consumer and Small Business Banking provides a full range of deposit and loan products to individuals and small businesses through a network of full-service banking centers and relationships with indirect and correspondent loan originators in addition to providing products designed to meet the specific needs of small businesses, including cash management services. Consumer and Small Business Banking includes the Bancorp’s residential mortgage, home equity loans and lines of credit, credit cards, automobile and other indirect lending and other consumer lending activities. Residential mortgage activities include the origination, retention and servicing of residential mortgage loans, sales and securitizations of those loans and all associated hedging activities. Indirect lending activities include extending loans to consumers through automobile dealers, motorcycle dealers, powersport dealers, recreational vehicle dealers and marine dealers. Other consumer lending activities include home improvement and solar energy installation loans originated through a network of contractors and installers.

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, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	977	1,257	101	(818)		—		1,517
Provision for credit losses	46		51	—	67		—		164
Net interest income after provision for credit losses	$	931	1,206	101	(885)		—		1,353
Noninterest income:
Commercial banking revenue	$	160	1	—	—		—		161
Wealth and asset management revenue	1		53	138	—		(46)	(a)	146
Service charges on deposits	87		51	—	(1)		—		137
Card and processing revenue	22		74	1	3		—		100
Mortgage banking net revenue	—		69	—	—		—		69
Leasing business revenue	57		—	—	—		—		57
Other noninterest income(b)	16		25	(1)	(18)		—		22
Securities gains (losses), net	(7)		—	—	11		—		4
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	$	336	273	138	(5)		(46)		696
Noninterest expense:
Compensation and benefits	$	190	224	61	282		—		757
Technology and communications	2		7	—	109		—		118
Net occupancy expense(d)	11		51	3	16		—		81
Equipment expense	7		11	—	19		—		37
Leasing business expense	34		—	—	—		—		34
Marketing expense	—		17	—	12		—		29
Card and processing expense	3		20	—	(1)		—		22
Other noninterest expense	304		315	82	(402)		(46)		253
Total noninterest expense	$	551	645	146	35		(46)		1,331
Income (loss) before income taxes	$	716	834	93	(925)		—		718
Applicable income tax expense (benefit)	136		175	19	(170)		—		160
Net income (loss)	$	580	659	74	(755)		—		558
Total goodwill	$	2,324	2,365	226	—		—		4,915
Total assets	$	83,545	85,296	11,707	28,109	(c)	—		208,657

(a)Revenue sharing agreements between Wealth and Asset Management and Consumer and Small Business Banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of $1 for bank premises and equipment recorded in Consumer and Small Business Banking and an immaterial amount recorded in General Corporate and Other. For more information, refer to Note 7 and Note 22.

(c)Includes bank premises and equipment of $22 classified as held for sale. For more information, refer to Note 7.

(d)Includes impairment losses and termination charges of $1 for ROU assets related to certain operating leases. For more information, refer to Note 9.

March 31, 2022 ($ in millions)	Commercial Banking			Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	523		517	35	120		—		1,195
Provision for (benefit from) credit losses	(34)			29	—	50		—		45
Net interest income after provision for (benefit from) credit losses	$	557		488	35	70		—		1,150
Noninterest income:
Commercial banking revenue	$	135		—	—	—		—		135
Wealth and asset management revenue	—			51	142	—		(44)	(a)	149
Service charges on deposits	100			53	—	(1)		—		152
Card and processing revenue	20			74	1	2		—		97
Mortgage banking net revenue	—			52	—	—		—		52
Leasing business revenue	62		(c)	—	—	—		—		62
Other noninterest income(b)	22			27	1	2		—		52
Securities losses, net	—			—	—	(14)		—		(14)
Securities losses, net – non-qualifying hedges on MSRs	—			(1)	—	—		—		(1)
Total noninterest income	$	339		256	144	(11)		(44)		684
Noninterest expense:
Compensation and benefits	$	182		218	60	251		—		711
Technology and communications	5			4	—	92		—		101
Net occupancy expense(e)	10			48	3	16		—		77
Equipment expense	7			9	—	20		—		36
Leasing business expense	32			—	—	—		—		32
Marketing expense	1			11	—	12		—		24
Card and processing expense	2			18	—	(1)		—		19
Other noninterest expense	240			293	79	(346)		(44)		222
Total noninterest expense	$	479		601	142	44		(44)		1,222
Income before income taxes	$	417		143	37	15		—		612
Applicable income tax expense	76			31	8	3		—		118
Net income	$	341		112	29	12		—		494
Total goodwill	$	1,980		2,303	231	—		—		4,514
Total assets	$	79,970		86,626	13,715	31,148	(d)	—		211,459

(a)Revenue sharing agreements between Wealth and Asset Management and Consumer and Small Business Banking are eliminated in the Condensed Consolidated Statements of Income.

(b)Includes impairment charges of an immaterial amount for bank premises and equipment recorded in Consumer and Small Business Banking. For more information, refer to Note 7 and Note 22.

(c)Includes impairment charges of $2 for operating lease equipment. For more information, refer to Note 8 and Note 22.

(d)Includes bank premises and equipment of $25 classified as held for sale. For more information, refer to Note 7.

(e)Includes impairment losses and termination charges of $1 for ROU assets related to certain operating leases. For more information, refer to Note 9.