Fifth Third Bank 2011 Annual Report Download - page 73

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fifth Third Bancorp 71
TABLE 55: AGENCY RATINGS
A
s of February 29, 2012 Moody's Standard and Poor's Fitch DBRS
Fifth Third Bancorp:
Short-term No rating A-2 F1 R-1L
Senior debt Baa1 BBB A- AL
Subordinated debt Baa2 BBB- BBB+ BBBH
Fifth Third Bank:
Short-term P-2 A-2 F1 R-1L
Long-term deposit A3 No rating A A
Senior debt A3 BBB+ A- A
Subordinated debt Baa1 BBB BBB+ A (low)
* As an investor, you should be aware that a security rating is not a
recommendation to buy, sell or hold securities, that it may be subject to revision
or withdrawal at any time by the assigning rating organization and that each
rating should be evaluated independently of any other rating.
CAPITAL MANAGEMENT
Management regularly reviews the Bancorp’s capital position to help
ensure it is appropriately positioned under various operating
environments. The Bancorp has established a Capital Committee,
which is responsible for all capital related decisions. The Capital
Committee makes recommendations to management involving
capital actions. These recommendations are reviewed and approved
by the Enterprise Risk Management Committee.
2011 Capital Actions
On January 25, 2011, the Bancorp raised $1.7 billion in new
common equity through the issuance of 121,428,572 shares of
common stock in an underwritten offering at an initial price of
$14.00 per share. On January 24, 2011, the underwriters exercised
their option to purchase an additional 12,142,857 shares at the
offering price of $14.00 per share. In connection with this exercise,
the Bancorp elected that all such additional shares be sold and the
Bancorp entered into a forward sale agreement which resulted in a
final net payment of 959,821 shares on February 4, 2011.
On February 2, 2011, the Bancorp redeemed all 136,320 shares
of its Series F Preferred Stock held by the U.S. Treasury totaling
$3.4 billion. The Bancorp used the net proceeds from the common
stock and senior notes offerings previously discussed and other
funds to redeem the Series F Preferred Stock. In connection with
the redemption of the Series F Preferred Stock, the Bancorp
accelerated the accretion of the remaining issuance discount on the
Series F Preferred Stock and recorded a corresponding reduction in
retained earnings of $153 million. In addition, dividends of $15
million were paid on February 2, 2011 when the Series F Preferred
Stock was redeemed.
On March 16, 2011, the Bancorp repurchased the warrant
issued to the U.S. Treasury under the CPP for $280 million, which
was recorded as a reduction to capital surplus in the Bancorp’s
Consolidated Financial Statements.
On March 18, 2011, the Bancorp announced that the FRB did
not object to the Bancorp’s capital plan submitted under the FRB
2011 CCAR. Pursuant to this plan, in the second quarter of 2011,
the Bancorp redeemed $452 million of certain trust preferred
securities, at par, classified as long-term debt. The trust preferred
securities redeemed related to the Fifth Third Capital Trust VII,
First National Bankshares Statutory Trust I and R&G Capital Trust
II, LLT. As a result of these redemptions the Bancorp recorded a $6
million gain on the extinguishment within other noninterest expense
in the Consolidated Statements of Income. The trust preferred
securities were a component of Tier I capital: however, these
securities are being phased out of Tier I capital by the Dodd-Frank
Act as discussed below.
Pursuant to the Bancorp’s capital plan discussed above, the
Bancorp redeemed certain trust preferred securities on September
19, 2011, totaling $40 million, which related to the R&G Crown Cap
Trust IV and First National Bankshares Statutory Trust II. As a
result of the redemption the Bancorp recorded a $1 million gain on
the extinguishment within other noninterest expense in the
Consolidated Statements of Income. In addition, on October 24,
2011 the Bancorp redeemed certain trust preferred securities
totaling $25 million, which related to the R&G Crown Cap Trust I.
TABLE 56: CAPITAL RATIOS
As of December 31 ($ in millions) 2011 2010 2009 2008 2007
Average equity as a percent of average assets 11.41 % 12.22 11.36 8.78 9.35
Tangible equity as a percent of tangible assets (a) 9.03 10.42 9.71 7.86 6.14
Tangible common equity as a percent of tangible assets (a) 8.68 7.04 6.45 4.23 6.14
Tier I capital $ 12,503 13,965 13,428 11,924 8,924
Total risk-based capital 16,885 18,178 17,648 16,646 11,733
Risk-weighted assets (b) 104,945 100,561 100,933 112,622 115,529
Regulatory capital ratios:
Tier I capital 11.91 % 13.89 13.30 10.59 7.72
Total risk-based capital 16.09 18.08 17.48 14.78 10.16
Tier I leverage 11.10 12.79 12.34 10.27 8.50
Tier I common equity (a) 9.35 7.48 6.99 4.37 5.72
a) For further information on these ratios, see the Non-GAAP Financial Measures section of the MD&A.
b) Under the banking agencies’ risk-based capital guidelines, assets and credit equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar
amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together resulting in the Bancorp’s total risk-weighted assets.