Business Segments

3 Months Ended

Mar. 31, 2016

Segment Reporting

Business Segments

21.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 business 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, 2016 to reflect the current market rates and updated market assumptions. These rates were generally higher than those in place during 2015, thus net interest income for deposit-providing businesses waspositivelyimpacted during 2016. FTP charge rates on assets were affected by the prevailing level of interest rates and by the duration and repricing characteristics of the portfolio. As overall market rates increased, the FTP charge increased for asset-generating businesses, thus negatively affecting net interest income during 2016.

During the first quarter of 2016, the Bancorp refined its methodology for allocating provision expense to the business segments to include 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. The results of operations and financial position for the three months ended March 31, 2015 wereadjusted to reflect this change.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 threemonths ended March 31, 2015 were adjusted to reflect changes in internal expense allocation methodologies.

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 1,241 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 creditand 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.

The following tables present the results of operations and assets by business segment for the three months ended:
						General
		Commercial	Branch	Consumer	Investment	Corporate
March 31, 2016 ($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Net interest income	$	451	426	60	43	(77)	-	903
Provision for loan and lease losses		65	34	12	-	8	-	119
Net interest income after provision for loan and lease losses		386	392	48	43	(85)	-	784
Total noninterest income		223	189(b)	83	100	75	(33)(a)	637
Total noninterest expense		363	411	118	107	20	(33)	986
Income (loss) before income taxes		246	170	13	36	(30)	-	435
Applicable income tax expense		35	60	5	13	(5)	-	108
Net income (loss)		211	110	8	23	(25)	-	327
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income (loss) attributable to Bancorp		211	110	8	23	(25)	-	327
Dividends on preferred stock		-	-	-	-	15	-	15
Net income (loss) available to common shareholders	$	211	110	8	23	(40)	-	312
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	59,652	54,528	22,475	8,900	(3,125)	-	142,430

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes an impairment chargeof $2for branches and land. For more information refer to Note7 andNote 20.

						General
		Commercial	Branch	Consumer	Investment	Corporate
March 31, 2015 ($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Net interest income	$	392	377	63	29	(14)	-	847
Provision for loan and lease losses		42	42	14	1	(30)	-	69
Net interest income after provision for loan and lease losses		350	335	49	28	16	-	778
Total noninterest income		174(c)	176(b)	129	107	82	(38)(a)	630
Total noninterest expense		348	400	105	115	(7)	(38)	923
Income before income taxes		176	111	73	20	105	-	485
Applicable income tax expense		13	39	26	7	39	-	124
Net income		163	72	47	13	66	-	361
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		163	72	47	13	66	-	361
Dividends on preferred stock		-	-	-	-	15	-	15
Net income available to common shareholders	$	163	72	47	13	51	-	346
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	57,855	53,295	22,057	10,042	(2,812)	-	140,437

• Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes an impairment charge of $4 for branches and land. For more information, refer to Note 7 and Note 20.
• Includes an impairment charge of $30 for operating lease equipment. For more information, refer to Note 20.