Fifth Third Bancorp 2026 Q3 Earnings Call

Welcome to Fifth Third's third quarter 2026 earnings call. This morning, our Chairman, CEO, and President, Tim Spence, and CFO, Bryan Preston, will provide an overview of our third 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 October 19, 2026, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Bryan, we will open up the call for questions. With that, let me turn it over to Tim.

Hello, everyone, and thank you for joining us. It is my custom to start these calls with a comment on great banks and navigating uncertainty. Today, I want to start with something else that distinguishes great banks, their people. This quarter was a defining moment in the history of our company. I am humbled by and exceptionally grateful for the commitment our people showed to our clients, our shareholders, and to one another. We announced the acquisition of Comerica one year and 13 days ago, and throughout that time, all our people hustled and collaborated to complete the largest and most complicated conversion in our 168-year history. Following legal day one, you welcomed new colleagues onto your teams and introduced Fifth Third to new communities. You made the tough decisions necessary to achieve our expense commitments and worked together to identify and pursue revenue opportunities.

You invested more than 4 million hours in preparation for conversion, and you gave new meaning to the word labor and Labor Day weekend when you onboarded approximately 600,000 accounts and 293 banking centers while decommissioning 82 others. Since then, you have continued to work tirelessly to welcome new customers to the bank, to get their accounts configured the way they want them, and to ensure customers experience the benefits of banking with our combined company. Your advice is what improves our clients' personal lives and their businesses. Your creativity is what wins awards for innovation, and your commitment to excellence is what produces peer-leading financial results. Thank you for keeping our customers at the center of everything you do. This morning, we reported earnings per share of $0.90 or $1.13, excluding certain items outlined on page 2 of the release.

Adjusted PPNR grew 8% over the second quarter as adjusted revenue grew 2%, while adjusted expenses fell 2%. In an increasingly competitive environment, core deposits grew 3% sequentially and loans grew 1%. Net charge-offs remained stable at 31 basis points. Despite the conversion occurring a full 10 weeks into the quarter, we have already exceeded two of the three 2027 profitability targets spelled out in our deal announcement. Our adjusted return on tangible common equity was 20.6%. Our adjusted return on assets was 1.41%, and our adjusted efficiency ratio was 54.6%. Even with the largest acquisition in our company's history and the 10-year treasury increasing 114 basis points in the past year, our tangible book value per share grew 2% year-over-year, and our TCE ratio was flat.

With technical conversion and the work on expense synergies now behind us, our primary task going forward is to leverage the power of our combined company to drive organic growth and market share. The FDIC summary of deposit data set is one mechanism we use to measure progress, and the 2026 release became available in September. Using a capped branch deposit methodology to focus on retail deposits, I am pleased that Fifth Third ranked number one in our retail footprint and number three nationally in year-over-year retail deposit growth. In Texas, we came straight out of the chute in February. Retail deposits in Dallas and Houston grew more than 20% over the prior year, and we gained more than 40 basis points of market share.

We now rank number seven and number eight in Dallas and Houston, respectively, and that is prior to opening any of our 150 de novo branches in Texas over the next three years, starting with the first one in the third quarter next year. In our Southeast footprint, we again ranked number six in retail market share. Retail deposits continue to grow at a rate more than five times the rate of the Southeast overall, and they have grown at an 11% compound annual rate over the past five years. Our Southeast de novo program continued to be a big part of the growth story, but it is not all of it. We rank number two in total new branches built and number two in average deposits per branch after three years. But we are also number two in same-branch deposit growth for legacy branches over the same period.

Our total cost of Southeast consumer deposits remains 207 basis points below Fed funds. We have already opened 35 additional branches in the Southeast in 2026 and remain on track to open the full 55 that we committed for the full year. One other strategic item I would like to note from the quarter was the formal launch of Fifth Third Innovation Banking, a business focused on startup and growth-stage companies, their founders, and the investors who back them. Innovation Banking pairs Comerica's 34-year-old tech and life sciences vertical with Fifth Third's payments, digital, investment banking, and wealth management capabilities.

It will be built around hub cities where venture capital flows are concentrated and the industry verticals where we can bring unique expertise, starting with our recently launched fintech vertical. We will spend more time dimensioning this business for you in the coming months, but we see it as a $10 billion deposit opportunity by 2030, in addition to other avenues for revenue growth. Let me close where I usually begin. At Fifth Third, we believe great banks distinguish themselves not by how they perform in benign environments, but by how they navigate uncertain ones. While our clients tell us the underlying economy remains strong, this is a fluid operating environment, as evidenced by the recent sharp spike in interest rates. When things change, the factors that dictate success change along with them. Discipline and optionality become very important.

In this environment, our priorities are to be strongly differentiated in core deposit growth, broadly diversified in loans and other earning assets with limited exposure to unproven high growth categories and the interest rate-sensitive borrowers balanced across recurring fee businesses and less exposed to market-sensitive revenue streams, and to have the profitability to sustain the long-term investments in growth and AI without compromising return targets. While we will always have opportunities to get 1% better, I feel great about how Fifth Third is positioned and in our ability to deliver an even better 2027. After all, you can't spell flexibility without F, I, T, and B. With that, I'll hand it over to Brian to provide more detail on the quarter and on our outlook for the remainder of the year.

Thanks, Tim, and good morning. Our third quarter results show the profitability of the combined company, even with the expense synergies not yet fully in the run rate. The conversion over Labor Day weekend was the last major step of the technical integration, and the remaining expense synergies will follow. Additionally, the rate environment tested the balance sheet. Rates moved sharply higher in the quarter. That weighed on capital markets fees and on AOCI, but it will drive NII growth and provide attractive entry points to reduce the increased asset sensitivity we've carried since closing the acquisition. Through the conversion and the rate volatility, the businesses kept growing in both the Fifth Third and Comerica footprints, and credit performance remained stable. As Tim mentioned, adjusted PPNR grew 8% to $1.5 billion.

Of the $113 million sequential increase, over half came from revenue, with net interest income up 3% and fees up 1%. The realization of expense synergies was the primary driver of the $45 million decrease in adjusted expenses. Page 2 of our release details the certain items excluded from these adjusted figures. The PPNR growth drove the approximately 160 basis point improvement in our adjusted ROTCE and the 250 basis point improvement in our adjusted efficiency ratio. The step-up in profitability is sustainable. In the fourth quarter, the expense base comes down further as the remaining expense synergies are realized, and revenue continues to grow organically. With the systems conversion complete and the expense base where it will be, the fourth quarter gives you the first full view of the combined company's profitability and the baseline from which we will grow.

Net interest income was $2.28 billion, up $56 million from the second quarter. The increase was driven by organic loan growth, investment portfolio activity, and continued fixed rate asset repricing, partially offset by higher deposit costs and tighter spreads in C&I and auto. Net interest margin was 3.34%, down 2 basis points. In order to simplify certain conversion-related activities, we intentionally migrated Comerica off-balance sheet investment sweep products onto the balance sheet into deposit products, which resulted in elevated cash. As a result, average short-term investments rose $3.1 billion and reduced net interest margin by approximately 4 basis points but had no material impact on NII. Excluding this cash build, the margin would have expanded about 2 basis points over the prior quarter. The higher market rates during the quarter provided attractive entry points to begin reducing our asset sensitivity.

We added $2.5 billion to the held-to-maturity portfolio at an average yield of 4.9%, and we added $7 billion of receive-fixed cash flow hedges. The third quarter taxable securities yield increased 13 basis points to 3.68%. As a result of the investment portfolio actions, period end short-term investments declined $2.8 billion. Even with these actions, we remain asset sensitive and expect to benefit from further potential rate hikes. Loan growth in the quarter was commercial led, with production diversified across the combined footprints and verticals. Total commercial loan production in the third quarter was double the production generated in the year-ago quarter. Among regions, Chicago, Indiana, and Michigan continue to generate meaningful activity in the Midwest. The Carolinas and Florida were the standout regions in the Southeast.