Fifth Third (FITB) Q2 2025 Earnings Transcript

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DATE

• Thursday, July 17, 2025, at 9 a.m. EDT

CALL PARTICIPANTS

• Chief Executive Officer — Tim Spence
• Chief Financial Officer — Bryan Preston
• Investor Relations Director — Matt Curoe
• Chief Credit Officer — Greg Schroeck

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RISKS

• The CFO said provision expense for Q2 2025 included a $34 million increase in our allowance for credit losses, driven by weaker Moody’s macroeconomic scenarios forecasting higher unemployment through 2027.
• Solar loan originations declined 72% from 2025 levels as new tax legislation eliminated certain credits, with management projecting a slower recovery.

TAKEAWAYS

• Adjusted Earnings Per Share: $0.90, excluding specified items, for Q2 2025, exceeding consensus estimates.
• Adjusted Revenue Growth: Adjusted revenues grew 6% year over year in Q2 2025, driven by 7% growth in net interest income (NII).
• Adjusted Pre-Provision Net Revenue (PPNR): Adjusted PPNR increased 10% year over year in Q2 2025.
• Positive Operating Leverage: 250 basis points of positive operating leverage in Q2 2025, marking the third consecutive quarter.
• Key Profitability Metrics: Adjusted Return on Assets was 1.2% for Q2 2025 and Adjusted Return on Tangible Common Equity reached 18% for Q2 2025.
• Efficiency Ratio: Efficiency ratio was 55.5% for Q2 2025.
• Net Charge-Offs: Net charge-offs were 45 basis points in Q2 2025, at the bottom of guidance and improved year over year.
• Nonperforming Assets (NPAs): Nonperforming assets (NPAs) declined 11% sequentially in Q2 2025, driven by an 18% reduction in commercial NPAs.
• Tangible Book Value Per Share: Tangible book value per share, inclusive of the impact of AOCI, grew 18% from the prior year and increased 5% compared to Q1 2025 in Q2 2025.
• Average Loan Growth: Average loan growth was 5% over the prior year, with increases across C&I, CRE, leasing, mortgage, home equity, auto, Provide, and Dividend platforms in Q2 2025.
• Commercial Relationship Manager Headcount: Commercial relationship manager headcount increased 11% year over year in Q2 2025.
• Home Equity Market Position: Ranked No. 2 by market share in core footprint, with first-half production growth third-best nationally.
• Net New Household Growth (Southeast Consumer Bank): Net new households in the Southeast consumer bank grew 6% over the prior year in Q2 2025.
• Average Cost of Consumer and Small Business Deposits (Southeast): Average cost of consumer and small business deposits was 191 basis points in Q2 2025.
• Loan Growth Contribution (Southeast Middle Market): More than half of total middle market loan growth over the past year was driven by the Southeast region.
• Middle Market Relationship Production (Southeast): 50% more new quality relationships year to date compared to the same period last year.
• Wealth Management AUM Growth (Southeast): Southeast markets grew assets under management 16% year over year, reaching nearly $16 billion in total AUM, with advisor headcount up 15%.
• Mobile App Recognition: Ranked No. 1 in user satisfaction among regional banks by J.D. Power.
• Embedded Payments Business (New Line): Fees increased 30% compared to the same period a year ago. Deposits attached to new line services rose to $3.7 billion, up $1.1 billion from a year ago.
• NII Outlook: Full-year NII guidance was raised to 5.5%-6.5% growth for 2025, with “record NII in 2025 even if there are zero rate cuts for the remainder of the year.”
• Loan Growth Guidance: Full-year 2025 average total loans are expected to increase 5%, driven by C&I and auto lending.
• Deposit Cost Management: Interest-bearing deposit costs decreased by three basis points sequentially in Q2 2025 and declined 65 basis points over the last year.
• Branch Expansion: 10 Southeast branches added in 2025 so far, with another 40 openings projected before year-end 2025; 80% of locations for 200 new Southeast branches secured.
• LCR Compliance: Category 1 LCR was 120% for Q2 2025, and the loan-to-core deposit ratio was 76% for Q2 2025.
• Adjusted Noninterest Income: Adjusted noninterest income grew 3% year over year in Q2 2025, led by a 4% increase in Wealth fees and a 6% increase in Consumer banking fees over the prior year. Commercial payments fees declined in Q2 2025 due to lower card spend and higher earnings credits.
• Adjusted Noninterest Expense: Adjusted noninterest expense increased 4% compared to the year-ago quarter, down 4% sequentially in Q2 2025, and up 3% year over year, excluding deferred compensation, primarily for technology, branches, and personnel, in Q2 2025.
• Allowance for Credit Losses (ACL) Ratio: The allowance for credit losses (ACL) ratio increased by two basis points to 2.09% in Q2 2025 due to reserve build.
• CET1 Capital Ratio: CET1 capital ratio was 10.6%, up 13 basis points in Q2 2025; Pro forma CET1 ratio, including the AOCI impact of securities, was 8.6% at the end of Q2 2025.
• Share Repurchases: $400 million-$500 million targeted during the remainder of 2025.
• Full-Year Guidance (Key Highlights): Adjusted revenue growth is expected at 4%-4.5% for the full year 2025, Full-year PPNR growth is expected at around 7%. Adjusted noninterest income is projected to increase 1%-2% for the full year 2025, Adjusted noninterest expense is expected to rise 2%-2.5% for the full year 2025 compared to 2024, and Net charge-offs guidance was tightened to 43-47 basis points for the full year 2025.
• Third Quarter Guidance: NII up 1% sequentially, Adjusted noninterest income is expected to increase 1%-4% for Q3 2025, Third quarter adjusted noninterest expense is expected to rise 1% compared to the second quarter. Charge-offs are projected in the 45-49 basis point range for Q3 2025, and A stable CET1 ratio is targeted at 10.5% for 2025.

SUMMARY

Fifth Third Bancorp (FITB -1.46%) delivered notable year-over-year profit and revenue growth in Q2 2025, citing diversified loan production and continued momentum in core fee businesses as key contributors. Management highlighted durable deposit cost control, robust capital ratios, and targeted expansion in high-priority geographies such as the Southeast, all of which support forward-looking guidance despite mixed loan utilization trends. The company addressed sector-specific headwinds, including regulatory change and solar lending disruption, but signaled confidence in risk management, credit metrics, and the ability to sustain organic growth and return capital to shareholders.

• CEO Spence emphasized that “M&A is a means to achieve a strategic outcome. It shouldn’t be a strategy under itself.” reiterating organic growth and density remain primary capital allocation priorities.
• CFO Preston stated, regarding the impact of tax credit changes, “we believe that the dividend net charge-offs have peaked in the second quarter” and anticipate further improvement in subsequent periods.
• Management explained Southeast de novo branches built during 2022-2024 are averaging over $25 million in deposit balances within the first twelve months after opening. noting the branch strategy outpaced expectations.
• Spence described stablecoins as a potential growth area—especially for cross-border payments—while minimizing risk to domestic deposit flows and in-person payments, suggesting increased activity benefits FITB’s payments and banking infrastructure role.
• Greg Schroeck reported NPA reductions align with prior visibility, stating that Inflows of NPAs dropped 77% from the previous quarter. reflecting improved credit portfolio performance.
• Preston clarified that credit spreads remained stable, with only occasional “irrational” pricing to defend legacy client accounts.

INDUSTRY GLOSSARY

• Provide: FITB’s fintech lending platform focused on healthcare practice finance for medical, dental, and veterinary professionals.
• Dividend: FITB’s home improvement and solar lending fintech platform, now adapting product mix in response to federal tax credit changes.
• De novo branches: Newly established bank branches, as opposed to acquired locations, typically in growth markets.
• New Line: FITB’s embedded payments business, facilitating instant payments infrastructure for commercial clients.

Full Conference Call Transcript

Tim Spence: Thanks, Matt, and good morning, everyone. At Fifth Third, we believe great banks distinguish themselves not by how they perform in benign environments, but rather by how they navigate uncertain ones. In a period of tariff negotiations, cross currents in interest rates, and significant regulatory change, Fifth Third continues to deliver excellent profitability, strong credit trends, and accelerating revenue growth. This morning, we reported earnings per share of $0.88 or $0.90, excluding certain items outlined on Page two of the release. Exceeding consensus estimates, adjusted revenues grew by 6% year over year, led by 7% growth in NII. Adjusted PPNR increased 10%. We delivered 250 basis points of positive operating leverage, our third consecutive quarter of positive operating leverage.

Our key profitability metrics continue to be very strong, and among the best of all peers who have reported thus far. Our adjusted return on assets was 1.2%. Our adjusted return on tangible common equity was 18%. And our efficiency ratio was 55.5%. Our credit metrics were strong and improved as we said they would. At 45 basis points, net charge-offs were at the bottom of our guidance range and improved over the prior year. NPAs declined 11% sequentially, led by an 18% decline in commercial NPAs. Early-stage delinquencies declined again and are near historical lows.

As a result of our strong financial performance, and the positioning of our balance sheet, tangible book value per share increased by 18% over the prior year and by 5% sequentially. The strategic investments we have made over the past several years drove our results in the quarter. In a quarter where uneven C&I loan demand and a soft housing market made loan growth tepid for the industry, our diversified loan origination platforms produced average loan growth of 5% over the prior year. We grew loans in the C&I, CRE, leasing, mortgage, home equity, auto, and both our Provide and Dividend fintech platforms. Investments we have made should continue to support strong loan growth in future quarters.

Commercial relationship manager headcount increased by 11% year over year, and Provide had record production in the first half of the year. In our home equity business, we were number two market share in our footprint, and first-half production growth was third best in the country. Both Provide and Home Equity are examples of the benefits we have achieved from digitally enabled lending channels combined with OneBank collaboration. Our investments in the Southeast also continue to produce strong results across business lines. Our consumer bank grew net new households by 6% over the prior year in the Southeast.

The granular deposit growth those households provide has provided flexibility to continue to manage deposit costs even as the Fed paused on rate cuts. In the second quarter, our average cost of consumer and small business deposits in the Southeast was 191 basis points. A 250 basis points plus spread to Fed funds. We have added 10 branches year to date in the Southeast, and we’ll open another 40 before year-end. Bringing us to nearly 400 branches across all our Southeast markets. In commercial banking, our Southeast regions have contributed more than half of total middle market loan growth over the past year. With North Carolina, South Carolina, Georgia, and Alabama producing the strongest results.

New middle market relationship production has also accelerated across Southeast where our teams have added 50% more new quality relationships year to date than they did over the same period last year. In wealth management, our Southeast markets grew assets under management by 16% year over year, to nearly $16 billion in total AUM. Advisor headcount is up about 15% in the same markets, which should support future growth. We also continue to see benefits from our investments in innovative, tech-enabled products. In consumer, J.D.

Power recently recognized the Fifth Third mobile app as number one in user satisfaction among regional banks and we also launched an initiative to provide free wills to every Fifth Third customer through an exclusive partnership with FinTech Trust and Will. We will begin to embed AI-enabled functionality into our mobile app in the 30% revenue growth compared to last year, and an increase of more than $1 billion in commercial deposits connected to NewLine services. We continue to win more business from existing clients and to see transaction migration from legacy ACH to modern instant payments rails. During the quarter, Rippling selected NewLine to be their payments infrastructure provider. Joining our existing roster of blue-chip fintech customers.

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