Fifth Third(US:FITB)2023-04-20 18:27Financial Data and Key Metrics Changes - The first quarter core PPNR grew nearly 40% year over year, driven by diversified revenue streams and disciplined expense management [2] - Net interest income (NII) was approximately $1.52 billion, a 27% increase year over year but a 4% decline sequentially [2] - The company expects full year NII to increase by 7% to 10% [7] - Earnings per share increased by 20% year over year to $0.83 [38] - The adjusted efficiency ratio improved to 59%, a six-point improvement compared to the previous year [42] Business Line Data and Key Metrics Changes - Average total consumer portfolio loans and leases increased by 2% compared to the prior quarter, led by dividend finance [21] - Total adjusted non-interest income increased by 2% year over year, driven by commercial banking and mortgage fee income [43] - Adjusted non-interest expenses are expected to rise by 4% to 5% compared to 2022 [28] Market Data and Key Metrics Changes - The company has grown deposits by 1% since the end of last June, while the top 25 banks experienced a 4% decline [6] - The consumer deposit base is granular, with nearly 90% of total consumer deposits being FDIC insured [16] - The average total deposits were flat compared to the prior quarter, with increases in CDs and interest checking balances offset by a decline in demand deposits [21] Company Strategy and Development Direction - The company aims to achieve top quartile returns through a focus on stability, profitability, and growth despite headwinds from increased deposit competition and economic uncertainty [5] - The company plans to open an additional 30 branches by the end of 2023, building on the 70 branches added in the past three years [16] - The company is focused on maintaining a defensive balance sheet position and managing interest rate and liquidity risks [5][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate strong profitability through the cycle, despite the volatility in the banking sector [14] - The company anticipates continued pressure on deposit pricing due to industry-wide competition [7] - Management noted that credit trends remain healthy, with key credit metrics well below normalized levels [45] Other Important Information - The company was recognized by Ethisphere as one of the world's most ethical companies and by Fortune as one of America's most innovative companies [15] - The company has maintained a CET1 ratio of 9.25%, reflecting strong earnings generation [24] Q&A Session All Questions and Answers Question: Can you provide insights on the recent commercial account openings and customer behavior? - Management noted a significant increase in commercial account openings during the recent turmoil, with expectations of a bifurcation in behavior between operational and non-operational accounts [78] Question: What are the implications of the current credit environment on the C&I portfolio? - Management indicated that the increase in NPAs was primarily driven by sectors such as restaurants and entertainment within the C&I portfolio [60] Question: How does the company view the potential regulatory changes and their impact on capital? - Management expressed confidence in their proactive management of capital and liquidity, indicating that they have positioned themselves well for potential regulatory changes [70][96] Question: What is the outlook for net interest income given the current rate environment? - Management provided a cautious outlook, indicating that if competitive dynamics stabilize, they could operate in a low to mid-40s beta range, which would positively impact NII [86]