Fifth Third Q2 Earnings Top Estimates on Higher NII & Fee Income

Core Insights - Fifth Third Bancorp (FITB) reported second-quarter 2025 adjusted earnings per share (EPS) of 9 cents, which was below the Zacks Consensus Estimate of 87 cents and down from 86 cents in the prior-year quarter [1][2][8] - The results were positively impacted by an increase in net interest income (NII), fee income, and loan balances, but faced challenges from higher expenses and deteriorating asset quality [1][8] Financial Performance - Total quarterly revenues reached $2.25 billion, marking a 7.7% year-over-year increase and surpassing the Zacks Consensus Estimate by 1.8% [3] - NII (on a fully taxable equivalent basis) was $1.5 billion, up 7.6% year over year, exceeding the estimate of $1.48 billion [3] - The net interest margin (on an FTE basis) improved to 3.12% from 2.88% year over year, surpassing the estimate of 3.05% [3] - Non-interest income rose 7.9% year over year to $750 million, driven by increases in wealth and asset management revenues and consumer banking fees, exceeding the estimate of $721.6 million [4] - Non-interest expenses increased 3.5% year over year to $1.26 billion, primarily due to rising costs across all components except occupancy and other non-interest income, slightly below the estimate of $1.27 billion [4] Credit Quality - The provision for credit losses was reported at $173 million, a significant increase of 78% from the previous year, exceeding the estimate of $149.1 million [5] - Total non-performing portfolio loans and leases rose to $886 million, up 37.8% year over year [5] - Net charge-offs increased to $139 million or 0.45% of average loans and leases on an annualized basis, down from $144 million or 0.49% in the prior-year quarter, slightly below the estimate of $145.3 million [6] - The total allowance for credit losses increased by 5.5% to $2.56 billion year over year, surpassing the estimate of $2.53 billion [6] Capital Position - The Tier 1 risk-based capital ratio was reported at 11.83%, down from 11.93% in the prior-year quarter [7] - The CET1 capital ratio decreased to 10.56% from 10.62% year over year [7] - The leverage ratio improved to 9.42% compared to 9.07% in the year-ago quarter [7] Strategic Outlook - The rise in NII, driven by loan growth, deposit rate management, and fixed-rate asset repricing, supported top-line growth [9] - Strategic acquisitions have diversified Fifth Third's revenue sources, which is expected to aid future top-line growth [9] - However, higher expenses and weak asset quality remain concerns in the near term [9]