Business Segments

6 Months Ended

Jun. 30, 2016

Segment Reporting

Business Segments

21.Business Segments

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Wealth and Asset Management (formerly 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 the origination of loans and acceptance of deposits. 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 Wealth and Asset Management, 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 was positively impacted 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. Credit rates for deposit products and charge rates for loan products may be reset periodically in response to changes in market conditions.

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 and six months ended June 30, 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 three and six months ended June 30, 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 1,191 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.

Wealth and Asset Management provides a full range of investment alternatives for individuals, companies and not-for-profit organizations. In the second quarter of 2016, the Investment Advisors segment name was changed to Wealth and Asset Management to better reflect the services provided by the business segment. Wealth and Asset Management 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:
					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
June 30, 2016 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	460	433	62	44	(97)	-	902
Provision for loan and lease losses		72	35	9	1	(26)	-	91
Net interest income after provision for loan and lease losses		388	398	53	43	(71)	-	811
Total noninterest income		236 (c)	214 (b)	80	100	3	(34)(a)	599
Total noninterest expense		355	409	122	108	23	(34)	983
Income (loss) before income taxes		269	203	11	35	(91)	-	427
Applicable income tax expense (benefit)		43	71	4	12	(32)	-	98
Net income (loss)		226	132	7	23	(59)	-	329
Less: Net income attributable to noncontrolling interests		-	-	-	-	(4)	-	(4)
Net income (loss) attributable to Bancorp		226	132	7	23	(55)	-	333
Dividends on preferred stock		-	-	-	-	23	-	23
Net income (loss) available to common shareholders	$	226	132	7	23	(78)	-	310
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	60,042	54,220	22,598	8,399	(1,634)(d)	-	143,625

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment chargesof $1for branches and land. For more information refer to Note 7 and Note 20.
• Includes impairment charges of $5 for operating lease equipment. For more information refer to Note 20.
• Includes bank premises and equipment of $52 classified as held for sale. For more information, refer to Note 7.

					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
June 30, 2015 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	402	376	63	29	17	-	887
Provision for loan and lease losses		37	36	8	1	(3)	-	79
Net interest income after provision for loan and lease losses		365	340	55	28	20	-	808
Total noninterest income		232 (c)	94 (b)	122	103	44	(39)(a)	556
Total noninterest expense		348	404	113	115	6	(39)	947
Income before income taxes		249	30	64	16	58	-	417
Applicable income tax expense		38	11	23	6	30	-	108
Net income		211	19	41	10	28	-	309
Less: Net income attributable to noncontrolling interests		-	-	-	-	(6)	-	(6)
Net income attributable to Bancorp		211	19	41	10	34	-	315
Dividends on preferred stock		-	-	-	-	23	-	23
Net income available to common shareholders	$	211	19	41	10	11	-	292
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets(e)	$	58,688	52,508	22,534	10,264	(2,366)(d)	-	141,628

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of $98 for branches and land. For more information, refer to Note 7 and Note 20.
• Includes impairment charges of $4 for operating lease equipment. For more information, refer to Note 20.
• Includes bank premises and equipment of $84 classified as held for sale. For more information, refer to Note 7.
• Upon adoption of ASU 2015-03 on January 1, 2016, the June 30, 2015 Condensed Consolidated Balance Sheet was adjusted to reflect the reclassification of $30 of debt issuance costs from other assets to long-term debt. For further information refer to Note 3.

The following tables present the results of operations and assets by business segment for the six months ended:
					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
June 30, 2016 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	911	859	122	87	(174)	-	1,805
Provision for loan and lease losses		137	69	21	1	(18)	-	210
Net interest income after provision for loan and lease losses		774	790	101	86	(156)	-	1,595
Total noninterest income		457 (c)	401 (b)	164	202	78	(67)(a)	1,235
Total noninterest expense		716	820	240	215	44	(67)	1,968
Income (loss) before income taxes		515	371	25	73	(122)	-	862
Applicable income tax expense (benefit)		77	131	9	25	(36)	-	206
Net income (loss)		438	240	16	48	(86)	-	656
Less: Net income attributable to noncontrolling interests		-	-	-	-	(4)	-	(4)
Net income (loss) attributable to Bancorp		438	240	16	48	(82)	-	660
Dividends on preferred stock		-	-	-	-	38	-	38
Net income (loss) available to common shareholders	$	438	240	16	48	(120)	-	622
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	60,042	54,220	22,598	8,399	(1,634)(d)	-	143,625

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of $3for branches and land. For more information refer to Note 7 and Note 20.
• Includes impairment charges of $5 for operating lease equipment. For more information refer to Note 20.
• Includes bank premises and equipment of $52 classified as held for sale. For more information, refer to Note 7.

					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
June 30, 2015 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	794	752	125	58	5	-	1,734
Provision for loan and lease losses		77	78	22	3	(32)	-	148
Net interest income after provision for loan and lease losses		717	674	103	55	37	-	1,586
Total noninterest income		404 (c)	270 (b)	251	212	126	(76)(a)	1,187
Total noninterest expense		696	803	216	231	1	(76)	1,871
Income before income taxes		425	141	138	36	162	-	902
Applicable income tax expense		53	50	49	12	68	-	232
Net income		372	91	89	24	94	-	670
Less: Net income attributable to noncontrolling interests		-	-	-	-	(6)	-	(6)
Net income attributable to Bancorp		372	91	89	24	100	-	676
Dividends on preferred stock		-	-	-	-	38	-	38
Net income available to common shareholders	$	372	91	89	24	62	-	638
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets(e)	$	58,688	52,508	22,534	10,264	(2,366)(d)	-	141,628

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of$102 for branches and land. For more information refer to Note 7 and Note 20.
• Includes impairment charges of $34 for operating lease equipment. For more information refer to Note 20.
• Includes bank premises and equipment of $84classified as held for sale. For more information, refer to Note 7.
• Upon adoption of ASU 2015-03 on January 1, 2016, the June 30, 2015 Condensed Consolidated Balance Sheet was adjusted to reflect the reclassification of $30 of debt issuance costs from other assets to long-term debt. For further information refer to Note 3.