Fifth Third Bancorp (FITB) Earnings Report: Q2 2015 Conference...
Transcript of Fifth Third Bancorp (FITB) Earnings Report: Q2 2015 Conference...
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
©2014TheStreet,Inc.Al l R ightsReserved Page1of26
FifthThirdBancorp(FITB)EarningsReport:Q22015ConferenceCallTranscriptThefollowingFifthThirdBancorpconferencecalltookplaceonJuly21,2015,09:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
JimEglseder;FifthThirdBancorp;Director-IRKevinKabat;FifthThirdBancorp;ViceChairman,CEOGregCarmichael;FifthThirdBancorp;President,COOTayfunTuzun;FifthThirdBancorp;EVP,CFOFrankForrest;FifthThirdBancorp;EVP,CROJamieLeonard;FifthThirdBancorp;SVP,Treasurer
OtherPart icipants
ErikaNajarian;BofAMerrillLynch;AnalystScottSiefers;SandlerO 'NeillandPartners;AnalystKenZerbe;MorganStanley;AnalystMattO 'Connor;DeutscheBank;AnalystKenUsdin;JefferiesandCompany;AnalystMikeMayo;CLSALimited;AnalystChrisMutascio;Keefe,BruyetteandWoods;AnalystJohnPancari;EvercoreISI;AnalystDavidEads;UBS;AnalystThomasLeTrent;FBRandCompany;AnalystMartyMosby;ViningSparks;AnalystGeoffreyElliott;AutonomousResearch;AnalystSameerGokhale;JanneyCapitalMarkets;AnalystMattBurnell;WellsFargoSecurities;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
AtthistimeIwouldliketowelcomeeveryonetotheFifthThirdBankearningsreleasecall.
(OperatorInstructions).
Thankyou.JimEglseder,DirectorofInvestorRelations,youmaybeginyourconference.
JimEglseder (Director-IR):
Thanks.Goodmorning.
Today,wewillbetalkingwithyouaboutoursecondquarter2015results.
Thisdiscussionmaycontaincertainforward-lookingstatementsaboutFifthThirdpertainingtoourfinancialcondition,resultsofoperations,plansandobjectives.Thesestatementsinvolvecertainrisksanduncertaintiesandthereareanumberoffactorsthatcouldcauseresultstodiffermateriallyfromhistorical
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
©2014TheStreet,Inc.Al l R ightsReserved Page2of26
performanceandthesestatements.Wehaveidentifiedsomeofthesefactorsintheforward-lookingcautionarystatementattheendofourearningsreleaseandinothermaterialsandweencourageyoutoreviewthem.
FifthThirdundertakesnoobligationandwouldnotexpecttoupdateanysuchforward-lookingstatementsafterthedateofthiscall.
I'mjoinedonthecalltodaybyseveralpeople:ourCEOKevinKabatandCFOTayfunTuzun;FrankForrest,ChiefRiskOfficer;andTreasurerJamieLeonard.AlsoheretodayisourPresidentandCOOGregCarmichael.
Duringthequestion-and-answerperiod,pleaseprovideyournameandthatofyourfirmtotheoperator.
Withthat,IwillturnthecallovertoKevinKabat.Kevin?
KevinKabat (ViceChairman,CEO):
Thanks,Jim.Goodmorning,everybody.Thanksforjoiningus.
Asyouallknow,IannouncedmyretirementasCEOthatwillbeeffectivelaterthisyear.
Beforewegetintothehighlightsofthisquarter'sresults,Iwanttotakeamomenttoreflectonmy33yearsinthebankingindustry,especiallythelastroughly10leadingFifthThird.I'mproudofthehardworkanddedicationoftheverytalentedindividualsI'vehadtheopportunitytoworkwithovertheyears.Togetherwehavenavigatedsomeofthemostchallengingtimestheindustryhaseverfaced.
Inearly2007whenIwasnamedCEO,wewerejuststartingtoseecracksinthefoundationthatultimatelyturnedouttobetheworstcrisistheindustryhasseensincetheGreatDepression.OurdecisiveandearlyactionsbuiltasignificantlybetterCompanythatistodaypositionedtooperateinallenvironmentswithstrongmomentumgoingforward.
Todaywehaveverysolidcapitallevelsthatsupportsomeofthehighesttotalpayoutratiosofourpeers.Wehavemadechangestohowweapproachourcommercialbusinessand,morerecently,ourretailbusinessinresponsetothechangingconditionsandpreferencesofourcustomers.
WehavepositionedtheCompanywellinordertoeffectivelyendurethecurrentlowrateenvironment,butalsomaintaintheflexibilitytoaccelerategrowthoncetheeconomyregainsfullgrowthandratesstarttorise.
LetmeintroduceyoutoGregCarmichaelwhowilltakeoverformeas[COO]inNovember.GreghasbeenourChiefOperatingOfficersince2006andPresidentandCOOsince2012.HeisaverycapableleaderandI'mconfidentthatunderhiswatchtheCompanywillcontinuetothriveandgrow.Greg?
GregCarmichael(President,COO):
Thanks,Kevin.IamexcitedtohavetheopportunitytobuilduponKevin'saccomplishmentsthathavefirmlychangedourCompanyoverthelast10years.IamalsoappreciativeoftheBoard'sconfidenceinmeandourteamtocontinuetobuildvalueforourshareholders.
Ilookforwardtomeetingyouintheupcomingmonthsandsharewithyoumyplanstocontinueourprogressandmoveourfranchiseforwardinthisfast-changingenvironment.NowIwillturnitbacktoKevinsohecancoverthehighlightsofthequarter.Kevin?
KevinKabat (ViceChairman,CEO):
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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Thanks,Greg.ObviouslythereisagreatdealofrespectthatwehaveforeachotherandI'mconfidentthetransitionwillgosmoothly.Icontinuetobeoptimisticaboutourfuture.Sowiththatlet'stalkaboutthequarter.
Todaywereportedsecond-quarternetincometocommonshareholdersof$292millionandearningsperdilutedshareof$0.36,including$0.07ofitemsthatTayfunwillgoovershortly.Weareverypleasedwithourcorebusinesstrends,althoughtheenvironmentcontinuestochallengebanks.
Weareveryfocusedonourbusinessesandcontinuetodemonstrateourwillingnesstotakedecisiveactionwhennecessary,asyousawwithourbranchannouncementinJune.
Ultimatelywearebuildingafranchisethatmeetstheneedsofourcustomersbyenablingthemtoconductbusinessinthemannertheywish,whilealsobuildingaCompanythatiswellpositionedtocompeteeffectivelytodayandbewell-positionedwiththeappropriatestrategiesinplacetosucceedinthefuture.
Forthesecondquarter,excellentbalancesheettrendscontinuedwithloangrowthledbyC&Iwhichwasup3%bothsequentiallyandyearoveryear.Strongdepositgrowthcontinuedwithcoredepositsup$2.3billionfromthefirstquarterdrivenprimarilybydemanddepositswiththosebalancesup5%sequentiallyandup13%overlastyear.
FeeincomewasledbyverygoodresultsinCorporateBankingwhichwereup$50millionsequentiallyonstrengthincapitalmarketsandhighersyndicationfees,whichwereupfromsoftmarketactivitylevelsinthefirstquarter.
MortgageBankingwasup$31millionfromthelastquarterasoriginationswereup39%to$2.5billion.Expenseswereupcomparedwithlastquarterasexpected.Second-quarterexpenseswerehigherlargelyduetolong-termincentivepayoutsthatoccurredinthequarterandseveralotherputsandtakesthatTayfunwilldiscuss.
WeremainveryfocusedonourcurrentoperatingresultsaswecontinuetoinvestinourCompanywithalong-termstrategicview.Creditmetricscontinuetobeexcellentandournetcharge-offratiowas37basispointsinthequarter,thelowestlevelI'veseeninmytenureasCEO.
Netperformingassetsweredown25%fromayearagoandourNPAratioendedthequarterat67basispoints,down12%sequentially.We'veseensignificantandsustainedimprovementinourcreditresultsoverthepastseveralyearsandwefeelverygoodaboutthepeopleandtheinfrastructuresthatwehaveinplacerightnow.
Thisquartermarksanotherinalonglinethatincludesactionsundertakeninordertoproactivelyadapttothechangingmarketplace.Wehavemaintainedoursitesandourprudentapproachtolendingwithafocusonappropriaterisk-adjustedreturns.
We'veactivelymanagedtheretailfranchiseoverthelastseveral--overthelastfewyearsandwehavebeenveryproactiveinadaptingtothechangingdemographicsandourcustomers'usageofnewtechnologies.
We'vetalkedabouttheinvestmentswearemakingtostrengthenourriskandcomplianceinfrastructureandweexpecttoseeacompetitivebenefitfromthem.UltimatelywearemanagingtheCompanyforthelong-term,thatisourfocus,andwedoexpectittobebeneficialtoshareholdersthroughtime.
WiththatIwillturnitovertoTayfuntodiscussoursecond-quarteroperatingresultsandouroutlookforthesecondhalfoftheyear.Tayfun?
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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T ayfunT uzun (EVP,CFO):
Thanks,Kevin.Goodmorningandthanksforjoiningus.Iwillstartwiththefinancialsummaryonpage3ofthepresentation.
Wereportednetincometocommonshareholdersof$292millionor$0.36perdilutedshare.Therewereseveralitemsthataffectedearningsinthequarter,asKevinmentioned.Thelargestwasthe$97millionnon-cashimpairmentchargerelatedtothechangesinourbranchnetworkthatweannouncedinJune.
WealsohadapositiveVantivwarrantvaluationmarkof$14millionthisquarter.Thesetwoitemshadanetnegativeimpactof$0.07pershare.Iwillcommentonthebranchannouncementattheendofthediscussionofouroperatingtrendsandmetrics.
Withthatlet'smovetotheaveragebalancesheetandpage4ofthepresentation.Thestrongerloanactivitywehadinthesecondhalfoffirstquartercarriedthroughoutthesecondquarter.Averageportfolioloanbalancesincreased$1.7billionfromthefirstquarterdrivenbyincreasesinC&I,commercialconstructionandresidentialmortgagebalances.Specifically,ourC&Ibalanceswereup3%onanaveragebasis.
Loangrowthmetricsreflecttheresultsofourteam'sfocusongrowingourexistingrelationshipsaswellasselectingnewclientsthatmeetourreturnprofilewithinourrisktolerancelevels.
Althoughourpayoutswerehigherthanthefirstquarter,ourloanproductionthisquarterwasverystrongacrossallindustriesexceptenergy.Intotal,oursecond-quarterproductionwasthehighestinthelastfivequarters.
Theaveragecreditratingforthisquarter'sproductionpoolwasthehighestofthelastfivequartersaswell.Thereisnoletdownincompetition,butweareconfidentthatourclientretentionandselectioneffortsaresupportiveofloangrowth.
Newproductioncouponsarelower,toacertainextentinlinewithbettercreditquality.Atthesametimeourpayoffcouponswerealsolowerthanthefirstquarter,indicativeofevent-relatedratherthanrefi-relatedpayoffs.Lineutilizationwasflat.
Averagecommercialmortgagebalancesweredown1%aswecontinuetoseerefinancingactivityofourlegacybook.Commercialconstructionlendingremainsstrong.Growthinmulti-familyandIndustrial/Commercialconstructionremainsstrongwith75%ofproductioncomingfromwithinourfootprint.Ournewcommitmentsnetofprepaymentactivityshouldsupportsecondhalfloangrowthinthisportfolio.
Inthesecondquarteraverageinvestmentsecuritiesincreasedby$4.2billion,or18%sequentially,reflectingthefullquarterimpactofourfirst-quarterpurchasesand$2billionofadditionalsecuritiesduringthesecondquarter.Onanendofperiodbasisweadded$1.5billionofsecurities.
Wesawverystrongdepositgrowththroughout2014and,asweexpected,thatcontinuedinthefirsthalfof2015.Averagecoredepositsincreased$2.3billionfromthefirstquarterdrivenbygrowthindemanddepositandmoneymarketaccounts.
MovingtoNIIonpagefiveofthepresentation.Taxableequivalentnetinterestincomeincreased$40millionsequentiallyto$892million,primarilydrivenbythefasterthananticipateddeploymentofcashintoearningassetgrowthandlowerdepositcosts.NIIwasalsopositivelyimpactedby$7millionduetoanextradayinthequarter.
Thenetinterestmarginwas290basispoints,up4basispointsfromthefirstquarter,drivenbya6basis
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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pointbenefitduetothefasterthananticipateddeploymentofcashthatImentioned;3basispointsduetobetterfundingratesincludingthecontinuedrationalizationofdepositrates;partiallyoffsetby4basispointsofloanyieldcompressionanda1basispointdecreaseprimarilyduetodaycount.
Shiftingtofeesonpage6ofthepresentation.Second-quarternon-interestincomewas$556millioncomparedwith$630millioninthefirstquarter.Resultsincludedthe$97millionimpairmentchargerelatedtothechangesinthebranchnetworkandthe$14millionpositivemarkontheVantivwarrantthatImentionedearlier.
First-quarterresultsincludeda$70millionpositivemarkontheVantivwarrant,a$37milliongainonthesaleoftheresidentialTDRs,anda$30millionimpairmentassociatedwithaircraftleases.QuarterlyresultsalsoincludedchargesontheVisatotalreturnswapof$2millioninthecurrentquarterand$17millionlastquarter.
Excludingtheseitemsinbothquartersfeeincomeof$641millionincreased$71millionor12%sequentiallywithbroad-basedincreasesinalmostallcategoriesledbyincreasesinCorporateBankingrevenueandMortgageBankingnetrevenue.Adjustedfeeincomewas42%ofrevenueinthesecondquarter.
Excludingtheimpactofthe$30millionaircraftleaseresidualimpairmentinthefirstquarter,corporatebankingfeesincreased$20millionsequentiallyduetoimprovementsininstitutionalsalesrevenueandhighersyndicationfees.Syndicationactivitywasbetterthisquarterthanlastandwehadastrongquarterincorporatebondfees.
Totalriskmanagementfees,whichincludeourinterestrates,foreign-exchangeandderivativebusinesses,werestable.
Cardandprocessingrevenueincreased8%sequentiallyand1%fromthesecondquarterof2014aswecontinuetobenefitfromanincreaseinthenumberofactivelyusedcards.
MortgageBankingnetrevenueof$117millionwasup36%sequentially.Originationsincreasedto$2.5billionfrom$1.8billioninthefirstquarter.Gainonsalemarginsweredown39basispointsto288basispoints.
Wehadagoodquarterinmortgageservicingrevenues.Netservicingassetvaluationadjustments,whichincludeamortizationandvaluationadjustments,werepositive$18millionthisquarterversusnegative$17millionlastquarter.Depositservicechargesincreased3%fromthefirstquarterandwereflatrelativetothesecondquarterof2014.
Totalinvestmentadvisoryrevenueof$105milliondecreased3%sequentiallyduetohighertax-relatedPrivateClientservicerevenueinthefirstquarter,partiallyoffsetbyanincreaseinsecuritiesandbrokeragefees,andincreased3%fromthesecondquarterlastyear.
Withininvestmentadvisoryrevenue,personalassetmanagementfeeswereup5%whilebrokeragefeeswereup8%fromthesecondquarterof2014.
Weshownoninterestexpenseonpage7ofthepresentation.Expenseswerehigherinthequarter,inlinewithourexpectations,andcameinat$947millioncomparedwith$923millioninthefirstquarter.Thesequentialincreasewasimpactedbyhigherrevenuebasedincentivecompensationandlong-termincentivesinthesecondquarter,aswellasanincreaseof$2millioninseverance.Overall,ourfirsthalfcomp-relatedexpenseswere2.3%higherthanthecomp-relatedexpensesforthefirsthalfof2014.
Includedinourexpensetotalisalsoa$6millionsequentialquarterchangeintheprovisionexpenserelatedtounfundedcommitmentsinlinewiththebroaderdirectionalmoveandprovision.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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Thesequentialcomparisonalsoexaggeratestheexpensegrowthasthefirstquarterbenefitedfromasettlementofataxliabilityrelatedtoprioryears.ThesewerepartiallyoffsetbyadecreaseinFICAandunemploymenttaxexpenserecordedinthequarterlybenefitswhichareseasonallyhighinthefirstquarter.Iwillspendmoretimeonexpensesinouroutlooksection.
Turningtocreditresultsonpage8,totalnetcharge-offsof$86million,or37basispointsasapercentageofaverageloans,decreased$5millionsequentially.Nonperformingassets,excludingloansheldforsale,were$626millionatquarterend,down$65millionfromthefirstquarterbringingtheNPLratioto51basispointsandtheNPAratioto67basispoints.
CommercialNPAsdecreased$45millionsequentially,primarilyduetoa$23milliondeclineinC&Iand$20milliondeclineincommercialmortgage.ConsumerNPAsdecreased$20millionfromthefirstquarterdrivenbya$12milliondeclineinresidentialmortgageanda$5milliondeclineinhomeequityNPAs.
Ourenergyportfoliodeclinedto$1.7billionandthequalityofthefirmswehaverelationshipswithremainsverygood.Theportfoliowasreducedby[105]--$[55]millionfromthefirstquarterofwhichapproximately50%relatestoreservebasedlending.
Utilizationintheportfoliodeclined3%ascompaniescontinuetoaccesscapitalmarketstobolstertheirbalancesheets.Thereweresomenegativeratingsmigrationbutnotmaterialinthecontextoftheoverallportfolio.
Wecontinuetobecomfortablewithourportfoliofromalossgivendefaultperspectivewithappropriatecollateral,liquidity,cashflowandreservecoveragelevels.InourRBLportfolioweareaseniorsecuredlenderwith,inmanycases,significantlevelsofsubordinatedriskaheadoftheBank'sposition.
Ofthe$66millioninNPAinflowsonly$11millionrelatedtotheenergyportfolio.Also,SNCresultswerecommunicatedtobanksinthesecondquarter.AndwhileIwon'tgetfurtherintospecifics,allmaterialimpactsfromtheexamareincludedinourresultsinthesecondquarter.
Wrappinguponcredit,theallowanceforloanandleaselossesdeclined$7millioncomparedwitha$22milliondeclinelastquarter.Provisioncoverageofnetcharge-offsincreasedto92%from76%lastquarterandreservecoveragedecreasedto1.39%ofloansandleases.
Virtuallyallofourcreditmetricscontinuetoimproveaswemoveintothesecondhalfof2015.
Lookingatcapitalonslide9,capitallevelscontinuetobestrongandwellaboveregulatoryrequirements.CommonequityTier1ratiowas9.4%.Attheendofthesecondquartertheaveragedilutedsharecountwasdownanother1%sequentially.
Duringthequarterweannouncedcommonstockrepurchasesof$155million.AnASRsettlementisexpectedtooccuronorbeforeJuly28andreducethesecondquartersharecountby6.7millionshares.
Now,afewcommentsaboutourannouncedretailbranchactionsandourperspectivesonthecurrentenvironmentbeforewemovetoouroutlooksection.
Aswehavebeendiscussingwithyouforthelastcoupleofyears,ourretailfranchisehasperformedverywellinthischallengingenvironmentandwehavebeenveryproactiveinadaptingtothechangingdemographicsandourcustomers'usageofnewtechnologies.
Afterexecutingasuccessfuldepositsimplificationstrategyin2012and2013,wehavebeenoptimizingourbranchFTEcountbybothreducingserviceemployeesaswellasreinvestinginsalesassociates.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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Thesechangesnotonlyenabledustooptimizeourexpenses,butalsohelpedimproveourcustomerservicelevelsandalignourservicechannelswithourcustomers'preferences.
Upuntilthisquarter,thebranchcounthasbeenfairlystable.Butgiventhesechangesadeeperreviewofourbranchnetworkwasconductedduringthesecondquarterwhichledtotheplannedreductionofourbranchcountby105.
Weuseascorecardwithover50variablesinassessingournetwork,includingproductionvolumesandtrends,transactionvolumesandtrendsandoverlapsamongothers.Wewillbeexecutingthisstrategyoverthenext12months.
We'vetakena$97millionimpairmentchargerelatedtotheownedbranchesandlandwhichis$12millionhigherthanourJuneannouncement.Theincrementalimpairmentchargewebookedwasduetotheadditionofahandfulofadditionallocationsandthereceiptofactualappraisals.
Ourannualizedexpensebenefitisalsogreatergiventhehighernumberofbranchesthanoriginallyannounced.Wewillidentifytheexpenseimpactrelatedtotheleasedbranchesforyouastheyflowthroughournumbersoverthenextsixmonthsbasedontheclosingdateofthosebranches.
Weexpecttofullyexecutethisstrategybymid-2016andthusexpectthereductiontoimpactexpensetotalsonarunratebasisduringthesecondhalfofthenextyear.
Betweennowandthenwewillcontinuetoupdateyouastotheprogressoftheproject,butatthistimeIamnotreadytosharemoredetailswithyouregardinggeographiesandtimingasIknowyouwillunderstandIwouldliketopreserveourabilitytoexecutetheplanasefficientlyaspossible.
Onafullyannualizedbasisweexpecttolowerourexpensesby$65milliononcetheentireactionisexecuted,whichis$5millionbetterthanoriginallyannounced.
Ourmanagementteamiskeenlyfocusedoncapturingasignificantportionoftheseexpensesavingsinourbottomline,butwearealsoanticipatingaportionofthesavingstobereinvestedinthebusinesstocontinuetobuildourdigitalchannelplatformsnotonlyforretailbutforourentireCompany.
Theseinvestmentsaredesignedtoprovidefurtheropportunitiestoimproveourcostefficienciesandimproveourcustomerserviceaswellassupportrevenuegrowth.Wewillbesharingourreinvestmentplanswithyouaswefinalizeourstrategicstudies.
Iwanttoreemphasizeourmanagementteam'sfocusonexpensemanagement,especiallyastheexpensecarryoftheriskandcompliancestructuresinoursectorcontinuestorampup.
Thetypesofstrategicactionsthatwearecurrentlyevaluatingarelong-termorientedactions,veryclearlyfocusedonbuildingourCompanytoachieveourrevenuegrowthandouroperationalexcellenceobjectivesinrecognitionoftheevolutionintechnology,demographicchangesandrequiredinfrastructuredesignsinthecurrentregulatoryenvironment.
Turningtotheoutlookandifyoucommentsonthethirdquarter.Thusfarwehavemaintainedandcommunicatedarealisticperspectiveontheeconomyandtheoverallmarketconditionsandsharedouroutlookwithyouonthatbasis.Thisperspectiveenabledustoreactappropriatelytomarketdrivenopportunitiestosupportourassetgrowthandearnings.
OurupdatedoutlookisnotmateriallydifferentthanwhatweprovidedinJanuaryandagaininApril.Wecontinuetofeelcomfortablewithourfull-yearNIIexpectations.Asareminder,wehaveonerateincreaseassumptioninthefourthquarteraswediscussedinApril.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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WehaveandwillcontinuetoactivelymanageourbalancesheettoadapttochangingmacroeconomicandFedpolicyexpectations.Wedon'thaveanyunderlyingassumptionsrelatedtoswapactivitybuiltintoourNIIoutlookandwehavefairlymodestlevelsofswapsrelativetopeers.
WedostillexpectourNIItogrowyearoveryearexcludingthedepositadvanceimpactandforthethirdquarterweexpectNIItobeslightlyhigherthantheseconddrivenprimarilybyloangrowthanddaycount.AtthistimewealsoexpectNIItogrowinQ4overthethird-quarterlevels.
AswediscussedinApril,weexpectourNIMtobestableduringbigyearfromthefirst-quarterlevels.We'veoutperformedourNIMexpectationsthisquartersowedon'texpectourNIMtowidenfurtherfromhereinthethirdquarterandouroverallNIMduringthesecondhalfshouldbestablewithourfirsthalfNIMwhichis2.88%.
Third-quartercorporatebankingfeestendtobeseasonallylowwithastrongerfourthquarterwhichshouldelevatethesecondhalftotalsandcorporatefeesoverthefirsthalftotals.
OurcurrentexpectationisthatthatMortgageBankingproductionthatrevenuewillbesomewhatbelowthesecond-quarterlevelsbutabovelastyear'sthirdquarter.Theservicingrevenueswillbeafunctionoftherateenvironment.
Excludingthemortgageservicingrevenuesweexpectastrongsecondhalfintotalfeeincome,butfollowingseasonaltrendswithastablethirdquarterandastrongfourthquarter.Overall,feetrendslookpositiveforthesecondhalf.
Ontheexpenseside,aswediscussed,wearecontinuingtoinvestinourbusinessesandinfrastructureandthoseinvestmentswillfurtherincreaseouremployeeexpensesprimarilyinourriskandcompliancefunctions.Inaddition,ourinvestmentsincybersecurityandfraudareaswillbuildasaferenvironmentforusaswellasforourcustomers.
ForthesecondhalfIexpectthatourtotalcompensationexpenseswillberelativelyflatincludingemployeebenefitsandincentivecompforbusinessactivity.
Inaddition,duringthisphasethird-partyexpensestendtobemoreelevated.Someoftheseexpensesareclearlynotpermanent.Youhaveseenthesetypesofincreasesfromotherbanksdependinguponwheretheyareinthecycle.
Weexpecthigherpaymentsprocessingexpensesasagoodportionofthosearedirectlytiedtopaymentactivity.Inaddition,aswediscussedwithyouearlierintheyear,wewillseeanuptickinEMV-relatedexpenditures,whichwillreducerisksgoingforward.
Technologyinvestmentswillcontinuetoincrease.WeexpectourITexpensesduringthesecondhalftobeabout10%higherthanthefirsthalf.AsIdiscussedearlier,wearemakinglong-termstrategicdecisionsandinvestinginourfranchise.
WealsowanttomakesurethatweallocatetheprioritiessmartlybetweenITprojectsthataretargetedforriskandcomplianceinfrastructureandthosethataretargetedfordirectbusiness-relatedpurposessuchasdigitaltechnology.
Webelievethatwecannotapproachtheseinvestmentsinasequentialmannerandthereforeinvestingonthesetwopathssimultaneously.Simplystated,wecannotaffordtodelayourtechnologyinvestmentsinourbusinessesastheenvironmentischangingfast.
Overallourcoreexpenseswillincreasenextquarterrelativetothesecondquarter.Thepredominantdriverwillbemarketingasweexpectaseasonaluptickinthethirdquarterrelatedtoourplanned
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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campaign.
Excludinganyone-timeitemsinthesecondhalf,suchastheleaseterminationexpensesrelatedtothebranchoptimizationannouncementorotherone-timeexpenses,ourtotalexpensesduringthenexttwoquartersshouldbeapproximately2.5%higherthanourfirsthalfexpenses.
Aswediscussed,ourexpenseadjustmentsrelatedtothebranchstrategyshowsweareveryfocusedonlong-termexpensedriversandwilltakedecisivestrategicactionstomaximizetheperformanceofourCompanybothintermsofrevenuesandexpenses.
Turningtocredit,westillexpectminimalbenefitsfromALLLreleasesduetoloangrowthandtheassociatedhigherlevelsofprovisioning.Ourfundamentalcreditperformanceshouldremainathistoricallylowlevelsgiventhecurrentenvironment.
WealsowouldliketoremindyouthattherevenueexpectationsthatwesharedwithyoutodaydonotincludepotentialandcurrentlyunforecasteditemssuchasVantivwarrantmarksorgainsonshareofsales.Withthatlet'sopenthelineforquestions.Angel?
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions).ErikaNajarian,BankofAmerica.
ErikaNajarian (Analyst-BofAMerrillLynch):
IjustwantedtomakesureIunderstoodthemessageonexpenses.Iknowyouarenotgoingtogiveusthe2016outlook,butaswethinkaboutwhatisareasonableexpectationfornextyear,shouldwetakethatsecondhalfrunratethatisup2.5%morethanthefirsthalf?
Iunderstandthatyoumentionedthattherearesomeseasonallyhighexpensesinthere,butitsoundedlikeyouwerecommunicatingastrongmessageonyourneedtore-investintechnology.
T ayfunT uzun (EVP,CFO):
Yes.Whenyouthinkaboutourstrategieshere,Erika,weareclearlycontinuingtosaveandoptimizeourexpensesontheretailside,forexample,wehavebeendoingthatforawhile.
Andtheannouncementclearlyaddsanotherlayerontopofthat,the$65millionrunrateexpenses.Butatthesametime,weareclearlygoingtocontinueourinvestmentsinbuildingtheriskandcomplianceinfrastructureandalsoreinvestingbackinthebusiness,especiallyonthedigitalside.
Havingsaidthat,atthispointwearenotgivingguidancefor2016andwewouldliketospendalittlebitmoretimeinevaluatingourstrategiesgoingforwardwithrespecttocostefficiencies.
Aswesaidthe$65millionwillnotinitsentiretywillfalltothebottomline.Butasignificantportionofthatshouldfall.Andwewilldetailthatforyougoingforward.Greg,doyouwanttocommentonyourthoughtson--?
GregCarmichael(President,COO):
Andonceagain--andthanks,Tayfun,andErika--asyoulookatourbusinessesandthechangingneedsofourcustomersastheymovetowantingtobankanywhereanytime,ourabilitytoinvestfromatechnologyperspectiveonopportunitiestoimproverevenue,improvethecustomerexperienceandobviouslydriveefficiencies,wearegoingtostayfocusedonthat.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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Andwewillalsocontinuetolookatourinvestmentsthatwehavetodayinourinfrastructureandbetterwaysofreengineeringourinfrastructuretoserveourcustomersgoingforward.
ErikaNajarian (Analyst-BofAMerrillLynch):
AndGreg,justasafollow-uptothat.
Inoticedinthepressreleasethattherewassomelanguagefromyouaboutlookingforfurtheropportunitiestoimproveoperationalefficiency.
AndIknowthatclearlyitistooearlytoaskwhatthoseare,butshouldweexpect,whenyoutakeoverinNovember,adeeperdiveintotheexpensebaseinFifthThird.Andthatwemayhearaboutperhapsmoreefficienciesatsomepointnextyear?
GregCarmichael(President,COO):
FifthThirdhasalwaysbeenfocusedonprudentexpensemanagement.Wearegoingtocontinuethatgoingforward.Technologyisagreatopportunityforus,especiallywithsomeoftherecentadvancements.
Mobilecheckdeposit--wehaveover15%ofourdepositsnowcomingthroughremotedepositcapture;thatdrivesefficiencyinourbackoperation.Wewillcontinuetolookforwaystoacceleratethatpaceofplayaroundthoseinvestmentswhereitmakegoodsenseforourcustomerandourshareholders.
ErikaNajarian (Analyst-BofAMerrillLynch):
Gotit.And,Kevin,goodluckwithyourretirement.
KevinKabat (ViceChairman,CEO):
Thanks,Erika,Iappreciateit.
Operator :
ScottSiefers,SandlerO 'Neill&Partners.
Scott Siefers (Analyst-SandlerO 'NeillandPartners):
Tayfun--firstofall,KevinandGreg,congratulationstobothofyou.Tayfun,Iwashopingyoucouldexpanduponsomeofthecommentsaboutloangrowthyoumadeinyourearlypreparedremarks,whereIthinkyoujustnotedkindoftheclientretentionandselectioneffortsyouguyshavemadewouldsuggestloangrowth.
Justgiventhatthedynamic,inotherwordstheacceleration,haschangedoverwhathasbeenthelastthreequartersorsoIwasjusthopingyoucouldexpandalittleonthosecomments.Inotherwords,despitethecompetitivedynamicwhatisitthatkindofmakesyoufeelbetteraboutgrowingtheloanbookmorerobustly?
T ayfunT uzun (EVP,CFO):
Sure.So,Scott,IthinkwhatisveryencouragingiswhenIlookatthelastsortoftwoquartersoftrends,despitethefactthatpayoffsremainedathealthylevels,ourproductionnumbersarecominginstronglyabovethosetodrivenetloangrowth.
WhenwegobacktothesecondhalfoflastyearIthinkasaCompanywehavedoneaverygoodjobinunderstandingtheimpactofthecompetitivedynamicsinthemarket.Andhavebeenableto,between
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sortofthesalesgroups,thecreditgroupaswellasmyfinancegroup,toorganizeourselvesinamuchmoreefficientmannertorespondtothemarketandtorespondtoourclients.
AndIthinkthatisreallydrivingthehealthyincreaseinproductionlevels.Andwhenyoulookatthecreditprofileofthesenewloanscomingonbalancesheet,asImentioned,thecreditprofilethisquarterofthisnewproductionwasthehighestinfivequarters.
Soitisclearthatwearenotstretchingorsacrificingoncreditasweincreasethenumberofourrelationships.Andalso,we'vebeenobviouslyfocusedindeepeningtheexistingrelationshipsandthatisworkingwellaswell.
Andthisisalso--Ihavetosaythatduringthelastthreeorfourquarterswehaveaddedgreattalentbothinoriginationsaswellasonthecreditside.Ithinkthatisworkingverywellforus.
Andwehaveidentifiedtherightareas,whetheritisourspecializationinhealthcare,ourcontinuedfocusonmid-core,ournewretailvertical.Ithinkthisisreallyabroadbasedsupportforloangrowththatweareseeingtoday.
Scott Siefers (Analyst-SandlerO 'NeillandPartners):
Okay,perfect.Thankyou.Andthenmaybeifyoucouldspendaquicksecondjusttouchingonoverallearningassetgrowthbeyondjusttheloanportfolio.
Iguessyouaremaybecallitroughlytwoquartersintobeingalittlemorecomfortableinvestinginthesecuritiesportfolio--inotherwordsthatmixfromcashtosecuritiesandyoustillgetaprettyrobustdepositgrowth.SohowdoyouseeIguessthesecuritiesportfolioinparticularplayingoutintermsofgrowthaswelookahead?
JamieLeonard (SVP,Treasurer):
Yes,Scott,itisJamie.Aswesaidonourfirst-quartercall,wewouldexpectduringthecourseof2015toaddanother$1billionto$2billionofleverageduringthecourseoftheyear.Duringthequarterwemadethedecisiontoacceleratethatadditionalleverageasyousawinourresults.
Soourportfolio,asweexitthesecondquarter,iswherewewouldlikeittobe.Weareprettypleasedwiththeexecutionandcontinuetobemindfuloftheraterisk.Sogoingforwardyoucanexpectourportfoliotobefairlystableandtogrowinlinewithearningassetgrowth.
Scott Siefers (Analyst-SandlerO 'NeillandPartners):
Okay,allright,perfect.Thanksalot,guys.
Operator :
KenZerbe,MorganStanley.
KenZerbe (Analyst-MorganStanley):
Justacouplequickquestions.Thefirst,intermsofthebranchrestructuring,Iknowobviouslyyoutookthechargenow,butImayhavemissedthepreparedcomments.Didyousayyouweregoingtotakeadditionalchargesduringthenextcouplequartersbutjusttellusasyoutakethemor--?
T ayfunT uzun (EVP,CFO):
Yes,thesecondpiece,Ken,we--actuallyitwasinour8-KthatwefiledinJune,therearesomeleasedbranchesandtheexpenseimpactonthosewillflowthroughournumbersasweclosethosebranches
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andreflecttheimpactofthoseleasesonagoingforwardbasis.Thatnumberwas--Ithinkwediscloseditbetween$6millionand$10million.
KenZerbe (Analyst-MorganStanley):
Gotit,okay.Andthensecondquestion,intermsoftheloangrowth,obviouslyalotofgrowthcomingfromtheconstructionportfolio.Howmuch--someofthebanksthathavealsoreportedhavetalkedaboutlikehighvolatilityCRE.
Canyoujusttalkalittlebitabouttheconstructionpiece?Likeisanyofthathighvolatility?Doesithaveahigherriskweighting?Justtryingtogetasenseofthetypesofconstructionthatyouareputtingon,thanks.
FrankForrest (EVP,CRO):
Hi,thisisFrank,goodmorning.Goodquestion.AsTayfunmentionedthough,whenyoulookatourgrowthitisnotheavilyconcentratedinconstructionactivity.Itisacrossallsectorsand,again,theriskprofileisverystrong.
Theconstructionactivityweareseeingisquitefranklyinnon-speculativeofficebuildings,apartmentbuildings,someretail.They'retonationalbuildersthatwe'vehadalongtimerelationshipwith.Andagain,IwillemphasizewearetakingIthinknominalriskinmanagingthatbookaswegoforward.
Wehavelearned,asotherinstitutionshave,ourlessons.ThisbookissmallrelativetoIbelieveourpeers.Andwearebeingveryprudentinclientselection.
Soitis--wearehappytoseethegrowth,butagaintheyaretoclientswefeelverygoodabout.TheseareagainloansthatIthinkhaveaverysolidriskprofileandwe'llcontinuetomanageitprudentlyaswegoforward.
KenZerbe (Analyst-MorganStanley):
Allright,thankyou.
Operator :
MattO 'Connor,DeutscheBank.
MattO'Connor (Analyst-DeutscheBank):
Canyoutalkaboutwhatisgoingonintheconsumerautolendingspace?Iknowitisanareathatyoupulledbackalittlebitseveralquartersagogiventightpricingthere.
Butobviouslythereisgoodloansalesand--orautosalesandtheaveragepriceofautoshasgoneup.Sooveralltheindustryseemstobedoingprettywell,buttalkaboutthelendingenvironmentandyourapproachrightnow,please.
T ayfunT uzun (EVP,CFO):
Matt,ourcolorthereisnodifferentthanthesamemessagethatwehavebeengivingoverthelasttwoyears.Yes,carsalesareathealthylevels,butwhenwelookatthepricingandprofitabilityofthatbusinesswithinthecreditprofilethatwearecomfortablewith,wearecomfortablewiththeoriginationlevelsthatwehaveandtheyhavebeenverystable.
Anumberofourcompetitorsobviouslyareoperatingatcreditprofilesbelowours.Theimmediateprofitmetricslookreasonable,butitjustdoesn'tfitourriskprofileandrisktolerancelevels.
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So,Idon'treallyhaveanynewnewsforyouinthatarea.Ithinkthenextfewquartersthenumberswilllookverysimilartowhatyouhaveseenfromusoverthelasttwo,threequarters.
MattO'Connor (Analyst-DeutscheBank):
Andthenmaybejuststeppingbackbiggerpictureforconsumerlendingoverall.Mostofthecategorieshavebeenrelativelystableforyouguys.Aretherepocketsofopportunitytobalancesheetgrowthorstillmostlyfocusedonthecommercialsideintermsofonbalancesheetgrowth?
T ayfunT uzun (EVP,CFO):
Thedevelopmentofourbalancesheetisreallyanextensionofwhatweareseeinginthebroadeconomy.Homeequitiescontinuedtheirsoftdecline.Atonepointthatisgoingtoturnandclearlyinourbranchnetworkweareveryfocusedinmakingsurethatwhenthathappensinourfootprintthatwearereadytoexperiencethatgrowth.
Creditcards,Ithinkthatstillcontinuestobeagoodbusinessforustosupportongoinggrowth.Thatbusiness,asyouknow,isaverybrandfocuseddirectretailportfolioforus;ithasgreatcreditprofileandwearehappytogrowthatportfolioandwewillgrowthatportfolio.
Wehaveaddedsomemanagementtalentoverthepastcoupleofquartersthere.Andaswefocusonthe[MV]projectandthecreditcardbusinessatthesametimewearefocusingonbusinessgrowthopportunities.Soyouwillseecontinuedgrowthincreditcards.
Andthenwealsowillobviouslymaintainourmortgagepresenceandasweseeopportunitiestherewewillsupportthat.Soatthispointthetrendsaregoingtolookfairlysimilar,butastheconsumercontinuestoimproveinitsbalancesheethealth,weareheretoabsorbobviouslymoregrowthinthatarea.ButrightnowC&Iwilldominateloangrowth.
MattO'Connor (Analyst-DeutscheBank):
Okay,thankyouverymuch.
Operator :
KenUsdin,Jefferies.
KenUsdin (Analyst-JefferiesandCompany):
Tayfun,justasummaryquestionontheoutlook.IfIheardyourightaboutexpectinggrowthinNII,abetterbackhalfforfees,andthenthisexpenseguidance,amIcorrectinassumingthatthePPNRoutlookwouldbebetterthanthe578adjustednumberthatyoupostedforthesecondquarter?
T ayfunT uzun (EVP,CFO):
Ken,IwillleavemyoutlookstructureasIlaidoutwithoutsortofaddingmoretothat.Imeanclearlythefundamentaldriverscontinuetobehealthy.AnditisnodifferentthanwhatwethoughtwasgoingtohappeninJanuary,whatwethoughtwasgoingtohappeninApril.
Wejustmaintainaverysimilarperspective.Weareconfidentinthehealthofthefundamentaldrivers,thatbeingearningassetgrowth,whichnowgoingforwardforthisyearwillreallyreflectloangrowthratherthansecuritiesgrowth.
NIMisgoodlevels;themomentumthereishelpful.Webelievethatthesecondhalfshouldshowgoodsort
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offeeincomelevels.SoIwilljustleaveitthereandwegaveyoualittlebitmoredetailedexpenseguidancebeyondthat.
IwouldbecarefulinnotprotectingQ2'sPPNRlevelsfortherestoftheyear.Weclearlyhaveperformedinthesecondquarter,butthingslookgoodandaswemoveintothethirdquarterweareconfidentinthefundamentaldrivers.ButIjustwanttopointoutthatinQ2weoutperformedsignificantly.
KenUsdin (Analyst-JefferiesandCompany):
Understood.Andthensecondly,justonyouroutlookforcreditwhereclearlythereweresomeadjustmentsmadeinside,soundslikealittlebitfortheenergyside.
UnderlyingthatandwhateveryoumayhaveadjustedfortheSNCspecifically,Iwasjustwonderingifyoucouldfurtherteaseoutwhatwascorecreditperformance,whatmighthavebeenSNCrelated.Andthenyourjustkindofunderlyingoutlookforanyfurthercharge-offimprovementandreserverelease.
T ayfunT uzun (EVP,CFO):
Yes,firstofall,Ididnotmakeanystatementsrelatedtotheenergybeingpartoftheunderlyingcredittrends.SoI'mgoingtoturnthatovertoFrankandthenIwillcomebackwithcommentsonprovisioning.
FrankForrest (EVP,CRO):
Thanks.Aswehavesaidbefore,thisenergybookisrelativelysmallincontextofbothcommercialandthebandcorp.asawhole.Itislessthan2%ofourbandcorp.loans,it's$1.67billion,soit'sasmallbook.
Wehaveahighlyexperiencedteamoflenderswhohavebeenwithusover20yearsonaverage.ItispredominantlyamidandlargecorporatefocusthatisconsistentwithourotherFifthThirdnationallines.Weexercisewhatwebelieveisconservativeunderwriting.
Itisadiversifiedbook,asTayfunhastalkedabout.Upstreamrepresents50%ofallenergy-relatedexposuresandthattendstobeawellstructuredbook.Itisunderatraditionalsecuredreservebaseborrowingbase.Thebalanceofthatbookispredominantlytoinvestmentgradecredit.
Sowhenyoulook--andaswewentthroughthisSharedNationalCreditexam,effectivelyforusitwasawash.ThenumbersthatTayfunsaidareinoursecond-quarterresults,therewerenomaterialadversechangesasaresultoftheexamacrossthebroadportfolioorintheenergysector.
Sothesectoritself,wetalkedaboutthefactthatwehadaslightmigrationonnonperformingassets,butthenonperformingassetsintheenergybookarelessthan1%andwedon'texpectanymaterialchangethere.Wedon'texpectanymaterialchangesintheoutlookforthesecondquarterasaresultofourenergybook.
Sowefeelgoodaboutthebookasawhole.Again,itissmall,well-managedandperformingtodate.Wehaveseensomeriskratingmigrationashaveothers.Butagain,itisjustnotamaterialnumberintermsofbandcorp.
T ayfunT uzun (EVP,CFO):
Andontheirprovision,Ken,Ithinkwesignaledattheendoflastyearveryclearlythatwewouldexpectthisyeartocrossthethresholdatsomepoint.Ourcoveragelevel,provisiontocharge-offcoveragelevelmovedupnowabove90%thisquarter.
Soouroutlookbasicallyisforthattrendtocontinueintofullcoverage.Butthatisjustthenaturalprogresswithrespecttoourexistingcreditprofile,ourloangrowthstatisticsandIthinkdespitethefact
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
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thatwefeelveryconfidentthatjustasanaturalprogressionatthispointthatweareexpecting.
KenUsdin (Analyst-JefferiesandCompany):
Understood,thanks.Sorryforthatmisstatementontheenergycommentearlier.
T ayfunT uzun (EVP,CFO):
Noproblem.
Operator :
MikeMayo,CLSA.
MikeMayo (Analyst-CLSALimited):
Whatwasthetippingpointforthisbranchreduction,105branchesoverthenext12months.I'mnotsayingitdoesn'tmakesense,itjustseems--whynow?
T ayfunT uzun (EVP,CFO):
Look,Mike,Ithinkwediscussedwithyou,aswellaswiththebroaderinvestorcommunity,thatwehavebeenaggressivelytakingactionsinourbranchnetworktoadapttonewtechnologies.
Wehavebeenobservingwhathasbeenhappeningintheunderlyingdemographicsandusagepatterns.Andthisisjustbasicallyanaccumulationofthosetrendsoverthelastnumberofquarters.
Andwehad--weanalyzedthissecondquarteroflastyearandthisquarterwasagoodtimetotakeanotherlookbecause,asyouknow,technologyismovingveryfast,thereareopportunities.Andwehadn'tmadesignificantchangesinourbranchnetworkoverthepastnumberofyears.
Sothiswastherighttimetodoit.Wefeltcomfortablewithwhatwasavailabletous.Andwehaveabetterlookintothefutureastohowourcustomersareutilizingourbranchestodaythanwedidbefore.
MikeMayo (Analyst-CLSALimited):
Andthenjustoneotherquestion.FifthThirdhashadtwoCEOsforthelast25years.Kevin,you'vebeenthereforawhile.AndIguess,Greg,youtakeoverlatethisyear.SocanyougiveussomecolorastowhytheCEOchange?Ithinkitwasalittlebitofasurprise.
Clearlyitwasn'tduetoanearningsshortfalloranything.ButwhatwasthemotivationbehindtheCEOchange?WhatwastheBoard'sthinking?AndGreg,howmight--howisyourstyleperhapsalittlebitdifferentthanKevin's?
KevinKabat (ViceChairman,CEO):
Hey,Mike,letmestart--giveyoumyperspective.Wehavetriedtobeastransparentaspossiblerelativetoorientation.Butasyouknow,whenIwasworkingwiththeBoardrelativetolookingatakindofCEOtransition,andparticularlyintermsoflookingataboutadecadeoftimeframe,itisnotthe--asItoldtheBoard,itisnottheyears,itisthemiles.
Andso,frommyperspective,giventhattheBankisinreallygoodshape,whetheryoulookatthebalancesheet,asyoujustmentioned,orearnings.Andthenasyoualsolookatintermsofthesuccessioninthetalentthatwehaveinternallyfromthatperspective,itreallytometiestogetherverywellforaverynormal,verythoughtfultransitionforaFortune500Company.
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AndIthinkIamreallycomfortable,IthinktheBoardwasreallycomfortableinourapproachandintheperspectivethatweputtogether.Asyousaid,long-servingCEOsandourexpectationisthatGregwilldothesameaswegoforwardfromthatstandpoint.
AndtheotherthingIwouldmentionisGreghasbeen--asIhighlighted,GreghasbeenChiefOperatingOfficersince2006.HehasbeenPresidentandChiefOperatingOfficersince2012.Sohehasalonghistory,heunderstandstheculture,heunderstandsboththechallengesandtheopportunities.
AndhewillgetachanceinthecomingmonthstoreallykindoflayouthisthoughtsandhisperspectiveintermsofwhereFifthThirdwillbegoingfromthatstandpoint.AndIthinkyouwillbepleasedwithwhathebringstothetablefromthatstandpoint.
So,Idon'tknow,Greg,ifyouwantedtoadd(multiplespeakers)?
GregCarmichael(President,COO):
Thanks,Kevin.Firstoff,KevinandIhavehadagreatrelationship.AsKevinmentioned,IhavebeentheCOOsince2006andPresidentsince2012.Itisbeenagreatpartnership.Andthishasbeenaverythoughtfultransition.Wehaveworkedhardtogetthisright.Wewillworkhardtocontinuetogetitrightgoingforward.
Leadershipstyle,Mike,whatIcantellyouaboutmyselfandwhatyoucanexpectfrommeisacouplethings.OneisIbelieveinclarity,makingsureourorganizationhascrystalclarityastoourmission,ourobjectives,whatwearetryingtoaccomplishasanorganization.
Beingverytransparentaboutwherewestand,whatweneedtogetaccomplish.Beingveryproactiveanddecisiveonmovingforwardandmakingsureweholdtheorganizationaccountableforouroverallmissionobjectivestoserveourcustomers.So,thatismystyle,Iwillcontinuethatgoingforwardintheorganization.
IlookforwardtoonceagainfocusingonhowwecanleveragemybackgroundandmyexperiencepriortoFifthThirdandwhenIfirstcameintoFifthThirdintechnology.
Weliveinatechnologyevolutionandtheworldischangingandmyexperienceinthatsectorandthepaceofplayinthatsectorwillcontinuetobeanopportunityforustogetitright.So,Iamlookingforwardtotheopportunity.
KevinKabat (ViceChairman,CEO):
Ithink,Mike,thebottomlineisthatwewouldhope--theBoard,myself,Greg,theleadershipteamherewouldhopethattheStreetandyouallseethatwearegoingtocontinuethemomentumthatwehavetalkedabout,wearegoingtocontinuetheeffectiveapproachtoarapidlychangingandchallengingenvironment.
AndIthinkyoucanexpecttoholdusaccountabletothatstandardnowandinthefuturewithGreg,so--.
GregCarmichael(President,COO):
AndtheotherthingIwouldadd,Mike,iswehavegotgreatleadershipinthisorganizationwiththemoveswehaverecentlymade.Youlookatourmarketsandthetalentwehaveinourmarkets,wehavegotgreatpeoplerunningourmarkets,wehavegotgreatleadersrunningourlinesofbusinesses.AndIamveryproudoftheperformanceofthisorganization.
AsTayfunsaidandasKevinsaid,weareinaverysolidpositionrightnowwithalotofupsideopportunitiesgoingforward.
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MikeMayo (Analyst-CLSALimited):
Thankyou.
Operator :
ChrisMutascio,KBW.
ChrisMutascio (Analyst-Keefe,BruyetteandWoods):
Tayfun,Ijusthadaquickquestionforyouifyoucanhelpmeout.Onslide14yougothroughyourinterestrateriskmanagementandhowyouarepositionedtoday.AndIlookedatacoupleofthingsofthose.
Andforexample,theinvestmentsecuritiesportfoliodurationisnow,what,4.9years.Ilookedbacklastpresentationanditwas4.3years.Thatmakessensebecauseyouare--Iguesswiththeinvestmentsecuritiespurchases.
Theshort-termwholesalefundingisnow3.5%to4%oftotalfunding,itwasonly1.5%atlastquarter.Andsecuritieshasn'tmovedagreatdealbecausemostofthebuildingoftheportfoliowasfirstquarter.Butsecuritiesasapercentofassetsisnowover20%;itwasjustover19%lastquarter.
Soitwouldseemtomelookingatsomeofthosecharacteristicsyourassetsensitivitywouldhavebeenreducedafairamount.ButwhenIcomparesomeofthenumbersonthisquarter's--theestimatedsensitivitiesandthosetables--whenIcomparethemthisquartertolastyear,therereallyisn'talotofmovement.
Somewhatdownward,but--socanyoukindofreconcilethebuildupofthesecuritiesportfolio,thedurationextensionandyetnotreallydeterioratingmuchofyourassetsensitivitygoingforward?
JamieLeonard (SVP,Treasurer):
Yes,itisJamie.Thebiggestportionoftheanswertoyourquestionisifyoulookbackanotherpresentationpriorandyoulookatyearend,weareactually--thedurationoftheportfoliowasatfiveyears.
Sowhathappenedisratesralliedinthefirstquarterwhichdrovetheportfoliodurationtoshorten.Andthenrateshavesoldoffinthesecondquarter.Sowehavenotreallychangedthemixorcompositionoftheportfolio,itismerelyafunctionoftheratesthatareimpactingthedisclosedduration.
Andthenwhenyoulookatwhatwehaveaddedintheportfoliobothinthefirst-quartergrowthandthenthesecond-quarteractivity,youreallyseethatdrivingthechangeinthe[EBE]wherewediddeclinefromaminus3.8downtoaminus4.6.
Butintermsofthedisclosedassetsensitivity,youcanseethebiggestdriversofyourrateriskarethebeta,thepricinglagsandthentheDDAdisintermediationandwehavenotchangedthoseassumptions.
Theonlychangethatoccurredtoourinterestrateriskupdatewaswedidanannualdepositliveattritionstudyandthatresultresultedinasmallincreaseintheaveragedepositlivesof0.2yearsandthatisdrivenbythecontinuedsuccessfromourdepositsimplificationprogramandourabilitytoserviceourcustomers.
Andweareseeinglessattritioninourdepositbase.Soreallytherewerenolargechangesinourrateriskassumptions.
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T ayfunT uzun (EVP,CFO):
Chris,Imeanyourquestionispreciselythereasonwhywehavethisslideinourpresentation,becausewewantedtomakesurethatwewereverytransparentintermsofnumbers,intermsoftheassumptionsthatsupportthosenumbers.
Wekeepseeingreferencestohistoricalbetarangesfromourpeersandwewerehopingforthisdiscussiontobebasedmoreonfactualdata,whichweareintendingtodo.Yourreferencetotheshort-termwholesalefundingisaquarterlyfluctuation,isnotsortofameaningfulchangeintermsoftheoveralltrendswhichclearlywillrelyoncorefunding.
ChrisMutascio (Analyst-Keefe,BruyetteandWoods):
IappreciateitandIdo,thedisclosureisfantasticrelativetowhatIseefromothers,soIdoappreciatethat.
T ayfunT uzun (EVP,CFO):
Sure.
Operator :
JohnPancari,EvercoreISI.
JohnPancari(Analyst-EvercoreISI):
Justonequestionreallyonthecreditside.OntheSharedNationalCreditbookonslide16,Iknowyouindicatethatthesizeofthebookis$25billion,sothat'sabout27%ofloansnow.Whatwasthesizeofthebookaboutayearago?
Whatarethebusinessesthatarereallydrivingthatgrowth?Isthereanyspecificonethatisreallydrivingthegrowthofthatbook?Andthenalsowhatisthe--doyouhavetheaverageyieldofthatportfoliobychancejusttogetanideaofwherethesetypesofloansarecominginat?
FrankForrest (EVP,CRO):
Hi,thisisFrankletmetakeittobeginwithandwearelookingontheyieldquestionforyou.Thebookisupfromabout39%to44%overthepastyearasitrelatestotheSharedNationalCredite-Exam.
Again,wehavealargecorporatebookandthatispredominatelywhatthisis,mid-corp.andlargecorporate,veryhighriskratedoverallbook;theoverallriskprofileisstrong.
AndasIhavesaidbefore,whenyouthinkabouttheSNCexamandyouthinkaboutthisportfolio,weunderwriteeveryloantoourownaccount.Soitdoesn'tmatterwhetherweparticipateinthesyndication,weleadasyndicationorwedoastandaloneone-offtoacorporate,westructureitandweunderwritetoourownaccount,toourriskappetiteandtoourownstandardswhichwebelievearehigh.
Sorelativetowhetheritis39%or44%Idon'tnecessarilythinkisthatmeaningfulbecause,again,weunderwritetoourownaccount.AndthisisaportfoliothathasperformedverywellandourportfolioperformedverywellinthemostrecentSNCexam.
T ayfunT uzun (EVP,CFO):
Yes,theSNCportfolio,John,asFrankmentioned,withrespecttoallthevariables,creditvariables,areactuallyabetterportfoliothanouroverallcommercialportfolio.Sowewillgetyou--Idon'thavetheyieldspecifictotheSNCportfolio.Butinoneofourpresentationswecansharethatwithyou.
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JohnPancari(Analyst-EvercoreISI):
Okay,allright.Andthenmysecondthingisonthatsametopicactually,buthowmuchofthatportfolioareyoualeadon?Andthenlastly,Iknowyouindicatedyoudidn'thaveanyissuesintheSNCexamfromit,isthere--theriskofanylingeringimpactlikenextquarterforanyofthestuffthatyouwerenotagentonornotleadagenton?
T ayfunT uzun (EVP,CFO):
IwillanswerthefirstpartthenIwillturnitovertoFrank.Theagentedportionofthatportfolioisabout6%to7%,soitisasmallpercentageofthattotal.Frank?
FrankForrest (EVP,CRO):
Again,theonlypieceofthatthatcouldbelingering,aswetalkedabout,wouldlikelybeintheenergysector.Buttheenergybookforusis2%oftheSNCbook.Imeanitissmall.
Soit'sasmallpieceoftheoverallpie.Andagain,we'vebookedalloftheresultsfromtheSNCexam,alltheratingsadjustmentswereallinthesecondquarter.Sowedon'texpectanymaterialchangesgoingforwardfromthatexam.
JohnPancari(Analyst-EvercoreISI):
Okay,great.Allright.Thankyou.
Operator :
DavidEads,UBS.
DavidEads (Analyst-UBS):
Maybejustoneforme.Canyouguystalkalittlebitaboutwhatyouareseeingwhenitcomestodepositpricing?ItseemslikesomepeoplearestartingtogetalittlebitmoreaggressivethereandIamjustcuriousifyouareseeingmuchinyourfootprint.
JamieLeonard (SVP,Treasurer):
Yes,wellwehavediscussedoverthepastcoupleofearningscallsiswefeltthereweresomeopportunitiestorationalizedepositpricing,especiallyinlightoftheLCR.
SoourfocushasbeenonreducingdepositratesespeciallyinthosebucketsthatarelessLCRfriendly.AndyouseethatinourresultsthisquarterontheNIM,asTayfuntalkedabout,thebenefitfromallofourfundingactionswasroughly3basispoints.Andthatshouldstabilizeasweheadintowhatpotentiallyisarisingrateenvironmentattheendofthisyear.
SoIthinkwehaveaccomplishedwhatwewantedtoaccomplishandyoucanexpectthattobefairlystablegoingforwarduntiltheFedbeginstotakeaction.
DavidEads (Analyst-UBS):
Great,thanks.
Operator :
PaulMiller,FBR.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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T homasLeT rent (Analyst-FBRandCompany):
Hey,goodmorning,is
actuallyThomasLeTrentonbehalfofPaul.Mosthavebeenaskedandanswered,butaquickquestiononprepaymentspeeds.
Wehaveheardfromafewregionalpeersthatprepaymentspeedsinsomeoftheirportfolioswerealittleelevatedinsecondquarter.Didyouguysseeanyelevated[CPRs]inanyofyourbooksorinresiortermCREspecifically?
T ayfunT uzun (EVP,CFO):
Areyoureferringbroadlyfortheentireloanbookor?
T homasLeT rent (Analyst-FBRandCompany):
Yes,broadly--thewholeportfolio,herethereanybooksthatsawhighprepaymentspeeds?
T ayfunT uzun (EVP,CFO):
Theresistuff,clearly--thesecondquarterwasimpactedbyalltherefiactivitythattookplaceinthefirstquarterwhichthenshowsupinourMSRamortizationlines.Theinvestmentportfolioreallywasnothingbeyondourexpectations,justreflectiveofthemarkettrends.
AsImentioned,thecommercialbookshowedalittlebitelevatedpayofflevels.Butwhenwesortoflookedatthedetailsofthosepayoffs,theyappeartobemoreevent-relatedratherthanrefi-related.
Therewassomeactivityinthecommercialconstructionbook;therewassomeprepaymentaheadoftheprojectfinalizationdates.Thisquartermorethanlastquarterisnothingsortofoutsideareasonablerange.Sothatismycoloronprepayactivity.
T homasLeT rent (Analyst-FBRandCompany):
Okay.Andonequickquestiononexpenses.Ibelieveyoumentionedsomethingaboutleaseterminationexpenses.Thatisanadditionalline,thatisitadditionalexpensethatwasnotincludedinthisquarter'simpairmentcharge,correct?Thatcouldcomeoverthenext6to12months?
T ayfunT uzun (EVP,CFO):
Yes,thatisspecificallyrelatedtothosebranchesthatwearegoingtoconsolidatewherewehavealeaseratherthanowningtheproperty.Andthatisgoingtoflowthroughourexpensesoverthenextcoupleofquarters.
T homasLeT rent (Analyst-FBRandCompany):
Andyoudidnotsizethatcorrectly?
T ayfunT uzun (EVP,CFO):
Well,wesizeditinour8-K;wesaiditisgoingtobetween$6millionand$10million.ButIdidnotincludethat.Iexplicitlystatedthatmyexpenseguidanceof2.5%doesnotincludethatnumber.
T homasLeT rent (Analyst-FBRandCompany):
Okay,perfect.Thanks.
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
©2014TheStreet,Inc.Al l R ightsReserved Page21of26
Operator :
MartyMosby,ViningSparks.
MartyMosby(Analyst-ViningSparks):
Tayfun,Iwantedtoaskyoualittlebitaboutthegrowththatyouhavedoneinthesecuritiesportfolioandyourchoicetoalmost100%utilizeavailable-for-saleversusheldtomaturity.
IthinkthisquarteryouactuallyhadsomenegativeimpactonyourtangiblebookvalueasOCIcameinalittlebit.Wasjustcuriouswhatyourstrategyortacticisthere?
JamieLeonard (SVP,Treasurer):
Yes.ThisisJamie.
Thestrategyontheavailableforsaleisreallyjusttomaintainflexibilityaswemanageinterestrateriskandseeopportunitiesinthemarket.IknowalotofourpeershaveusedHTM,butgiventhatourassetsizewe'rebelow$250billionwedidelecttheAOCIoptoutsothatuseoftheAFSandtheresultingmarksdon'timpactourcapitalratios.
Yes,therewillbeanimpactonsomeofthescreensthatyoualluseontangiblebook,butwe'dalsohopeyoujustwouldfairvaluetheHTMportfoliosfrompeersaswellwhenscreeningacrossthatmetric.
MartyMosby(Analyst-ViningSparks):
Andwouldyou[consider]the(inaudible)yes,goahead,I'msorry.
T ayfunT uzun (EVP,CFO):
TheflexibilityofmanaginganAFSbookoutweighsthebenefitsofnotmarkingaheldtomaturitybook.Sothathasbeenourlongsubscribedphilosophyhere.
MartyMosby(Analyst-ViningSparks):
AndwhatIwastryingtoaddtothatwasgiventheexcesscapitalthatyouhave,wouldyouthinkabouthavingthatflexibilitysowhenratesstarttomoveupyoucanutilizethatexcesscapitalinashort-termlossthatgetsrecapturedveryquickly,butyetimprovesyourearningsprettyrapidlybecauseyoucancontinuetokindofchurntheportfolioupasratesmovehigher?Haveyoukindofthoughtaboutthat?
T ayfunT uzun (EVP,CFO):
Imean,thatclearlyisareasonablestatement.Wewillseehowtheenvironmentmoves.Butthattypeofflexibilityiswhatwevalue.
MartyMosby(Analyst-ViningSparks):
Andthenjustlastly,ifyoulookatthemortgagekindofdetailbackintheappendix,itlookslikemaybewiththegainyouhadintheservicingsideyouactually--lookslikeyouheldmoremortgageoriginationsversussecuritizing.
Ididn'tknowifyouwerekindofsubstitutingoriginationforservicingincomeandcreatingsomelonger-termimpactwithhavingmoreintheportfolioversussecuritizingthisparticularquarter?
KevinKabat (ViceChairman,CEO):
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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Yes,acoupleofcommentsonthatone,oneonMSR.Wehavebeenactually--whenyoulookatourMSRmanagementoverthelastthree,fouryearswehaveaverycomprehensiveapproachtohowwemanageourMSRpositionwithrespecttoproductiontrends,interestrateenvironmentandalsotheup-and-downtrendsinoursourcingbook.
Sothedecisionwhenandhowmuchtoportfolioorwhatportionofourmortgageproductiontoportfolioreallydependsonenvironmentalfactors.Wedidhaveinthefirstcoupleofquartersalittlebitmoreelevatedbalancesheetpositionsinmortgageproduction,butthatdoesnotnecessarilyindicatewhatwewilldogoingforward.
Thatisreallyaquarter-to-quarterdeterminationintermsofwhereweseepricinginthemarket,whatourportfoliocharacteristicslooklike.RightnowwearejustholdingtheARMportionofouroriginations;wearenotholdingonto--ontheconformingsidewearenotholdingontolonger-termfixed-ratemortgages.
Wehavealwaysportfolioedthejumboproductionbecausethatjustismoreofarelationshipbusiness.Butingeneralthemortgageservicingassetriskmanagementisaverycomprehensiveapproachandwhether--whatwebalancesheetfromproductionisalittlebitseparatethanthat.
MartyMosby(Analyst-ViningSparks):
Understood.Itjustseemsliketherewasanincrementallegupthisparticularquarter.SoIwasjustcuriousaboutthat.Thanks.
T ayfunT uzun (EVP,CFO):
Quarter,yes.Youarecorrect,yes.
Operator :
GeoffreyElliott,Autonomous.
Geof f reyElliott (Analyst-AutonomousResearch):
IhavegotaquestiononVantiv.CanyougiveanupdateonyourthinkingaboutthestaketheregiventhatitisnowbeenoverayearsinceyoulastsoldsomesharesandtheVantivsharepricehasclearlymovedupquitealotoverthattimeperiod?
T ayfunT uzun (EVP,CFO):
OurlongstatedstrategicapproachtoourVantivownershipisthatoverthelong-termwewillnotremainamajorityoralargeownerofVantiv.Andthatdecision,reallywelookatitonaquarterlybasis,welookatwhereweare,welookatwherethestockpriceis.
ItisafairlycomplexownershipstructureaswehavethewarrantpositionaswellastheTRA,aswellasthedirectownership.Soatthistimeourpositionhasnotchanged.Westillintendtoreduceourownershiplikewewanttomakesurethatweexecutethatinthebestinterestofourshareholders.Andwewillcontinuetomonitorthatsituation.
Geof f reyElliott (Analyst-AutonomousResearch):
Andwouldsellinganotherslugofshareshere,wouldthatmeanyouhavetodeconsolidate,youlostthefeestream?Isthatpartofthethinkingbehindnotsellingoverthelastyearorso?
T ayfunT uzun (EVP,CFO):
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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No,Imeanweowncurrentlynearly23%oftheCompanydirectly.Sowearenotclosetohavingthatconcern.AndthereisreallynobrightlineaswehaveBoardmemberships,aswehavethewarrantpositionandasignificantoperatingpartnershipwiththeCompany.Sothatisnotthereasonwhywecurrentlyarestillholding23%oftheshares.
Geof f reyElliott (Analyst-AutonomousResearch):
Great,thankyouverymuch.
Operator :
SameerGokhale,JanneyMontgomery.
SameerGokhale (Analyst-JanneyCapitalMarkets):
Firstly,Greg,I'dliketocongratulateyouonyournewappointmentand,Kevin,Iwassurprisedbytheannouncementthatyouwereretiringbecause59isnowthenew49.Butbestoflucktoyouonthataswell.
WecoveredquiteafewofthequestionsIwasgoingtoask,butjustacoupleofthemjusttofleshthemoutalittlefurther.
ThefirstonewasreallyforGreg.InyourroleasCOOonewouldassumethatperhapsyouweremoreinternallyfocusedintotheoperationsoftheCompany.ButnowastheCEOIthinktheexpectationwouldbethatyoumightneedtobemoreoutwardlyfocused.
Soasyouhavetakenonorwillbefullyofficiallytakingonthisresponsibilitylaterthisyear,whatwouldyousayareyourtopthreeprioritieslookingoutwardly?Mobilebankingclearlyisoneofthethingsthathavebeenfocusedon,butarethereanyothertwoorthreethingsthatatthispointyouhavecommunicatedtotheBoardorarereadytosharewithus?
GregCarmichael(President,COO):
Firstoff,thanksforthequestion.AndIhavebeenfocusedontheorganization.ObviouslyasChiefOperatingOfficerandPresident,spentalotoftimeinthemarkets,alotoftimewithourbusinesses.
SooneofthefirstthingsIwanttodoismakesureItouchbasewithallkeyconstituents,ourstakeholdersoutthere,shareholders,keycustomers,employeesandmaintainthatfocusonourmarket.
Inadditiontothat,wearegoingtocontinuetolookforwaystotakeadvantageofsomeofthedynamicchangesthatareoccurringinourindustrysuchasinvestmentsintechnologytoaccelerateourpaceofchangewithrespecttohowweserveourcustomersandefficiencies.
Andalsocontinuetolookatourbusinessesmakingsurewearealignedandweareintherightbusinesses,we'vegottherightfocusonthosebusinesses,wehavetherightpartiesinplace,wehaveenoughresourcesdeckedagainstthoseopportunities.YoucanexpectIwillcontinuetofocusonthatandmakesurethatwearealignedtocapitalizeonthemarketopportunities.
KevinKabat (ViceChairman,CEO):
Sameer,I'malsotryingtogethimtopayattentiontoretireesbecausesignificantshareholderandmorealignedwithyouthanever,so...
GregCarmichael(President,COO):
Itoldhimmyplateisfull(laughter).
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
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SameerGokhale (Analyst-JanneyCapitalMarkets):
Terrific.Well,andthentheotherquestionIhadwasactuallyintermsofyourappetiteforM&A,Imeanthistiesintosomeofmaybeyourstrategicactionsyoumightlookatoverthenexttwoyearsorthreeyears.
Asyoulookattheportfolioofbusinessesyouhavetodayandtheloantypes,andoneofthethingsIwanttohoneonis,orzoneinon,iscommercialandindustrialloans.Itisaprettybroad-basedassetcategory,manysubcategoriesinthere.Arethereanyspecificareasthatmaybeyouhaveearmarkedasbeingofinterestfrom(technicaldifficulty)standpointandthingsyoumightwanttoacquire?
GregCarmichael(President,COO):
Firstoffwedon'ttypicallycommentonM&Aactivity,Sameer,butIwillstatethis--anytimethereisanopportunitytocreatevalueforourshareholdersoveralong-termhorizonwearegoingtolookatthatveryclosely.Andwearenotgoingtodoadealjusttodoadeal.Norwouldwedosomethingthatispositiveintheshort-termthatdoesn'tcreatelong-termshareholdervalue.
So,Ithinkaswelookatthoseopportunitiesinourbusinessorourgeographywewillalwaysbemindfulofdoesitcreatevalueforourshareholdersand,net-net,ourabilitytobeabletoexecute?Andwewillexecuteonthoseopportunitiesattheendofthedaywhenthetimeisrightandwhenthoseopportunitiesemerge.
T ayfunT uzun (EVP,CFO):
And,Sameer,wehavebeenverysuccessfulinorganicallyactuallystartingandgrowingsubbusinessesinsidethecommercialCorporateBankingarea.Sothatsuccessgivesusconfidencethatifweweretoventureintoanewareathatwecanactuallydoitwiththerighttalent.
Andinthisenvironmentitalmostisbettertodothatastheregulatoryenvironmentisverydifficultforanon-banktooperateinsideabank.So,oursuccesssofargivesusconfidencethatwecandoitinternally.Ifthereareopportunitiesoutsidewedon'tmindlookingatthem,butwewillhavetoevaluatethemastheycomealong.
SameerGokhale (Analyst-JanneyCapitalMarkets):
Okay,thatisgreat.Thankyouverymuch.
Operator :
MattBurnell,WellsFargoSecurities.
MattBurnell(Analyst-WellsFargoSecurities):
Firstofallmaybe,Greg,aquestionforyou,justfollowingupontheimmediatelypriorquestion.We'vebeenhearingforsometimethatincreasingregulationhasbeenabiggerchallengeforsmaller--muchsmallerbanksthanFifthThird.
IguessIamcuriouswithinthecontextofyourcommentsaboutyouwouldbewillingtoconsiderlonger-termaccretiveacquisitions,areyouseeingagreaterflowofthosetypeofopportunitiesoverthelast6to12monthsthanyousawmaybe2to3yearsagoorhasthatstreambeenprettysteady?
GregCarmichael(President,COO):
CompanyName:Fif thT hirdBancorpCompanyTicker:FIT BSector:FinancialIndustry:Banking
EventDescription:Q22015EarningsCallMarketCapasofEventDate:17.11BPriceasofEventDate:21.46
©2014TheStreet,Inc.Al l R ightsReserved Page25of26
No,Matt,wereallyhaven'tseenanythingofsignificanceoropportunitiesthatwethinkthatfitinsideourwheelhouse.Sonothingsignificantand,Tayfun,Idon'tknowifyouhaveanythingtoadd?
T ayfunT uzun (EVP,CFO):
No,Matt,Ithink,asyouknow,todaywhenyoulookatM&Aopportunitiesyoudon'tonlylookatthenext10yearsofthatorganization,butyoulookatthepast10years.Andthereallyattractiveopportunitiesarefewandfarbetween.Andsonothingreallytoreportoninthatside.
MattBurnell(Analyst-WellsFargoSecurities):
Fairenough.And,Tayfun,maybejustafollowupforyou,andIappreciatethismightbealittlebitsensitive.Butintermsofthebranchreductions,intermsofthefull-timeequivalentemployees,thosearedownaboutover--onayear-over-yearbasisaboutthesamerateasthebankingcenters.
Andgivenalltheinvestmentthatyouaremakingintechnologyshouldtherebeanoutsizedreductionpotentiallyinstaffinglevelswithinthebranchesgivenalltheinvestmentthatyouareclearlymakingintermsofdeliveringdigitalproductstoyourcustomers?Anumberofotherbankshavebeentalkingaboutthatasanintermediatetolonger-termbenefit.
T ayfunT uzun (EVP,CFO):
Yes.So,bydefinition,thisbranchactionwillclearlyimpacttheoverallemploymentlevelsinourretailbusiness.Butithasbeennow--Ithinkitisagoodsortof2.5yearssincewehavereducedourFTEcountinourbranchesandthatcontinuedevenintothisquarter.
Isuspectaswesortofcontinuetogrowtechnologyinsideofourbranchesandreconfigure,redesignourexistingbranchesthattrendwillcontinue.
Butontheotherhand,Ihavetotellyouthatrevenuegrowthcontinuestobeofutmostimportanceinourretailbusinessandwehavebeenandwewillcontinuetoaddsalesorientedassociates.
So,therearetwotrendsthataregoingagainsteachother,butthe105reductionitselfwillclearlytakeoutaportionofourretailemployeebase.
MattBurnell(Analyst-WellsFargoSecurities):
Great.Thankyou.
T ayfunT uzun (EVP,CFO):
Thankyouverymuchforjoiningusthismorning.
Operator :
Therearenofurtherquestions.Thisconcludestoday'sconferencecall.
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