Business Segments

6 Months Ended

Jun. 30, 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:

June 30, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,021	1,370	95	(1,029)		—		1,457
Provision for (benefit from) credit losses	(9)		65	—	121		—		177
Net interest income after provision for (benefit from) credit losses	$	1,030	1,305	95	(1,150)		—		1,280
Noninterest income:
Commercial banking revenue	$	147	1	—	(2)		—		146
Wealth and asset management revenue	—		52	135	2		(46)	(a)	143
Service charges on deposits	92		53	—	(1)		—		144
Card and processing revenue	23		79	1	3		—		106
Mortgage banking net revenue	—		59	—	—		—		59
Leasing business revenue	47		—	—	—		—		47
Other noninterest income	28		27	1	18		—		74
Securities gains (losses), net	(1)		—	—	8		—		7
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	$	336	271	137	28		(46)		726
Noninterest expense:
Compensation and benefits	$	153	222	55	220		—		650
Technology and communications	3		6	—	105		—		114
Net occupancy expense	10		52	3	18		—		83
Equipment expense	7		10	—	19		—		36
Leasing business expense	31		—	—	—		—		31
Marketing expense	1		18	—	12		—		31
Card and processing expense	2		19	—	(1)		—		20
Other noninterest expense	279		305	81	(353)		(46)		266
Total noninterest expense	$	486	632	139	20		(46)		1,231
Income (loss) before income taxes	$	880	944	93	(1,142)		—		775
Applicable income tax expense (benefit)	169		198	20	(213)		—		174
Net income (loss)	$	711	746	73	(929)		—		601
Total goodwill	$	2,324	2,369	226	—		—		4,919
Total assets	$	83,238	85,755	10,691	27,592	(b)	—		207,276

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

June 30, 2022 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	553	631	53	102		—		1,339
Provision for credit losses	80		29	—	70		—		179
Net interest income after provision for credit losses	$	473	602	53	32		—		1,160
Noninterest income:
Commercial banking revenue	$	137	1	—	(1)		—		137
Wealth and asset management revenue	1		51	132	—		(44)	(a)	140
Service charges on deposits	97		57	—	—		—		154
Card and processing revenue	22		79	1	3		—		105
Mortgage banking net revenue	—		31	—	—		—		31
Leasing business revenue	56		—	—	—		—		56
Other noninterest income(b)	43		22	(1)	21		—		85
Securities losses, net	—		—	—	(32)		—		(32)
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	$	356	241	132	(9)		(44)		676
Noninterest expense:
Compensation and benefits	$	153	207	56	168		—		584
Technology and communications	2		5	—	91		—		98
Net occupancy expense(d)	10		50	3	12		—		75
Equipment expense	7		10	—	19		—		36
Leasing business expense	31		—	—	—		—		31
Marketing expense	1		13	—	14		—		28
Card and processing expense	3		18	—	(1)		—		20
Other noninterest expense	235		277	78	(306)		(44)		240
Total noninterest expense	$	442	580	137	(3)		(44)		1,112
Income before income taxes	$	387	263	48	26		—		724
Applicable income tax expense	70		55	10	27		—		162
Net income (loss)	$	317	208	38	(1)		—		562
Total goodwill	$	1,946	2,302	226	452	(e)	—		4,926
Total assets	$	82,058	85,424	13,062	26,238	(c)	—		206,782

(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. For more information, refer to Note 7 and Note 22.

(c)Includes bank premises and equipment of $24 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.

(e)Due to the timing of a business acquisition, the Bancorp was in the process of completing its analysis of the allocation of the goodwill across its business segments, therefore goodwill was presented as part of General Corporate and Other as of June 30, 2022.

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

June 30, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,997	2,628	196	(1,847)		—		2,974
Provision for credit losses	37		116	—	188		—		341
Net interest income after provision for credit losses	1,960		2,512	196	(2,035)		—		2,633
Noninterest income:
Commercial banking revenue	305		2	—	—		—		307
Wealth and asset management revenue	1		106	274	—		(92)	(a)	289
Service charges on deposits	180		103	—	(2)		—		281
Card and processing revenue	45		155	1	5		—		206
Mortgage banking net revenue	—		127	—	—		—		127
Leasing business revenue	104		—	—	—		—		104
Other noninterest income(b)	44		52	—	1		—		97
Securities gains (losses), net	(8)		—	—	19		—		11
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	671		545	275	23		(92)		1,422
Noninterest expense:
Compensation and benefits	343		446	116	502		—		1,407
Technology and communications	5		13	—	214		—		232
Net occupancy expense(d)	20		104	6	34		—		164
Equipment expense	14		21	—	38		—		73
Leasing business expense	65		—	—	—		—		65
Marketing expense	1		35	1	23		—		60
Card and processing expense	5		38	—	(1)		—		42
Other noninterest expense	583		619	163	(754)		(92)		519
Total noninterest expense	1,036		1,276	286	56		(92)		2,562
Income (loss) before income taxes	1,595		1,781	185	(2,068)		—		1,493
Applicable income tax expense (benefit)	305		373	39	(383)		—		334
Net income (loss)	1,290		1,408	146	(1,685)		—		1,159
Total goodwill	$	2,324	2,369	226	—		—		4,919
Total assets	$	83,238	85,755	10,691	27,592	(c)	—		207,276

(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 $1 for bank premises and equipment recorded in Consumer and Small Business Banking. 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.

June 30, 2022 ($ in millions)	Commercial Banking			Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,076		1,148	88	222		—		2,534
Provision for credit losses	46			59	—	119		—		224
Net interest income after provision for credit losses	1,030			1,089	88	103		—		2,310
Noninterest income:
Commercial banking revenue	272			1	—	(1)		—		272
Wealth and asset management revenue	1			102	274	—		(88)	(a)	289
Service charges on deposits	196			111	—	(1)		—		306
Card and processing revenue	43			152	1	5		—		201
Mortgage banking net revenue	—			82	1	—		—		83
Leasing business revenue	118		(c)	—	—	—		—		118
Other noninterest income(b)	65			49	—	24		—		138
Securities losses, net	—			—	—	(47)		—		(47)
Securities losses, net – non-qualifying hedges on MSRs	—			(1)	—	—		—		(1)
Total noninterest income	695			496	276	(20)		(88)		1,359
Noninterest expense:
Compensation and benefits	335			425	116	419		—		1,295
Technology and communications	7			8	—	184		—		199
Net occupancy expense(e)	20			98	6	28		—		152
Equipment expense	14			18	—	40		—		72
Leasing business expense	63			—	—	—		—		63
Marketing expense	2			24	1	25		—		52
Card and processing expense	5			35	—	(2)		—		38
Other noninterest expense	475			571	157	(652)		(88)		463
Total noninterest expense	921			1,179	280	42		(88)		2,334
Income before income taxes	804			406	84	41		—		1,335
Applicable income tax expense	147			85	18	29		—		279
Net income	657			321	66	12		—		1,056
Total goodwill	$	1,946		2,302	226	452	(f)	—		4,926
Total assets	$	82,058		85,424	13,062	26,238	(d)	—		206,782

(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 $1 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 $24 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.

(f)Due to the timing of a business acquisition, the Bancorp was in the process of completing its analysis of the allocation of the goodwill across its business segments, therefore goodwill was presented as part of General Corporate and Other as of June 30, 2022.