Fifth Third Bancorp Q2 FY2025 earnings call

• Fifth Third has delivered excellent profitability, strong credit trends, and accelerating revenue growth amidst uncertain environments. Earnings per share was $0.88 or $0.90 excluding certain items, exceeding consensus estimates. - Strategic investments have driven results, including diversified loan origination platforms, growth in the Southeast with branch expansions and strong business line performances, and investments in innovative tech-enabled products like the mobile app, Newline embedded payments platform. - Key customer satisfaction achievements: J.D. Power recognized the mobile app as #1 in user satisfaction, and a free will initiative for customers was launched, with AI-enabled functionality to be embedded in the mobile app in the second half of the year.

For Fifth Third, in the second quarter of 2025, adjusted revenues grew by 6% year-over-year, led by 7% growth in net interest income (NII). Adjusted PPNR increased 10%, and there was 250 basis points of positive operating leverage for the third consecutive quarter. Credit metrics were strong: net charge-offs were 45 basis points, at the bottom of the guidance range, and NPAs declined 11% sequentially, with commercial NPAs down 18%. Loan growth was average 5% year-over-year across diversified platforms including C&I, CRE, leasing, mortgage, home equity, auto and fintech platforms. In the Southeast, consumer bank grew net new households by 6% year-over-year, had average cost of consumer and small business deposits at 191 basis points, and added 10 branches year-to-date with plans to open 40 more by year-end. Commercial banking in the Southeast contributed more than half of total middle market loan growth, and wealth management in the Southeast saw assets under management grow 16% year-over-year to nearly $16 billion. Consumer mobile app was #1 in user satisfaction among regional banks, and Newline embedded payments platform had 30% revenue growth with over $1 billion increase in connected commercial deposits.

• Upgraded full year NII guidance to 5.5% to 6.5% from earlier guide, expecting record NII even with no rate cuts. - Anticipate full year positive operating leverage approaching 2%. - Full year average total loans expected to be up 5% compared to 2024, driven by C&I and auto lending. - Adjusted noninterest income expected to be up 1% to 2%, and adjusted noninterest expense expected to be up 2% to 2.5%. - Narrowed full year net charge-off range to 43 to 47 basis points. - Third quarter NII expected to be up 1% from the second quarter, average total loan balances stable to up 1%, adjusted noninterest income expected to be up 1% to 4%, adjusted noninterest expense expected to be up 1% compared to the second quarter, and charge-offs expected to be in the 45 to 49 basis point range. - Plan to resume share repurchases in the third quarter, with an expected $400 million to $500 million of stock repurchased during the remainder of 2025.

• Global economic complexity and uncertainty pose challenges. - Tax bill changes for the residential solar industry may impact the Dividend business, with solar originations expected to decline in 2026 but credit trends remaining encouraging. - Regulatory environment changes and competition from nonbank entities could affect the business.

Q: Ebrahim Poonawala asked about capital allocation and solar business risk.

A: Tim Spence stated capital priorities are organic growth first, with focus on delivering strategy effectively. Bryan Preston discussed solar business impact, noting no impact on existing portfolio, credit trends improving, and plans for a new home equity product on the Dividend platform.

Q: Robert Scott Siefers asked about margin improvement and competitive dynamics.

A: Bryan Preston said DDA performance was a big outperformance item, expecting continued NIM improvement from fixed rate asset repricing and loan growth, and competitive landscape on loan and deposit sides is rational.

Q: Ryan Nash asked about loan growth and Southeast expansion.

A: Tim Spence talked about consumer loan growth drivers and Southeast branch expansion plans, with focus on quality locations and direct marketing capabilities.

Q: Thomas Leddy asked about stablecoins and regulatory relief.

A: Tim Spence was excited about stablecoins in certain use cases like cross-border payments, and discussed regulatory relief benefits and challenges for regional banks.

Q: Erika Najarian asked about balance sheet mix and deposit strategy.

A: Bryan Preston said focused on core deposit funding, balanced growth, and cost stabilization for deposits.

Q: Mike Mayo asked about loan growth status.

A: Tim Spence explained loan growth varies by universe, with Main Street banking loan growth back but with industry-specific uncertainties.

Q: Christopher McGratty asked about credit spreads and charge-off improvement.

A: Bryan Preston said credit spreads stable, and Greg Schroeck discussed NPA reduction and improved credit inflows.