Fifth Third Bancorp Q2 2011 Earnings Conference Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Foran - Goldman Sachs - Analyst : Good morning. I guess on the normalized ROA guidance, what I was trying to do was take the current credit-adjusted PPNR of $646 million -- I guess I have to add in the normalization of Vantiv earnings you referenced. Which those two things get you to like a 2.4% pre/pre ROA. And then backing into the provision rate, that would produce a 1.4% ROA as like 44 basis points. Breaking down the ROA, is that kind of consistent on how you are thinking about it? Or is the normal provision higher but there's opportunities also expanded pre/pre ROA, maybe with the TruPS redemptions and stuff like that? Just any thought process on breaking it into the two would be helpful.

Question: Brian Foran - Goldman Sachs - Analyst : And I guess also on Vantiv, if it were to go public, can you just remind us all the mechanics of how that would work in terms of revaluing the balance sheet to date, the equity method earnings that would come out? And if there is any adjustments that have to be made to the warrants and puts or if that happened this quarter?

Question: Brian Foran - Goldman Sachs - Analyst : Yes, it does. I guess it is proactive to think about it as -- let's assume the value that the paper talked about as somewhere in the reasonable ballpark. I guess with all of the expenses and the bond refinancing you talked about, right now it is a very modest part of your earnings stream. But it actually seems like this could be a situation where if, they were to partly go public, your earnings relative to this quarter could actually be the same or higher because they are so understated right now. But then you would have almost like a book value understatement right now. Obviously it's correctly stated by accounting, but economically the book value might be not fully reflective of Vantiv's value and so there might be a situation where earnings don't necessarily change, but the book value goes up. Is that -- I know you can't say guess that is correct because you don't know if it is going to go public and you don't know what the value would be. But is that like conceptually possible?

Question: Brian Foran - Goldman Sachs - Analyst : Got it. Okay. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Matt O'Connor - Deutsche Bank - Analyst : Hi, guys. If we look at your expenses, even trying to back out some of the stuff that might have helped this quarter that is not sustainable, it still seems like the good trends there. As we think out beyond the next quarter or two, how should we think about you managing your expense base for -- maybe there is no normal environment or this is normal. So that would mean loan growth a little bit less than all of us would have thought or hoped for, and fee volumes maybe a little bit less. What kind of levers can you pull on expenses looking out to 2012 and beyond?

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. And then separately, there are some changes and the accounting for TDRs that the industry will have to reflect in third-quarter results. Any meaningful change to your TDRs when you adopt those?

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay, thank you very much.

Question: Erika Penala - Bank of America/Merrill Lynch - Analyst : I was wondering if you could walk us through the mechanics on how you were getting to the Durbin mitigation. So far this earnings season, your Durbin mitigation has been the most optimistic thus far. And if you could, take us through what the wholesale changes that you're making on the revenue side to get to that number?

Question: Erika Penala - Bank of America/Merrill Lynch - Analyst : Okay. And on the NIM guidance, I appreciate the very specific color. And I was wondering on the loan yield side if your margin expectations bake in a similar type of decline, particularly in C&I and auto and yield, for the second half of the year in terms of pace?

Question: Erika Penala - Bank of America/Merrill Lynch - Analyst : Okay, and one last quick question. Could you share with us what you're earning in terms of ROE for Vantiv?

Question: Paul Miller - FBR Capital Markets - Analyst : On the auto side of the business, we're hearing a lot of national players in the indirect auto lending is really, really pushing pricing down on price competition. I'm just wondering; are you seeing that? And I'm also just wondering if you can walk us through a little bit how you are pricing the auto business?

Question: Paul Miller - FBR Capital Markets - Analyst : You know, you talk about how -- it's one of the few I think loan categories out there that is still attractive. But I'm just concerned about -- is that some of these big national players here struggling with balance sheet growth are really coming in hard in some regions. I don't know -- whereas some banks have told us they just pulled back completely. But I just guess in your areas you're not seeing that much of a cutthroat competition.

Question: Paul Miller - FBR Capital Markets - Analyst : Guys, thank you very much.

Question: Todd Hagerman - Sterne, Agee & Leach, Inc. - Analyst : Just a couple of capital questions. On the payment processor, I think Dan, Kevin, you have mentioned in the past the Basel III implication on the payments unit was fairly modest. And certainly with a [9.4] pro forma ratio, that seems to be the case. I'm just curious how the Basel III would possibly be affected by any potential IPO with Vantiv.

Question: Todd Hagerman - Sterne, Agee & Leach, Inc. - Analyst : I'm just trying to reconcile the Basel capital implications with the payments units in terms of how you guys are currently looking at it today, and your pro forma [9.4] ratio, and how that may possibly be influenced by any kind of a potential IPO in your capital thinking.

Question: Todd Hagerman - Sterne, Agee & Leach, Inc. - Analyst : Right. So at the end of the day, as you responded to the other question about -- again, conceptually, you improve your book value. But I'm just kind of wondering now, at the end of the day, Fifth Third is sitting on an extra 100 basis points of capital if you will under the new guidelines. And you have kind of suggested that acquisitions really aren't in the cards at least near-term. So how should shareholders kind of think about capital management going forward? It seems like, as you've mentioned, you are generating a lot of capital internally. You're currently operating well in excess of kind of what you see as your long-term goal. How should we think about that capital management going forward, some of these puts and takes?

Question: Todd Hagerman - Sterne, Agee & Leach, Inc. - Analyst : Great, thank you.

Question: Ken Zerbe - Morgan Stanley - Analyst : From Morgan Stanley. The -- just coming back to the interchange fee increases you guys plan to put in, have you guys looked at where your new or expected fee increases stack up relative to the rest of the industry? I guess I'm asking the question more from a consumer behavior perspective, that you are one of the more aggressive ones to try to offset interchange with higher fees. But does that puts you at a competitive disadvantage, given where your prices may stack up at the end of the day? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Ken Zerbe - Morgan Stanley - Analyst : Okay. One more question on the resi mortgage portfolio, obviously you have seen a lot of growth there. Can you just remind us what your ultimate retention goals are, or your willingness to put on incremental growth from here?

Question: Ken Zerbe - Morgan Stanley - Analyst : Okay, great. Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Craig Siegenthaler - Credit Suisse - Analyst : Hey guys, good morning. It's Craig Siegenthaler, Credit Suisse. First question just on aggregate loan growth trends, how have balances trended in July, so Q3 to date and June relative to the earlier part of the second quarter, like in April and May?

Question: Craig Siegenthaler - Credit Suisse - Analyst : Got it. (laughter) But I guess my point is you didn't see stronger activity in the first half of the second quarter than in the second half; it was kind of steady and consistent.

Question: Craig Siegenthaler - Credit Suisse - Analyst : Got it. And then just on capital management, you're generating a lot of capital generation here and your capital levels are quite robust. I'm just wondering when could we get back to a point when you start buying a significant amount of stock, really reducing your share count.

Question: Craig Siegenthaler - Credit Suisse - Analyst : Got it. Great, guys. Thanks for taking my questions.