Business Segments

3 Months Ended

Mar. 31, 2024

Segment Reporting [Abstract]

Business Segments

Business Segments

The Bancorp reports on three business segments: Commercial Banking, Consumer and 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.

During the first quarter of 2024, the Bancorp eliminated certain revenue sharing agreements between Wealth and Asset Management and Consumer and Small Business Banking. As a result, the results of operations for the Wealth and Asset Management segment for the three months ended March 31, 2023 were adjusted to reflect the impact of the elimination of these revenue sharing agreements between Wealth and Asset Management and Consumer and Small Business Banking. The impact of the elimination of these revenue sharing agreements for the years ended December 31, 2023, 2022 and 2021 resulted in a decrease in wealth and asset management revenue and an offsetting decrease in other noninterest expense within the Wealth and Asset Management segment of $186 million, $177 million and $180 million, respectively.

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, solar energy installation 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. Solar energy installation loans and certain other consumer loans are originated through a network of contractors and installers.

Wealth and Asset Management provides a full range of wealth management solutions for individuals, companies and not-for-profit organizations, including wealth planning, investment management, banking, insurance, trust and estate services. These offerings include retail brokerage services for individual clients, advisory services for institutional clients including middle market businesses, non-profits, states and municipalities, and wealth management strategies and products for high net worth and ultra-high net worth clients.

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

March 31, 2024 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		Total
Net interest income	$	686	1,125	59	(486)		1,384
Provision for (benefit from) credit losses	71		84	—	(61)		94
Net interest income after provision for (benefit from) credit losses	$	615	1,041	59	(425)		1,290
Noninterest income:
Wealth and asset management revenue	$	1	59	101	—		161
Service charges on deposits	100		51	—	—		151
Commercial banking revenue	142		1	—	—		143
Card and processing revenue	25		74	1	2		102
Mortgage banking net revenue	—		54	—	—		54
Leasing business revenue	39		—	—	—		39
Other noninterest income	18		27	—	5		50
Securities gains, net	1		—	—	9		10
Securities gains, net – non-qualifying hedges on MSRs	—		—	—	—		—
Total noninterest income	$	326	266	102	16		710
Noninterest expense:
Compensation and benefits	$	189	234	62	268		753
Technology and communications	4		7	—	106		117
Net occupancy expense	10		53	3	21		87
Equipment expense	7		13	—	17		37
Marketing expense	1		22	—	9		32
Leasing business expense	25		—	—	—		25
Card and processing expense	2		19	—	(1)		20
Other noninterest expense	263		291	38	(321)		271
Total noninterest expense	$	501	639	103	99		1,342
Income (loss) before income taxes	$	440	668	58	(508)		658
Applicable income tax expense (benefit)	71		141	12	(86)		138
Net income (loss)	$	369	527	46	(422)		520
Total goodwill	$	2,324	2,369	225	—		4,918
Total assets	$	77,401	89,219	11,360	36,526	(a)	214,506

(a)Includes bank premises and equipment of $16 classified as held for sale. For more information, refer to Note 7.

March 31, 2023 ($ in millions)	Commercial Banking		Consumer and Small Business Banking	Wealth and Asset Management	General Corporate and Other		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:
Wealth and asset management revenue	$	1	53	92	—		146
Service charges on deposits	87		51	—	(1)		137
Commercial banking revenue	160		1	—	—		161
Card and processing revenue	22		74	1	3		100
Mortgage banking net revenue	—		69	—	—		69
Leasing business revenue	57		—	—	—		57
Other noninterest income(a)	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	92	(5)		696
Noninterest expense:
Compensation and benefits	$	190	224	61	282		757
Technology and communications	2		7	—	109		118
Net occupancy expense(c)	11		51	3	16		81
Equipment expense	7		11	—	19		37
Marketing expense	—		17	—	12		29
Leasing business expense	34		—	—	—		34
Card and processing expense	3		20	—	(1)		22
Other noninterest expense	304		315	36	(402)		253
Total noninterest expense	$	551	645	100	35		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	(b)	208,657

(a)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 21.

(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.