Sales of Receivables and Servicing Rights (Tables)

9 Months Ended

Sep. 30, 2013

Sales of Receivables and Servicing Rights

Activity Related to Mortgage Banking Net Revenue

Information related to residential mortgage loan sales and the Bancorp’s mortgage banking activity, which is included in mortgage banking net revenue in the Condensed Consolidated Statements of Income, is as follows:
		For the three months			For the nine months
		ended September 30,			ended September 30,
($ in millions)		2013	2012		2013	2012
Residential mortgage loan sales	$	5,105	5,002	$	19,115	16,650
Origination fees and gains on loan sales		74	226		393	583
Servicing fees		63	62		187	186

Changes in the Servicing Assets

Servicing Assets
The following table presents changes in the servicing assets related to residential mortgage and automobile loans for the nine months ended September 30:
($ in millions)		2013	2012
Carrying amount before valuation allowance as of the beginning of the period	$	1,358	1,239
Servicing rights that result from the transfer of residential mortgage loans		211	254
Servicing rights that result from the transfer of automobile loans		6	-
Amortization		(145)	(134)
Carrying amount before valuation allowance		1,430	1,359
Valuation allowance for servicing assets:
Beginning balance		(661)	(558)
Recovery of (provision for) MSR impairment		150	(122)
Ending balance		(511)	(680)
Carrying amount as of the end of the period	$	919	679

Fair Value of the Servicing Assets

The following table displays the beginning and ending fair value of the servicing assets for the nine months ended September 30:
($ in millions)		2013	2012
Fixed rate residential mortgage loans:
Beginning balance	$	664	649
Ending balance		876	645
Adjustable rate residential mortgage loans:
Beginning balance		33	32
Ending balance		39	34
Fixed rate automobile loans:
Beginning balance		-	-
Ending balance		4	-

Activity Related to the MSR Portfolio

The following table presents activity related to valuations of the MSR portfolio and the impact of the non-qualifying hedging strategy, which is included in the Condensed Consolidated Statements of Income:
		For the three months		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2013	2012	2013	2012
Securities gains, net - non-qualifying hedges on MSRs	$	5	5	13	5
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio (Mortgage banking net revenue)		24	32	(13)	75
(Provision for) recovery of MSR impairment (Mortgage banking net revenue)		(1)	(72)	150	(122)

Servicing Assets and Residual Interests Economic Assumptions

As of September 30, 2013 and 2012, the key economic assumptions used in measuring the interests in residential mortgage loans that continued to be held by the Bancorp at the date of sale or securitization resulting from transactions completed during the three months ended:
		September 30, 2013						September 30, 2012
	Rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate
Residential mortgage loans:
Servicing assets	Fixed	7.7	8.5	%	10.2	%	N/A	6.3	11.0	%	10.3	%	N/A
Servicing assets	Adjustable	3.7	22.4		11.5		N/A	3.8	21.7		11.4		N/A

Sensitivity of the Current Fair Value of Residual Cash Flows to Immediate 10%, 20% and 50% Adverse Changes in Assumptions

At September 30, 2013, the sensitivity of the current fair value of residual cash flows to immediate 10%, 20% and 50% adverse changes in prepayment speed assumptions and immediate 10% and 20% adverse changes in other assumptions are as follows:
					Prepayment						Residual Servicing
					Speed Assumption						Cash Flows
			Fair	Weighted-Average Life (in				Impact of Adverse Change on Fair Value			Discount			Impact of Adverse Change on Fair Value
($ in millions)(a)	Rate		Value	years)	Rate			10%	20%	50%	Rate			10%	20%
Residential mortgage loans:
Servicing assets	Fixed	$	876	6.4	11.4	%	$	(36)	(70)	(158)	10.4	%	$	(34)	(65)
Servicing assets	Adjustable		39	3.2	25.7			(2)	(3)	(7)	11.6			(1)	(2)

• The impact of the weighted-average default rate on the current fair value of residual cash flows for all scenarios is immaterial.