Fifth Third Bank 4Q15 Earnings Call Notes

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Fifth Third Bancorp’s (FITB) CEO Greg Carmichael on Q4 2015 Results

Tayfun Tuzun

Credit spread widening has not reached bank loan credit spreads

“credit spread widening seen in the high yield market has not yet reached bank loan credit spreads.”

We are cognizant of where we are in the credit cycle

“As we discussed last quarter, we are cognizant of where we are in the credit cycle. The global concerns associated with a diverse set of factors reaching from geopolitical to fundamental economic performance are well-known. Although we are a predominantly domestic bank, it is difficult to take comfort purely around the health of the U.S. economy relative to the rest of the world. In this environment and in light of the absolute low levels of our credit metrics, we need to point out that these levels maybe subject to potential volatility from time to time.”

We have backed off in some markets where rents are rising faster than wages

“Specific to multifamily, we are sensitive not only to market demand and household generation, but also affordability as in some markets rents are rising faster than wages as the housing market returns. This has caused us to back off in certain markets”

Frank Forrest

We do look at high yield spreads, clearly there is a correlation, but right now things look ok

“We do look at high yield spreads, there is clearly a correlation between high yield spreads and future loan losses on the commercial sector and we follow that and they are going up both on the energy side and outside of the energy side. So, we will continue to monitor and watch that over time. But our performance overall, the core of our middle market book, the mid cap book and the large cap book is still performing very, very well outside of energy, to answer your question, with no really discernible trends either in geography or products that are cause for concern at this time. So, our intent is up like everybody else. We are looking at a lot of leading indicators. We are managing credit very closely. But at this point, we still feel good overall about our portfolio for the year. ”

Risk is to oil field service lenders

“Again, we feel very good as a senior secured lender with the exposure we have in the reserve-based portfolio. And that is the bulk actually is criticized assets. When you look at where there is potential loss, it would be on the oilfield services”

Manufacturing sector continues to be strong

“frankly, I do not see developing concerns at this point. In fact, the manufacturing sector continues to be very strong. The credit metrics of that profile continue to look like what we have seen over the past couple of years. They are generating high profits on a relative basis, historic basis, generating excess liquidity.”

Lars Anderson

“frankly as recently as just the last few days I have had interaction with a number of clients in the marketplace. So I think this is pretty contemporary feedback. We are seeing a growing sense of caution from our client base. And frankly, that is really across almost all of our businesses, maybe an exception could be in the healthcare sector where they continue to have a level of confidence is some of the uncertainty was taken out in the end of last year there.