Fifth Third Bancorp (NASDAQ:FITB) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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Access the full call at https://events.q4inc.com/attendee/920732669
Summary
Fifth Third Bancorp reported strong financial results with earnings per share of $0.83, excluding certain items, and revenue reaching $2.9 billion, a 33% increase year-over-year.
The company’s acquisition of Comerica, which closed on February 1, 2026, is progressing ahead of schedule, with expected net cost savings of $360 million this year and an $850 million annual run rate by the fourth quarter.
Fifth Third Bancorp’s credit performance remained stable, with net charge-offs at 37 basis points, and improved metrics in NPAs and criticized assets.
The commercial segment saw healthy growth with C&I loan balances up 6%, driven by manufacturing and construction sectors, while consumer and small business loans grew 7%, led by auto and home equity loans.
The company plans to open new branches and expand its market presence in Texas, Arizona, and California, with an emphasis on leveraging digital marketing channels post the technology conversion scheduled for Labor Day weekend.
Management remains optimistic about achieving its 2027 financial targets, with a focus on sustaining strong returns on equity and efficiency ratios, and plans to resume share repurchases in the second half of 2026.
Full Transcript
Audra (Conference Operator)
Good morning, My name is Audra and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter 2026 Fifth Third Bancorp earnings conference call. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you’d like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time I would like to turn the conference over to Matt Kirow, Director of Investor Relations. Please go ahead.
Matt Kirow (Director of Investor Relations)
Good morning everyone. Welcome to Fifth Third First Quarter 2026 Earnings Call. This morning our Chairman, CEO and President Tim Spence and CFO Brian Preston will provide an overview of our first quarter results and outlook. Please review the cautionary statements in our materials which can be found in our earnings release and presentation. These materials contain information regarding the use of non GAAP measures and reconciliations to the GAAP results, as well as forward looking statements about Fifth Third’s performance. These statements speak only as of April 17, 2026 and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Brian, we’ll open up the call for questions. With that, let me turn it over
Tim Spence (Chairman, CEO and President)
to Tim Good morning everyone and thanks for joining us today. At Fifth Third, we believe great banks distinguish themselves based on how they perform in uncertain environments, not in benign ones. We prioritize stability, profitability and growth in that order. We deliver them by finding ways to get 1% better every day while investing meaningfully in the future. Today we reported earnings per share of $0.15 or $0.83, excluding certain items outlined on page 2 of the release. Results reflect the February 1 closing of the Comericaa acquisition. Revenue was $2.9 billion, up 33% year over year and adjusted net income was $734 million, up 38%. Credit performance was in line with expectations with net charge offs at 37 basis points. Both NPAs and criticized assets improved modestly in the quarter we closed the largest M&A transaction in fifth thirds history. We delivered an adjusted return on assets of 1.12% and an adjusted return on tangible common equity of 13.7%. Our tangible common equity ratio rose to 7.3% and tangible book value per share increased 1%. We are the only bank among our peers who have reported to date to increase both of these key metrics during the quarter. Fifth Third legacy strategies are continuing to produce broad based growth while we execute the Comericaa integration on plan and on schedule. In Commercial Legacy Fifth Third CNI loan balances grew 6% year over year. Production remained healthy with the strongest activity in manufacturing and construction supported by reshoring and infrastructure investment. New client acquisition more than doubled led by our southeast markets and 35% of new clients were fee led with no extension of credit. Importantly, our commercial loan growth continues to come from relationship based lending and not from non relationship sources. In commercial payments, Newline continued to scale with revenue up 30% and deposits up $2.7 billion year over year. During the quarter, Plaid launched a new payment product built on Newline, joining other marquee clients like Stripe and Circle, and we advanced preparations for the second quarter launch of a new Direct Express platform. In consumer the Legacy Fifth Third franchise delivered 3% household growth and 4% DDA balance growth. Southeast households grew 8% led by Georgia and the Carolinas, and we opened 10 additional branches in the region during the quarter. Consumer and small business loans grew 7% led by auto home equity and and our provide fintech platform. Now turning to Comericaa thanks to timely regulatory approvals, we closed earlier than originally expected on February 1 and have continued to make progress at an accelerated pace. Our top priority is our people and we’re working hard to become one team. Since Legal Day One leaders have been on the ground in Comericaa’s major markets nearly every week and we visited every branch in the Comericaa Network. We’ve also hosted product showcases to highlight the breadth of our combined capabilities. Organizational design and leadership decisions are complete and I’m very excited about the caliber of our combined team on technology. We remain on track to convert all systems over Labor Day weekend with our first full mock conversion later this month. As a result, we remain confident that we will deliver $360 million of net cost savings this year and reach an $850 million annual run rate by the fourth quarter. We’re also already building a strong pipeline of revenue synergies in commercial we’re seeing early wins by bringing capital markets payments and specialty lending to existing relationships. In the first 60 days, our capital markets team completed fuels and metals commodity hedges and executed an accelerated share repurchase for Comericaa clients. We also booked our first Comericaa to Fifth Third loan win in asset based lending, while Fifth Third referrals helped to build the largest ever pipeline in Comericaa’s national dealer services business. Commercial Payments has presented our managed services solutions to over 100 Comericaa clients with 65 of them interested in moving forward in consumer we launched our first Comericaa branded deposit campaign in Texas in February. Response rates and average opening balances were broadly consistent with results that we generate in our legacy Fifth Third markets and nearly half of new savings customers also opened a checking account. We’ve hired more than half of the mortgage loan officers and auto dealer representatives that we plan to add this year in Comericaa’s footprint and pipelines in each of those businesses. We’ll open our first Fifth Third branded branches in Dallas and Fresno this month. And we now have letters of intent in place or in progress for 81 of our targeted 150 de novo branches in Texas. As I wrote in our annual letter to shareholders, the global economy is a complex, adaptive system, and such systems react to change in unexpected ways. We’re closely evaluating the direct impacts of the war in Iran on energy and other commodities, as well as the implications for prices, interest rates and customer activity in an environment where we may not see the macro tailwinds that many expected at the start of the year. The Comericaa merger expands Fifth Third organic opportunity set, but we do not need a perfect backdrop to deliver on our commitments. Before I turn it over to Brian, I want to take a moment to say thank you to our colleagues. Earlier this month we surpassed 300 billion in total assets for the the first time, an important milestone that reflects the work we do together to serve customers, support communities and show up for one another. I know many of you are putting in extra effort to support the integration, whether that’s helping customers, learning new products, meeting new teammates or navigating change. Your commitment to getting 1% better every day, and your dedication to our clients and to each other is what gives me confidence in what we’re building and and the opportunities ahead. With that, Brian will provide more detail on the quarter and the outlook.
Brian Preston (Chief Financial Officer)
Thanks Tim and good morning. Our first quarter results reflect the strength of what we have built and the discipline with which we are executing. Results exceeded our March expectations, driven by stronger nii, disciplined expense management and integration. Execution on plan adjusted Return on Assets (ROA) was 1.12% and adjusted Return on Tangible Common Equity (ROTCE) excluding AOCI was 13.7%. The Comerica acquisition closed without tangible book value. Dilution and Tangible Book Value (TBV) per share grew 1% sequentially and 15% year over year. The earnings power of the combined company is intact and the integration is on track. Given the magnitude of the acquisition standard year over year and sequential comparisons obscure more than they reveal this quarter, what matters is how we exit a larger, more granular loan portfolio, a lower cost deposit base and larger diversified fee income businesses. Each of those is a deliberate outcome and each positions us to generate stronger and more durable returns as the integration delivers. Now diving further into the income statement starting with net interest income (NII) and the balance sheet, net interest income was $1.94 billion for the quarter above our March expectations. Net interest margin expanded 17 basis points to 330 basis points driven by the impacts of the Comerica acquisition that includes 7 basis points from securities portfolio marks and repositioning, 6 basis points from cash flow hedge termination and 2 basis points from purchase accounting accretion on the loan portfolio. A full quarter of these impacts will benefit NIM by a few additional basis points in the second quarter, end of period loans were $178 billion, up 2% sequentially from pro forma combined year end balances. Average total loans were 158 billion, reflecting the February 1 close. The growth was broad based. Strong middle market production, a rebound in line utilization and continued momentum in home equity auto and a provide fintech platform in commercial line utilization ended the quarter at 40.7%, up approximately 120 basis points from the pro forma combined year end level and notably held steady throughout the volatility in March. Clients are cautious but active on a legacy 5th 3rd basis. Commercial loans grew 6% year over year. Combined with the Comerica addition, shared national credits now represent only 26% of total loans, a deliberate and ongoing reduction in concentration risk. On the consumer side, first quarter auto originations were the highest in two years with average indirect secured balances up 10% year over year. Home equity balances grew substantially supported by both the acquisition and strong underlying production. We achieved the number one HELOC origination market share in our legacy 5th 3rd branch footprint with an average portfolio FICO of 773 and average loan to value of 64%. The production strength is real and the credit discipline behind it is equally real. Turning to deposits, Average core deposits were 207 billion and end of period core deposits were 231 billion dollars. Non interest bearing balances comprised 28% of core deposits at quarter end, up from 25% at the same point last year. That improvement reflects the combined benefit of Comerica’s commercial DDA franchise and our continued organic consumer DDA growth. The household growth Tim described is showing up directly in our funding costs. On a legacy 5 third basis, consumer household growth of 3% over last year supported 4% consumer DDA growth. Total deposit costs including the benefit of non interest bearing balances were 158 basis points in the first quarter, a funding cost profile that compares favorably across the peer group. Interest bearing deposit costs were 215 basis points, down 27 basis points year over year, reflecting both that organic deposit mix improvement and the benefit of the Comerica balance sheet. Despite the larger balance sheet, our approach to balance sheet management is unchanged. We prioritize granular insured deposit funding over large wholesale holds, we maintain strong liquidity buffers and we proactively managed the overall cost of funds. That discipline showed up again this quarter. Average wholesale funding declined 3% year over year even with Comerica balances included. That favorable mix shift lowered the cost of interest bearing liabilities by 36 basis points. We also maintained full category one Liquidity Coverage Ratio (LCR) compliance at 109% and a loan to core deposit ratio of 76%. Now turning to fees, adjusted noninterest income excluding securities losses and the other items listed on page four of our release was $921 million, slightly above the midpoint of our March expectations. The most significant milestone here is that both wealth and commercial payments are now generating fee income at the run rate necessary to deliver $1,000,000,000 each in annualized non interest income. That outcome reflects years of consistent disciplined investment in both businesses and the recurring nature of the revenue. Looking further at wealth, fees were $233 million and total AUM ended the quarter at 119 billion. Legacy 5 3rd AUM trends remained strong, up $10 billion or 15% over last year. 5th 3rd securities delivered strong retail brokerage results with revenue up 15% year over year. These are businesses that we have been consistently investing in and the returns are compounding. Commercial payment fees totaled 218 million for the quarter. Direct Express contributed $14 million in fees for the quarter and approximately $3.7 billion in average deposits for the month of March. Newline continues to drive strong fee growth of 30% year over year and related deposits reached $5.5 billion, up $2.7 billion from last year. Capital markets fees were $134 million, up 11%. Sequentially increased hedging activities and commodities and FX and strong bond underwriting fees combined with two months of Comerica activity were the primary drivers of this growth. Turning to expenses, page 5 of our release details certain items that had a larger impact on the non interest expense this quarter, primarily $635 million in merger related expenses. Adjusted noninterest expense was 1.77 billion. Consistent with our guidance, the adjusted efficiency ratio was 61.9%, which reflects the addition of Comerica and normal first quarter seasonality associated with the timing of compensation awards and payroll taxes. On the Synergy front, we remain confident in our ability to achieve the $850 million of annualized run rate cost savings in the fourth quarter of this year. Integration activities are progressing as planned against our established milestones and savings are being realized. The expense benefit will build steadily over the first three quarters of this year with a more significant increase in the fourth quarter once the system conversion and branch consolidations are completed in early September. Shifting to Credit the net charge off ratio was 37 basis points for the quarter, in line with our expectations and the lowest level in two years. The NPA ratio was 57 basis points compared to 65 basis points last quarter. Commercial net charge offs were 26 basis points, also a two year low with stable trends across industries and geographies. Consumer net charge offs were 58 basis points, down 5 basis points from last year. The consumer portfolio remains healthy with non accrual and over 90 delinquency rates relatively stable across all loan categories. We have been deliberate about where we choose to grow. Our exposure to non depository financial institutions represents only 7% of our total loan portfolio, well below the industry average. Our three largest categories are subscription lines, supporting capital call facilities, corporate credit facilities to traditional institutions such as payment processors, insurance companies and brokerage firms, and secured lending to residential mortgage related entities. These are long standing portfolios. We have deep underwriting expertise in each of them, strong collateral visibility and structural protections where needed, including borrowing base requirements and advance rates that provide significant loss absorption before we would recognize a dollar of loss on private credit. We have chosen not to participate meaningfully in lending to private credit vehicles and business development companies which combined represent less than 1% of total loans. That was a deliberate decision, not a missed opportunity. The structural complexity embedded in these exposures introduces risks that are harder to assess through a cycle. We would rather grow in categories where we have more transparency to the collateral and have direct relationships with the underlying borrowers. On software and data center lending, we have maintained that same disciplined posture. We believe in the long term demand for AI infrastructure, but we have also seen how quickly these build cycles can overshoot. We have remained selective and our exposure is intentionally limited. Software related exposures is less than 1% of total loans with the portfolio performing in line with expectations with no material migration in the quarter. ACL as a percentage of portfolio loans and leases decreased to 1.79%, primarily reflecting the Comerica acquisition. The ACL as a percentage of non performing assets increased to 316%. Provision expense included $83 million for merger related day one ACL build. Our baseline and downside cases assume unemployment reaching 4.5 and 8.5% respectively in 2027. We made no changes to our macroeconomic scenario weightings during the quarter, though a qualitative adjustment was applied to reflect the direct impacts of the elevated energy and commodity costs as well as the broader implications for economic growth, inflation and unemployment in the current geopolitical environment. Moving to capital CET1 ended at 10% reflecting the impact of the Comerica transaction and strong RWA growth under the proposed capital rule. Our estimated fully phased in pro forma CET1 ratio is 9.6%. The RWA benefit to capital ratios associated with the new rule is nearly 100 basis point improvement primarily due to credit risk RWA reduction. The proposed rule recognizes the granular, well secured and relationship based nature of our loan portfolio, the same portfolio characteristics we have been deliberately building toward over the past several years. The proposed rule should expand the ability of the banking industry to support the economy through increased lending capacity. Additionally, our tangible common equity ratio including the impact of AOCI and the Comeric acquisition increased to 7.3% over the last 12 months. The impact of unrealized losses included in regulatory capital under the proposed rule has decreased by 16%, a 25 basis point improvement to the pro forma capital ratios despite an 11 basis point increase in the 10 year treasury rate. That is the direct result of our strategy to concentrate our AFS portfolio in securities that return principal on a known schedule which represents approximately 55% of the fixed rate holdings within our AFS portfolio. We expect continued improvement in the unrealized losses as the securities pulled apart. Moving to our Current Outlook Our outlook reflects the forward curve at the end of March which assumes no rate cuts or hikes in 2026. Given the updated rate outlook and our more asset sensitive balance sheet, we are updating our full year net interest income (NII) outlook to a range between 8.7 and $8.8 billion. We will continue to take actions to move the balance sheet to a more neutral rate risk position over time which could include investment portfolio and or other hedging actions. Our outlook for full year average total loans remains in the mid $170 billion range. Full year non interest income is expected to be between 4.0 and $4.2 billion reflecting continued revenue growth in commercial payments, capital markets and wealth and asset management. Full year non interest expense is expected to be 7.2 to $7.3 billion, including the impact of $210 million of CDI amortization and $360 million of net expense synergies in 2026. This outlook excludes acquisition related charges. In total, our guide implies full year adjusted PP and R including CDI amortization up approximately 40% over 2025. We remain on track to exit 2026 at or near the profitability and efficiency levels consistent with our 2027 targets. For credit. We expect full year net charge offs between 30 and 40 basis points. Turning to Capital with the release of the proposed Capital Rule, we are updating our CET1 operating target to a range of 10 to 10.5%. We expect to resume regular quarterly share repurchases in the second half of 2026 with the amount and timing dependent on the balance sheet growth and the timing of the remaining merger related charges. Our capital return priorities are unchanged. Pay a strong dividend, support …
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