Fifth Third Bank 2012 Annual Report Download - page 49

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
47 Fifth Third Bancorp
The following table contains selected financial data for the Investment Advisors segment:
TABLE 16: INVESTMENT ADVISORS
For the years ended December 31 ($ in millions) 2012 2011 2010
Income Statement Data
Net interest income $ 117 113 138
Provision for loan and lease losses 10 27 44
Noninterest income:
Investment advisory revenue 366 364 346
Other noninterest income 30 9 10
Noninterest expense:
Salaries, incentives and benefits 161 164 156
Other noninterest expense 276 257 249
Income before taxes 66 38 45
A
pplicable income tax expense 23 14 16
Net income $ 43 24 29
A
verage Balance Sheet Data
Loans and leases $ 1,877 2,037 2,574
Core deposits 7,709 6,798 5,897
Comparison of 2012 with 2011
Net income increased $19 million compared to 2011 primarily due
to an increase in noninterest income and a decrease in the provision
for loan and lease losses, partially offset by an increase in
noninterest expense. Net interest income increased $4 million from
2011 due to a decrease in interest expense on core deposits and
favorable decreases in the FTP charge applied to the segment,
partially offset by a decline in average loan and lease balances and
declines in yields of 27 bps on loans and leases.
Provision for loan and lease losses decreased $17 million from
the prior year. Net charge-offs as a percent of average loans and
leases decreased to 53 bps compared to 132 bps for the prior year
reflecting improved credit trends during 2012.
Noninterest income increased $23 million compared to 2011
primarily due to increases in other noninterest income. The increase
in other noninterest income was primarily driven by the $13 million
gain on the sale of certain funds previously mentioned and an
increase in gains on the sale of loans of $5 million.
Noninterest expense increased $16 million compared to 2011
due to increases in other noninterest expense primarily driven by an
increase in corporate allocations.
Average loans and leases decreased $160 million compared to
the prior year. The decrease was primarily driven by declines in
home equity loans of $55 million, commercial mortgage loans of
$45 million and commercial and industrial loans of $30 million.
Average core deposits increased $911 million compared to 2011 due
to growth in interest checking as customers have opted to maintain
excess funds in liquid transaction accounts as a result of interest
rates remaining near historic lows, partially offset by account
migration from foreign office deposits.
Comparison of 2011 with 2010
Net income decreased $5 million compared to 2010 primarily due to
a decline in net interest income and an increase in noninterest
expense partially offset by a decrease in the provision for loan and
lease losses and an increase in investment advisory revenue. Net
interest income decreased $25 million from 2010 due to a decline in
average loan and lease balances as well as declines in yields on loans
and leases.
Provision for loan and leases losses decreased $17 million from
the prior year. Net charge-offs as a percent of average loans and
leases decreased to 132 bps compared to 171 bps for the prior year
reflecting moderation of general economic conditions during 2011.
Noninterest income increased $17 million compared to 2010
primarily due to increases in investment advisory revenue related to
an increase of $10 million in Private Bank income driven by market
performance and an increase of $7 million in securities and broker
income due to continued expansion of the sales force and market
performance.
Noninterest expense increased $16 million compared to 2010
due to increases in salaries, incentives and benefit expense resulting
from the expansion of the sales force and compensation related to
improved performance in investment advisory revenue related fees.
Average loans and leases decreased $537 million compared to
the prior year. The decrease was primarily driven by declines in
home equity loans of $373 million due to tighter underwriting
standards. Average core deposits increased $901 million compared
to 2010 due to growth in interest checking and foreign deposits.

General Corporate and Other
General Corporate and Other includes the unallocated portion of
the investment securities portfolio, securities gains and losses,
certain non-core deposit funding, unassigned equity, provision
expense in excess of net charge-offs or a benefit from the reduction
of the ALLL, representation and warranty expense in excess of
actual losses or a benefit from the reduction of representation and
warranty reserves, the payment of preferred stock dividends and
certain support activities and other items not attributed to the
business segments.
Comparison of 2012 with 2011
Results for 2012 and 2011 were impacted by a benefit of $400
million and $748 million, respectively, due to reductions in the
ALLL. The decrease in provision expense was driven by general
improvements in credit quality and declines in net charge-offs. Net
interest income increased from $321 million in 2011 to $370 million
for 2012 due to a benefit in the FTP rate. The change in net income
compared to the prior year was impacted by a $157 million gain on
the sale of Vantiv, Inc. shares and $115 million in gains on the initial
public offering of Vantiv, Inc. In addition, the results for 2012 were
impacted by dividends on preferred stock of $35 million compared
to $203 million in the prior year.
Comparison of 2011 with 2010
Results for 2011 and 2010 were impacted by a benefit of $748
million and $789 million, respectively, due to reductions in the
ALLL. The decrease in provision expense for both years was due to
a decrease in nonperforming assets and improvement in
delinquency metrics and underlying loss trends. Net interest income