Fifth Third Bank 2010 Annual Report Download - page 41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 39
Investment Advisors
Investment Advisors provides a full range of investment
alternatives for individuals, companies and not-for-profit
organizations. Investment Advisors is made up of four main
businesses: FTS, an indirect wholly-owned subsidiary of the
Bancorp; FTAM, an indirect wholly-owned subsidiary of the
Bancorp; Fifth Third Private Bank; and Fifth Third Institutional
Services. FTS offers full service retail brokerage services to
individual clients and broker dealer services to the institutional
marketplace. Fifth Third Asset Management, Inc. provides asset
management services and also advises the Bancorp’s proprietary
family of mutual funds. Fifth Third Private Banking offers holistic
strategies to affluent clients in wealth planning, investing,
insurance and wealth protection. Fifth Third Institutional Services
provide advisory services for institutional clients including states
and municipalities. The following table contains selected financial
data for the Investment Advisors segment.
Comparison of 2010 with 2009
Net income decreased $24 million, or 45%, compared to 2009 as a
decrease in net interest income and an increase in noninterest
expense were partially offset by a decrease in provision for loan
and lease losses and an increase in investment advisory revenue.
Net interest income decreased $19 million, or 12%, from 2009
due to a decrease in average loans and leases partially offset by an
increase in the yield on interest earning assets.
Provision for loan and lease losses decreased $13 million, or
23%, from 2009. Net charge-offs as a percent of average loans
and leases decreased from 183 bp in 2009 to 171 bp in 2010
reflecting moderation of general economic conditions during
2010.
Noninterest income increased $20 million, or six percent,
compared to 2009 due to an increase in investment advisory
revenue partially offset by a decrease in other noninterest income.
Investment advisory revenue increased $31 million, or 10%,
compared to 2009 due to increases in securities and broker
income, private client service income and institutional income.
Securities and broker income increased $18 million, or 17%, from
2009 due to continued expansion of the sales force and effective
sales management, resulting in strong net asset and account
growth. Private client service income increased $11 million, or
eight percent, and institutional income increased $5 million, or
seven percent, from 2009 due to increases in the market value of
managed assets and an increase in transaction activity. Assets
under care increased from $182 billion at December 31, 2009 to
$266 billion at December 31, 2010 and managed assets increased
from $24 billion at December 31, 2009 to $25 billion at December
31, 2010.
Noninterest expense increased $51 million, or 14%,
compared to 2009 due to an increase in salaries, incentives and
benefits and other noninterest expense. Salaries, incentives and
benefits increased $16 million, or 11%, primarily due to the
expansion of the sales force and compensation related to
improved performance in investment advisory revenue related
fees. Other noninterest expense increased $35 million, or 16%,
primarily due to an increase in expenses associated with the
revenue sharing agreement between Investment Advisors and
Branch Banking.
Average loans and leases decreased $538 million, or 17%,
from 2009 primarily due to a $418 million decrease in commercial
loans as a result of a decrease in demand and decrease in line
utilization rates among the Bancorp’s high net worth customers
due to excess liquidity. Average core deposits increased $958
million, or 19%, compared to 2009 primarily due to growth in
interest checking and foreign deposits as customers have opted to
maintain excess funds in liquid transaction accounts as rates
remained near historic lows.
Comparison of 2009 with 2008
Net income decreased $45 million in 2009, or 46%, compared to
2008 as decreases in net interest income and investment advisory
revenue were only partially offset by lower salaries and benefit
expenses.
Noninterest income decreased $50 million in 2009 compared
to 2008, as investment advisory revenue decreased $39 million,
with private client services income declining $14 million and
institutional income declining $13 million, driven by lower asset
values on assets managed compared to 2008. Also included within
investment advisory revenue is securities and brokerage income,
which declined $10 million, or nine percent, compared to 2008,
reflecting a decline in transaction-based revenue as well as the
continued shift in assets from equity products to lower yielding
money market funds due to market volatility through much of
2009.
TABLE 17: INVESTMENT ADVISORS
For the years ended December 31
($ in millions) 2010 2009 2008
Income Statement Data
Net interest income $138 157 191
Provision for loan and lease losses 44 57 49
Noninterest income:
Investment advisory revenue 346 315 354
Other noninterest income 10 21 32
Noninterest expense:
Salaries, incentives and benefits 156 140 159
Other noninterest expense 249 214 217
Income before taxes 45 82 152
A
pplicable income tax expense 16 29 54
Net income $29 $53 98
A
verage Balance Sheet Data
Loans and leases $2,574 3,112 3,527
Core deposits 5,897 4,939 4,666