Business Segments

9 Months Ended

Sep. 30, 2016

Segment Reporting

Business Segments

23.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 federal 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 ninemonths ended September 30, 2015wereadjusted 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 ninemonths ended September 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
September 30, 2016 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	456	414	63	40	(66)	-	907
Provision for (benefit from) loan and lease losses		(18)	34	12	-	52	-	80
Net interest income after provision for loan and lease losses		474	380	51	40	(118)	-	827
Total noninterest income		228 (c)	163 (b)	71	99	312	(33)(a)	840
Total noninterest expense		349	402	117	103	35	(33)	973
Income before income taxes		353	141	5	36	159	-	694
Applicable income tax expense		74	50	2	13	39	-	178
Net income		279	91	3	23	120	-	516
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		279	91	3	23	120	-	516
Dividends on preferred stock		-	-	-	-	15	-	15
Net income available to common shareholders	$	279	91	3	23	105	-	501
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	59,392	54,955	22,430	8,437	(1,935)(d)	-	143,279

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment chargesof $28for branches and land. For more information refer to Note 7 and Note 21.
• Includes impairment charges of $4 for operating lease equipment. For more information refer to Note 21.
• Includes bank premises and equipment of $45 classified as held for sale. For more information, refer to Note 7.

					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
September 30, 2015 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	413	395	62	33	(2)	-	901
Provision for (benefit from) loan and lease losses		195	37	11	-	(87)	-	156
Net interest income after provision for loan and lease losses		218	358	51	33	85	-	745
Total noninterest income		228 (c)	197 (b)	76	102	148	(38)(a)	713
Total noninterest expense		334	404	107	112	24	(38)	943
Income before income taxes		112	151	20	23	209	-	515
Applicable income tax expense (benefit)		(9)	53	7	9	74	-	134
Net income		121	98	13	14	135	-	381
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		121	98	13	14	135	-	381
Dividends on preferred stock		-	-	-	-	15	-	15
Net income available to common shareholders	$	121	98	13	14	120	-	366
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets(e)	$	59,383	52,180	22,805	8,965	(1,450)(d)	-	141,883

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of $2 for branches and land. For more information, refer to Note 7 and Note 21.
• Includes impairment charges of $2 for operating lease equipment. For more information, refer to Note 21.
• Includes bank premises and equipment of $81classified as held for sale. For more information, refer to Note 7.
• Upon adoption of ASU 2015-03 on January 1, 2016, the September 30, 2015 Condensed Consolidated Balance Sheet was adjusted to reflect the reclassification of $35 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 nine months ended:
					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
September 30, 2016 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	1,367	1,272	185	127	(239)	-	2,712
Provision for loan and lease losses		119	104	32	1	33	-	289
Net interest income after provision for loan and lease losses		1,248	1,168	153	126	(272)	-	2,423
Total noninterest income		683 (c)	566 (b)	234	302	390	(100)(a)	2,075
Total noninterest expense		1,065	1,223	358	317	79	(100)	2,942
Income before income taxes		866	511	29	111	39	-	1,556
Applicable income tax expense		151	181	11	38	4	-	385
Net income		715	330	18	73	35	-	1,171
Less: Net income attributable to noncontrolling interests		-	-	-	-	(4)	-	(4)
Net income attributable to Bancorp		715	330	18	73	39	-	1,175
Dividends on preferred stock		-	-	-	-	52	-	52
Net income (loss) available to common shareholders	$	715	330	18	73	(13)	-	1,123
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	59,392	54,955	22,430	8,437	(1,935)(d)	-	143,279

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of $31for branches and land. For more information refer to Note 7 and Note 21.
• Includes impairment charges of $9 for operating lease equipment. For more information refer to Note 21.
• Includes bank premises and equipment of $45 classified as held for sale. For more information, refer to Note 7.

					Wealth	General
		Commercial	Branch	Consumer	and Asset	Corporate
September 30, 2015 ($ in millions)		Banking	Banking	Lending	Management	and Other	Eliminations	Total
Net interest income	$	1,207	1,148	187	91	3	-	2,636
Provision for loan and lease losses		271	116	33	3	(118)	-	305
Net interest income after provision for loan and lease losses		936	1,032	154	88	121	-	2,331
Total noninterest income		630 (c)	468 (b)	327	315	274	(114)(a)	1,900
Total noninterest expense		1,031	1,207	325	342	23	(114)	2,814
Income before income taxes		535	293	156	61	372	-	1,417
Applicable income tax expense		43	103	56	21	144	-	367
Net income		492	190	100	40	228	-	1,050
Less: Net income attributable to noncontrolling interests		-	-	-	-	(6)	-	(6)
Net income attributable to Bancorp		492	190	100	40	234	-	1,056
Dividends on preferred stock		-	-	-	-	52	-	52
Net income available to common shareholders	$	492	190	100	40	182	-	1,004
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets(e)	$	59,383	52,180	22,805	8,965	(1,450)(d)	-	141,883

• Revenue sharing agreements between wealth and asset management and branch banking are eliminated in the Condensed Consolidated Statements of Income.
• Includes impairment charges of$104 for branches and land. For more information refer to Note 7 and Note 21.
• Includes impairment charges of $36 for operating lease equipment. For more information refer to Note 21.
• Includes bank premises and equipment of $81classified as held for sale. For more information, refer to Note 7.
• Upon adoption of ASU 2015-03 on January 1, 2016, the September 30, 2015 Condensed Consolidated Balance Sheet was adjusted to reflect the reclassification of $35 of debt issuance costs from other assets to long-term debt. For further information refer to Note 3.