Business Segments

9 Months Ended

Sep. 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:

September 30, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,007	1,390	98	(1,057)		—		1,438
Provision for credit losses	—		105	1	13		—		119
Net interest income after provision for credit losses	$	1,007	1,285	97	(1,070)		—		1,319
Noninterest income:
Commercial banking revenue	$	154	1	—	(1)		—		154
Wealth and asset management revenue	—		53	137	—		(45)	(a)	145
Service charges on deposits	95		55	—	(1)		—		149
Card and processing revenue	23		78	—	3		—		104
Mortgage banking net revenue	—		57	—	—		—		57
Leasing business revenue	58		—	—	—		—		58
Other noninterest income	24		30	2	(1)		—		55
Securities losses, net	(1)		—	—	(6)		—		(7)
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	$	353	274	139	(6)		(45)		715
Noninterest expense:
Compensation and benefits	$	156	217	53	203		—		629
Technology and communications	4		7	—	104		—		115
Net occupancy expense(c)	12		52	3	17		—		84
Equipment expense	7		11	—	19		—		37
Marketing expense	1		17	—	17		—		35
Leasing business expense	29		—	—	—		—		29
Card and processing expense	3		19	—	(1)		—		21
Other noninterest expense	266		301	79	(363)		(45)		238
Total noninterest expense	$	478	624	135	(4)		(45)		1,188
Income (loss) before income taxes	$	882	935	101	(1,072)		—		846
Applicable income tax expense (benefit)	164		196	22	(196)		—		186
Net income (loss)	$	718	739	79	(876)		—		660
Total goodwill	$	2,324	2,369	226	—		—		4,919
Total assets	$	82,829	88,230	10,538	31,370	(b)	—		212,967

(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.

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

September 30, 2022 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	594	833	79	(8)		—		1,498
Provision for (benefit from) credit losses	(2)		34	—	126		—		158
Net interest income after provision for (benefit from) credit losses	$	596	799	79	(134)		—		1,340
Noninterest income:
Commercial banking revenue	$	133	1	1	(1)		—		134
Wealth and asset management revenue	1		52	132	—		(44)	(a)	141
Service charges on deposits	90		53	—	—		—		143
Card and processing revenue	22		79	1	3		—		105
Mortgage banking net revenue	—		69	—	—		—		69
Leasing business revenue	60		—	—	—		—		60
Other noninterest income(b)	24		33	—	2		—		59
Securities losses, net	(32)		—	—	(6)		—		(38)
Securities losses, net – non-qualifying hedges on MSRs	—		(1)	—	—		—		(1)
Total noninterest income	$	298	286	134	(2)		(44)		672
Noninterest expense:
Compensation and benefits	$	147	207	54	197		—		605
Technology and communications	2		6	—	98		—		106
Net occupancy expense	10		49	3	12		—		74
Equipment expense	7		9	—	20		—		36
Marketing expense	1		20	—	14		—		35
Leasing business expense	33		—	—	—		—		33
Card and processing expense	3		19	—	(1)		—		21
Other noninterest expense	237		298	85	(319)		(44)		257
Total noninterest expense	$	440	608	142	21		(44)		1,167
Income (loss) before income taxes	$	454	477	71	(157)		—		845
Applicable income tax expense (benefit)	85		100	15	(8)		—		192
Net income (loss)	$	369	377	56	(149)		—		653
Total goodwill	$	2,324	2,375	226	—		—		4,925
Total assets	$	83,798	84,653	12,232	24,780	(c)	—		205,463

(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 $1 of impairment charges for bank premises and equipment recorded in Consumer and Small Business Banking. For more information, refer to Note 7 and Note 23.

(c)Includes bank premises and equipment of $24 classified as held for sale. For more information, refer to Note 7.

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

September 30, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	3,006	4,016	294	(2,905)		—		4,411
Provision for credit losses	37		221	1	201		—		460
Net interest income after provision for credit losses	$	2,969	3,795	293	(3,106)		—		3,951
Noninterest income:
Commercial banking revenue	$	459	3	1	(2)		—		461
Wealth and asset management revenue	2		159	410	—		(137)	(a)	434
Service charges on deposits	275		159	—	(3)		—		431
Card and processing revenue	69		231	2	8		—		310
Mortgage banking net revenue	—		184	—	—		—		184
Leasing business revenue	162		—	—	—		—		162
Other noninterest income(b)	68		83	2	(1)		—		152
Securities gains (losses), net	(9)		—	—	12		—		3
Securities losses, net – non-qualifying hedges on MSRs	—		—	—	—		—		—
Total noninterest income	$	1,026	819	415	14		(137)		2,137
Noninterest expense:
Compensation and benefits	$	499	663	169	705		—		2,036
Technology and communications	10		20	1	316		—		347
Net occupancy expense(d)	32		156	9	51		—		248
Equipment expense	22		32	—	56		—		110
Marketing expense	2		52	1	41		—		96
Leasing business expense	94		—	—	—		—		94
Card and processing expense	8		57	1	(3)		—		63
Other noninterest expense	849		920	242	(1,118)		(137)		756
Total noninterest expense	$	1,516	1,900	423	48		(137)		3,750
Income (loss) before income taxes	$	2,479	2,714	285	(3,140)		—		2,338
Applicable income tax expense (benefit)	470		569	59	(579)		—		519
Net income (loss)	$	2,009	2,145	226	(2,561)		—		1,819
Total goodwill	$	2,324	2,369	226	—		—		4,919
Total assets	$	82,829	88,230	10,538	31,370	(c)	—		212,967

(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 both Consumer and Small Business Banking and General Corporate and Other. For more information, refer to Note 7 and Note 23.

(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 $2 for ROU assets related to certain operating leases. For more information, refer to Note 9.

September 30, 2022 ($ in millions)	Commercial Banking			Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Eliminations		Total
Net interest income	$	1,669		1,981	167	215		—		4,032
Provision for credit losses	44			93	—	246		—		383
Net interest income after provision for credit losses	$	1,625		1,888	167	(31)		—		3,649
Noninterest income:
Commercial banking revenue	$	405		2	1	(2)		—		406
Wealth and asset management revenue	2			154	407	—		(133)	(a)	430
Service charges on deposits	285			164	1	(1)		—		449
Card and processing revenue	65			231	2	8		—		306
Mortgage banking net revenue	—			151	1	—		—		152
Leasing business revenue	179		(c)	—	—	—		—		179
Other noninterest income(b)	88			86	—	21		—		195
Securities losses, net	(32)			—	—	(52)		—		(84)
Securities losses, net – non-qualifying hedges on MSRs	—			(2)	—	—		—		(2)
Total noninterest income	$	992		786	412	(26)		(133)		2,031
Noninterest expense:
Compensation and benefits	$	483		630	166	621		—		1,900
Technology and communications	9			15	1	281		—		306
Net occupancy expense(e)	30			147	9	39		—		225
Equipment expense	21			28	—	59		—		108
Marketing expense	3			44	1	39		—		87
Leasing business expense	95			—	—	—		—		95
Card and processing expense	8			54	—	(3)		—		59
Other noninterest expense	712			871	244	(973)		(133)		721
Total noninterest expense	$	1,361		1,789	421	63		(133)		3,501
Income (loss) before income taxes	$	1,256		885	158	(120)		—		2,179
Applicable income tax expense	230			186	33	21		—		470
Net income (loss)	$	1,026		699	125	(141)		—		1,709
Total goodwill	$	2,324		2,375	226	—		—		4,925
Total assets	$	83,798		84,653	12,232	24,780	(d)	—		205,463

(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 $2 of impairment charges for bank premises and equipment recorded in Consumer and Small Business Banking. For more information, refer to Note 7 and Note 23.

(c)Includes impairment charges of $2 for operating lease equipment. For more information, refer to Note 8 and Note 23.

(d)Includes bank premises and equipment of $24 classified as held for sale. For more information, refer to Note 7.

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