Fifth Third Bancorp Q4 2024 Earnings Call Summary

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

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Good morning, guys. Thanks for taking the question. Maybe Tim or Bryan, I was hoping you could just provide a little more context as to how you see loan demand developing through the year. Your commentary I'd say recently, it's been much more encouraging. You discussed things like the robust commercial line -- commercial pipelines, et cetera. So just maybe some additional color on how you see things developing.

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Perfect. And like all the analogies in there. And then Bryan, I think you had suggested you wouldn't change the guide based on more or fewer cuts, implies you're, I guess, pretty agnostic to changes in rates. How would you characterize your rate sensitivity now versus where you'd like it to be? I'm guessing it's pretty much where you want it, but I would just appreciate your thoughts.

Question: Scott Siefers - Piper Sandler & Co. - Analyst : Perfect. Alright, thank you guys.

Question: Mike Mayo - Wells Fargo - Analyst : Hi. I'm going to ask a long question, just looking for a really short answer. That's not that is Look, you're talking about record pipelines and middle market, 1% higher loan utilization, 13 to 15 markets have picked up, two of three verticals have picked up. It seems like your customers are more positive. Are you calling the turn for commercial loan growth for Fifth Third? Are you calling it for the industry? Are you calling it for both? And what's your confidence level around that?

Question: Mike Mayo - Wells Fargo - Analyst : Sounds good. All right, thank you.

Question: Thomas Leddy - RBC Capital Markets LLC. - Analyst : Hi, good morning. This is Thomas Leddy standing in for Gerard. You saw a good drop in deposit rates in the fourth quarter. Could you just give us a little more color on what your outlook is for deposit rates in 2025, assuming the Fed is finished cutting?

Question: Thomas Leddy - RBC Capital Markets LLC. - Analyst : Okay, that's helpful. And then just quickly, can you give us any color on the uptick we saw in C&I nonaccruals this quarter?

Question: Thomas Leddy - RBC Capital Markets LLC. - Analyst : Okay, great. That's helpful color. Thank you for taking my questions.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Hey, good morning. Tim, I guess maybe just going back to the where you start in terms of consistent investments in branches, Southeast. Just remind us around the payoff that you had from branches opened two, three, four years ago. As we think about -- I mean, again, if loan growth picks up for the industry, that's great, should we think of Fifth Third as someone that outperforms on loan and deposit growth given these investments. So give us a sense of what the payoff has been as you measure these investments? And maybe even talk about like any specific markets, areas where the new -- the growth for 2025 is planned. Thanks.

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. That's helpful. And I guess maybe just one quick one on the fees. Maybe you don't have kind of as deeper for capital markets franchises, some of your peers. But just give us a sense of when we look at slide 7, wealth, payments, markets. How dependent is that revenue growth on actually balance sheeting loan growth or loans? And are those -- should we view any of those as a tool for client acquisition?

Question: Ebrahim Poonawala - BofA Securities - Analyst : That's helpful. Thanks, Tim.

Question: Manan Gosalia - Morgan Stanley - Analyst : Hi, good morning. On capital, here you on keeping the reported CET1 at 10.5%. The question was how are we thinking about CET1, including AOCI, I know some of your peers are operating or looking to operate in that 9% to 10% range. There is some volatility here on the long end of the curve. So I guess the question is, do you have a target for CET1, including AOCI? And how are you thinking about buybacks and capital management from here?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. So on the -- I hear you that you keep that -- you accrete through that CET1, including AOCI. Is there any level at which it will -- it could impact loan growth, drive RWA diets at some stage?

Question: Brian Foran - Truist Securities - Analyst : Thank you. So on the commercial payments, first of all, thank you for breaking that out and giving us more disclosure. I know it's an area you've invested and feel like you're kind of pulling away from the pack. When we look at it being 20% of fees up 8% year-over-year, I think you kind of gave us a couple of times 40% of new commercial relationships where payments led. Do you have any sense like if we got the disclosure from all your peers, are you a little higher? Are you a lot higher? And what's the main metric you think you would stand out on? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 2:00PM, FITB.OQ - Q4 2024 Fifth Third Bancorp Earnings Call

Question: Brian Foran - Truist Securities - Analyst : It would. Maybe if I could sneak in a follow-up on the guidance on page 15. Definitely appreciate your comments going out of your way to mention that 2024 is going to hit the guidance on all lines and very few banks did that. So you're assuming giving us a down the fairway plan here. You've touched on all the individual line items, but maybe just kind of wrapping it up, if there was kind of one or two upside and downside risks you were thinking about for the year, what would you highlight within everything you've given us?

Question: Brian Foran - Truist Securities - Analyst : Awesome. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 2:00PM, FITB.OQ - Q4 2024 Fifth Third Bancorp Earnings Call

Question: John Pancari - Evercore Group LLC - Analyst : Morning. Just on the -- back to capital, on the M&A front, just -- I hear you on your deployment priorities, organic is still top priority then dividend and buybacks. How are you thinking about M&A here, both from a non-bank M&A perspective, but also for -- in the whole bank perspective given the regime change in Washington and the regulatory posture changing in need for scale? Just want to get your updated thoughts there, Tim.

Question: John Pancari - Evercore Group LLC - Analyst : Got it. Okay. That's helpful. And then separately, it's clear you guys have certainly been executing better than many of your peers in terms of your growth and your returns and hitting your targets, as you had noted earlier in the call as well. As we look at your broader returns, I mean, you're here in the high teens, 18% to 19% return on tangible common equity here. You're in the mid-50s efficiency ratio. As you look at in 2025, which is a year where we expect some underlying improvement and a few macro backdrop. How do you view the return profile for Fifth Third, as you're looking at ROTCE and operating efficiency for the year and then possibly even beyond that, where do you think the returns are heading towards?

Question: John Pancari - Evercore Group LLC - Analyst : Thanks, Tim, very helpful.

Question: Matthew O'Connor - Deutsche Bank AG - Analyst : Good morning. A little bit of any kind of nonfit question, but since you mentioned it, you said middle market customers, the biggest thing that they're highlighting is still some challenges in labor. And maybe that's -- I would assume that's impacting some of that loan demand or pipelines turning into actual volumes. But are they hopeful that some of that dislocation will finally solve itself? Are they kind of trying to offset these challenges with tech that should kind of help at some point? Or I guess what's the plan, if they have any? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 2:00PM, FITB.OQ - Q4 2024 Fifth Third Bancorp Earnings Call

Question: Matthew O'Connor - Deutsche Bank AG - Analyst : That's interesting color. And then you guys are pretty balanced, I think, between large corporate and middle market. Are there kind of different themes in the large corporate, meaning there are less pressure by labor? And then as you think about -- just bringing it all together, as you think about your C&I growth, you think it will be more large corporate or middle market driven this year if you had to guess? And then I'm done. Thank you.

Question: Matthew O'Connor - Deutsche Bank AG - Analyst : All right, great. Thank you for all that.

Question: Erika Najarian - UBS Investment Bank - Analyst : Hi, good morning. Just two quick follow-up questions. Bryan, as we think about the net interest income outlook, could you share with us how you expect net interest margin to traject from that 2 97. And do you have a view if we have a 4% neutral rate, what the normalized margin would be for Fifth Third under that scenario?

Question: Erika Najarian - UBS Investment Bank - Analyst : Got it. And maybe the next follow-up question is for Tim. I believe the stressed capital buffer that your received was 3.2% last year. I'm wondering, as you think about the embedded risk in the balance sheet, if we think it's worth it to participate off cycle to revisit that stress capital buffer?

Question: Erika Najarian - UBS Investment Bank - Analyst : Got it, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 2:00PM, FITB.OQ - Q4 2024 Fifth Third Bancorp Earnings Call

Question: Christopher Marinac - Janney Mongomery Scott - Analyst : Thanks. Good morning. Just wanted to ask about additional C&I utilization as well as any upgrade downgrade trends from the criticized and classified.

Question: Christopher Marinac - Janney Mongomery Scott - Analyst : Great. We'll leave it there. Thank you both very muc.