Related Party Transactions

12 Months Ended

Dec. 31, 2019

21. RELATED PARTY TRANSACTIONS

The Bancorp maintains written policies and procedures covering related party transactions with principal shareholders, directors and executives of the Bancorp. These procedures cover transactions such as employee-stock purchase loans, personal lines of credit, residential secured loans, overdrafts, letters of credit and increases in indebtedness. Such transactions are subject to the Bancorp’s normal underwriting and approval procedures.

Prior to approving a loan to a related party, Compliance Risk Management must review and determine whether the transaction requires approval from or a post notification to the Bancorp’s Board of Directors. At December 31, 2019 and 2018, certain directors, executive officers, principal holders of Bancorp common stock and their related interests were indebted, including undrawn commitments to lend, to the Bancorp’s banking subsidiary.

The following table summarizes the Bancorp’s lending activities with its principal shareholders, directors, executives and their related interests at December 31:



($ in millions)	2019		2018

Commitments to lend, net of participations:
Directors and their affiliated companies	$	736		700
Executive officers		5		6

Total	$	741		706


Outstanding balance on loans, net of participations and undrawn commitments	$	49		10

The commitments to lend are in the form of loans and guarantees for various business and personal interests. This indebtedness was incurred in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties. This indebtedness does not involve more than the normal risk of repayment or present other features unfavorable to the Bancorp.

Worldpay, Inc. and Worldpay Holding, LLC

On June 30, 2009, the Bancorp completed the sale of a majority interest in its processing business, Vantiv Holding, LLC (now Worldpay Holding, LLC). Advent International acquired an approximate 51% interest in Worldpay Holding, LLC for cash and a warrant. The Bancorp retained the remaining approximate 49% interest in Worldpay Holding, LLC.

During the first quarter of 2012, Vantiv, Inc. (now Worldpay, Inc.) priced an IPO of its shares and contributed the net proceeds to Worldpay Holding, LLC for additional ownership interests.

As a result of this offering, the Bancorp’s ownership of Worldpay Holding, LLC was reduced to approximately 39%. The impact of the capital contributions to Worldpay Holding, LLC and the resulting dilution in the Bancorp’s interest resulted in a gain of $115 million recognized by the Bancorp in the first quarter of 2012. In conjunction with Worldpay, Inc.’s IPO, the Bancorp entered into two TRAs with Worldpay, Inc. Refer to Note 1 for further information.

The Bancorp completed transactions that impacted the Bancorp’s ownership interest in Worldpay, Inc. from the time of the initial IPO in the first quarter of 2012 through the first quarter of 2019. On March 18, 2019, the Bancorp exchanged its remaining 10,252,826 Class B Units of Worldpay Holding, LLC for 10,252,826 shares of Class A common stock of Worldpay, Inc., and subsequently sold those shares. As a result of this transaction, the Bancorp recognized a gain of $562 million in other noninterest income during the first quarter of 2019. As a result of the sale, as of January 1, 2020, Worldpay Holding, LLC and Worldpay, Inc. are no longer considered related parties of the Bancorp as the Bancorp no longer beneficially owns any of Worldpay, Inc.’s equity securities.

The following table provides a summary of the transactions that impacted the Bancorp’s ownership interest in Worldpay Holding, LLC after the initial IPO:



($ in millions)		Gain on Transactions	Remaining Ownership Percentage

Q4 2012	$	157	33.1 %
Q2 2013		242	27.7
Q3 2013		85	25.1
Q2 2014		125	22.8
Q4 2015		331	18.3
Q3 2017		1,037	8.6
Q1 2018		414	4.9
Q2 2018		205	3.3
Q1 2019		562	-

The Bancorp recognized $2 million, $1 million and $47 million, respectively, in other noninterest income as part of its equity method investment in Worldpay Holding, LLC for the years ended December 31, 2019, 2018 and 2017 and received cash distributions totaling $1 million, $3 million and $19 million during the years ended December 31, 2019, 2018 and 2017, respectively.

During the fourth quarter of 2015, the Bancorp entered into an agreement with Worldpay, Inc. under which a portion of its TRA with Worldpay, Inc. was terminated and settled in full for a cash payment of approximately $49 million from Worldpay, Inc. Under the agreement, the Bancorp sold certain TRA cash flows it expected to receive from 2017 to 2030, totaling to a then estimated $140 million. Approximately half of the sold TRA cash flows related to 2025 and later. This sale did not impact the TRA payment recognized during the fourth quarter of 2015.

During the third quarter of 2016, the Bancorp entered into an agreement with Worldpay, Inc. under which a portion of its TRA with Worldpay, Inc. was terminated and settled in full for consideration of a cash payment in the amount of $116 million from Worldpay, Inc. Under the agreement, the Bancorp terminated and settled certain TRA cash flows it expected to receive in the years 2019 to 2035, totaling to a then estimated $331 million. The Bancorp recognized a gain of $116 million in other noninterest income in the Consolidated Statements of Income from this settlement. Additionally, the agreement provides that Worldpay, Inc. may be obligated to pay up to a total of approximately $171 million to the Bancorp to terminate and settle certain remaining TRA cash flows, totaling to a then estimated $394 million, upon the exercise of certain call options by Worldpay, Inc. or certain put options by the Bancorp. In 2016, the Bancorp recognized a gain of $164 million in other noninterest income in the Consolidated Statements of Income associated with these options. The Bancorp received $63 million and $108 million in settlement for the call options and put options exercised during 2017 and 2018, respectively. This agreement did not impact the TRA payment recognized in the fourth quarter of 2017.

During the fourth quarter of 2019, the Bancorp entered into an agreement with Fidelity National Information Services, Inc. and Worldpay, Inc. under which Worldpay, Inc. may be obligated to pay up to approximately $366 million to the Bancorp to terminate and settle certain remaining TRA cash flows, totaling an estimated $720 million, upon the exercise of certain call options by Worldpay, Inc. or certain put options by the Bancorp. If exercised, certain of the obligations would be settled with four quarterly payments beginning in April 2020, a second set of the obligations would be settled with four quarterly payments beginning in April 2022, and a third set of the obligations would be settled with four quarterly payments beginning in April 2023. In 2019, the Bancorp recognized a gain of approximately $345 million in other noninterest income associated with these options. This agreement did not impact the TRA payment recognized in the fourth quarter of 2019.

In addition to the impact of the TRA agreement discussed above, the Bancorp recognized $1 million, $20 million and $44 million in other noninterest income in the Consolidated Statements of Income associated with the TRA during the years ended December 31, 2019, 2018 and 2017, respectively.

The following table provides the estimated cash flows expected to be received subsequent to December 31, 2019 associated with the TRA for the years ending December 31, 2020 and thereafter:



($ in millions)		Cash Flows to be Received from Put/Call Options Exercised in the First Quarter of 2020	Cash Flows to be Received from Put/Call Options Expected to be Exercised	Estimated Cash Flows to be Received not Subject to Put/Call Option (a)

2020	$	31		1
2021		11		73
2022			139	44
2023			150	45
2024			35	22
2025				11

Total	$	42	324	196

(a)

The 2020 cash flow of $1 million was agreed upon with Worldpay, Inc. and recognized as a gain in other noninterest income during the fourth quarter of 2019 with payment received by the Bancorp in January 2020. The remaining estimated cash flows in this column will be recognized in future periods when the related uncertainties are resolved.

The Bancorp and Worldpay Holding, LLC have various agreements in place covering services including interchange clearing, settlement and sponsorship. Worldpay Holding, LLC paid the Bancorp $87 million, $75 million and $68 million for these services for the years ended December 31, 2019, 2018 and 2017, respectively. In addition to the previously mentioned services, the Bancorp previously entered into an agreement under which Worldpay Holding, LLC will provide processing services to the Bancorp. The total amount of fees relating to the processing services provided to the Bancorp by Worldpay Holding, LLC totaled $77 million, $74 million and $72 million for the years ended December 31, 2019, 2018 and 2017, respectively. These fees are primarily reported as a component of card and processing expense in the Consolidated Statements of Income.

As part of the initial sale, Worldpay Holding, LLC assumed loans totaling $1.25 billion owed to the Bancorp, which were refinanced in 2010 into a larger syndicated loan structure that included the Bancorp. There was no outstanding carrying value of loans and unused line of credit to Worldpay Holding, LLC as of December 31, 2019. The outstanding carrying value of loans and unused line of credit to Worldpay Holding, LLC was $187 million and $74 million at December 31, 2018, respectively. Interest income relating to the loans was $2 million, $7 million and $5 million for the years ended December 31, 2019, 2018 and 2017, respectively, and is included in interest and fees on loans and leases in the Consolidated Statements of Income.

SLK Global Solutions Private Limited

As of December 31, 2019, the Bancorp owns 100% of Fifth Third Mauritius Holdings Limited, which owns 49% of SLK Global Solutions Private Limited, and accounts for this investment under the equity method of accounting. The Bancorp recognized $3 million and $2 million in other noninterest income in the Consolidated Statements of Income as part of its equity method investment in SLK Global Solutions Private Limited for the years ended December 31, 2019 and 2018, respectively. The Bancorp received cash distributions of $1 million during the year ended December 31, 2019 and did not receive cash distributions during the year ended December 31, 2018. The Bancorp’s investment in SLK Global Solutions Private Limited was $26 million and $23 million at December 31, 2019 and 2018, respectively. The Bancorp paid SLK Global Solutions Private Limited $22 million, $21 million and $21 million for their process and software services during the years ended December 31, 2019, 2018 and 2017, respectively, which are included in other noninterest expense in the Consolidated Statements of Income.

CDC investments

The Bancorp’s subsidiary, CDC, has equity investments in entities in which the Bancorp had $12 million and $83 million of loans outstanding at December 31, 2019 and 2018, respectively, and unfunded commitment balances of $21 million and $80 million at December 31, 2019 and 2018, respectively. The Bancorp held $116 million and $77 million of deposits for these entities at December 31, 2019 and 2018, respectively. For further information on CDC investments, refer to Note 13.