Business Segments

12 Months Ended

Dec. 31, 2015

Business Segments

Business Segments

30. BUSINESS SEGMENTS

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. 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. This methodology insulates the business segments from interest rate volatility, enabling them to focus on serving customers through loan originations and deposit taking. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration and the U.S. swap curve. Matching duration allocates interest income and interest expense to each segment so its resulting net interest income is insulated from interest rate risk. In a rising rate environment, the Bancorp benefits from the widening spread between deposit costs and wholesale funding costs. However, the Bancorp's FTP system credits this benefit to deposit-providing businesses, such as Branch Banking and Investment Advisors, on a duration-adjusted basis. The net impact of the FTP methodology is captured in General Corporate and Other.

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 the estimated durations for the indeterminate-lived deposits. The credit rate provided for demand deposit accounts is reviewed annually based upon the account type, its estimated duration and the corresponding fed funds, U.S. swap curve or swap rate. The credit rates for several deposit products were reset January 1, 2015 to reflect the current market rates and updated market assumptions. These rates were generally lower than those in place during 2014, thus net interest income for deposit-providing businesses was negatively impacted during 2015.

The business segments are charged provision expense based on the actual net charge-offs experienced by the loans and leases owned by each segment. Provision expense attributable to loan and lease growth and changes in ALLL factors are 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 cross-sell opportunities and when funding operations by accessing the capital markets as a collective unit.

The results of operations and financial position for the years ended December 31, 2014 and 2013 were adjusted to reflect the transfer of certain customers and Bancorp employees from Commercial Banking to Branch Banking, effective January 1, 2015. In addition, the balances for the years ended December 31, 2014 and 2013 were adjusted to reflect a change in internal allocation methodology.

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.

Branch Banking provides a full range of deposit and loan and lease products to individuals and small businesses through 1,254 full-service banking centers. Branch Banking offers depository and loan products, such as checking and savings accounts, home equity loans and lines of credit, credit cards and loans for automobiles and other personal financing needs, as well as products designed to meet the specific needs of small businesses, including cash management services.

Consumer Lending includes the Bancorp's residential mortgage, home equity, automobile and other indirect lending activities. Direct lending activities include the origination, retention and servicing of residential mortgage and home equity loans or lines of credit, sales and securitizations of those loans, pools of loans or lines of credit, and all associated hedging activities. Indirect lending activities include extending loans to consumers through correspondent lenders and automobile dealers.

Investment Advisors provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. Investment Advisors is made up of four main businesses: FTS, an indirect wholly-owned subsidiary of the Bancorp; ClearArc Capital, Inc., 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. ClearArc Capital, Inc. provides asset management services. Fifth Third Private Bank offers holistic strategies to affluent clients in wealth planning, investing, insurance and wealth protection. Fifth Third Institutional Services provides advisory services for institutional clients including states and municipalities.

Results of operations and assets by business segment for the years ended December 31 are:
								General
		Commercial		Branch		Consumer	Investment	Corporate
2015 ($ in millions)		Banking		Banking		Lending	Advisors	and Other	Eliminations		Total
Net interest income	$	1,625		1,555		249	128	(24)	-		3,533
Provision for loan and lease losses		239		159		45	3	(50)	-		396
Net interest income after provision for loan and lease losses		1,386		1,396		204	125	26	-		3,137
Total noninterest income		853	(c)	652	(b)	407	418	822	(149)	(a)	3,003
Total noninterest expense		1,402		1,567		436	455	64	(149)		3,775
Income before income taxes		837		481		175	88	784	-		2,365
Applicable income tax expense		98		170		63	30	298	-		659
Net income		739		311		112	58	486	-		1,706
Less: Net income attributable to noncontrolling interests		-		-		-	-	(6)	-		(6)
Net income attributable to Bancorp		739		311		112	58	492	-		1,712
Dividends on preferred stock		-		-		-	-	75	-		75
Net income available to common shareholders	$	739		311		112	58	417	-		1,637
Total goodwill	$	613		1,655		-	148	-	-		2,416
Total assets	$	58,166		53,587		22,656	9,938	(3,265)	-		141,082

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income.
• Includes an impairment charge of $109 for branches and land. For more information refer to Note 7 and Note 27.
• Includes an impairment charge of $36 for operating lease equipment. For more information refer to Note 8 and Note 27.

							General
		Commercial	Branch		Consumer	Investment	Corporate
2014 ($ in millions)		Banking	Banking		Lending	Advisors	and Other	Eliminations		Total
Net interest income	$	1,627	1,573		258	121	-	-		3,579
Provision for loan and lease losses		235	181		156	3	(260)	-		315
Net interest income after provision for loan and lease losses		1,392	1,392		102	118	260	-		3,264
Total noninterest income		880	726	(b)	350	410	253	(146)	(a)	2,473
Total noninterest expense		1,317	1,554		554	445	(15)	(146)		3,709
Income (loss) before income taxes		955	564		(102)	83	528	-		2,028
Applicable income tax expense (benefit)		155	199		(36)	29	198	-		545
Net income (loss)		800	365		(66)	54	330	-		1,483
Less: Net income attributable to noncontrolling interests		-	-		-	-	2	-		2
Net income (loss) attributable to Bancorp		800	365		(66)	54	328	-		1,481
Dividends on preferred stock		-	-		-	-	67	-		67
Net income (loss) available to common shareholders	$	800	365		(66)	54	261	-		1,414
Total goodwill	$	613	1,655		-	148	-	-		2,416
Total assets	$	56,306	51,462		22,567	10,443	(2,072)	-		138,706

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income.
• Includes an impairment charge of $20 for branches and land. For more information refer to Note 7 and Note 27.

							General
		Commercial	Branch		Consumer	Investment	Corporate
2013 ($ in millions)		Banking	Banking		Lending	Advisors	and Other	Eliminations		Total
Net interest income	$	1,569	1,380		312	154	146	-		3,561
Provision for loan and lease losses		195	211		93	2	(272)	-		229
Net interest income after provision for loan and lease losses		1,374	1,169		219	152	418	-		3,332
Total noninterest income		811	745	(b)	755	406	654	(144)	(a)	3,227
Total noninterest expense		1,230	1,576		685	453	161	(144)		3,961
Income before income taxes		955	338		289	105	911	-		2,598
Applicable income tax expense		157	119		102	37	357	-		772
Net income		798	219		187	68	554	-		1,826
Less: Net income attributable to noncontrolling interests		-	-		-	-	(10)	-		(10)
Net income attributable to Bancorp		798	219		187	68	564	-		1,836
Dividends on preferred stock		-	-		-	-	37	-		37
Net income available to common shareholders	$	798	219		187	68	527	-		1,799
Total goodwill	$	613	1,655		-	148	-	-		2,416
Total assets	$	54,495	47,788		22,624	10,711	(5,175)	-		130,443

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income.
• Includes an impairment charge of $6 for branches and land. For more information refer to Note 7 and Note 27.