Fifth Third Bank 2012 Annual Report Download - page 80

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
78 Fifth Third Bancorp
approximately $350 million of its outstanding common stock on
August 28, 2012. At settlement of the forward contract on October
24, 2012, the Bancorp received an additional 1,444,047 shares which
were recorded as an adjustment to the basis in the treasury shares
purchased on the acquisition date.
On November 6, 2012, the Bancorp entered into an
accelerated share repurchase transaction with a counterparty
pursuant to which the Bancorp purchased 7,710,761 shares, or
approximately $125 million, of its outstanding common stock on
November 9, 2012. At settlement of the forward contract on
February 12, 2013, the Bancorp received an additional 657,917
shares which were recorded as an adjustment to the basis in the
treasury shares purchased on the acquisition date.
Following the sale of a portion of the Bancorp’s shares of Class
A Vantiv, Inc. common stock, the Bancorp entered into an
accelerated share repurchase transaction on December 14, 2012
with a counterparty pursuant to which the Bancorp purchased
6,267,410 shares, or approximately $100 million, of its outstanding
common stock on December 19, 2012. The Bancorp expects the
settlement of the transaction to occur on March 14, 2013.
TABLE 60: SHARE REPURCHASES
For the years ended December 31 2012 2011 2010
Shares authorized for repurchase at January 1 19,201,518 19,201,518 19,201,518
A
dditional authorizations(a) 86,269,178 - -
Share repurchases(b) (42,424,014) - -
Shares authorized for repurchase at December 31 63,046,682 19,201,518 19,201,518
A
verage price paid per share $ 14.82 N/A N/A
(a) In August 2012, the Bancorp announced that its Board of Directors had authorized management to purchase 100 million shares of the Bancorp’s common stock through the open market or in any
private transaction. The authorization does not include specific price targets or an expiration date. This share repurchase authorization replaces the Board’s previous authorization pursuant to which
approximately 14 million shares remained available for repurchase by the Bancorp.
(b) Excludes 2,059,003 , 1,164,254 and 333,808 shares repurchased during 2012 , 2011, and 2010, respectively, in connection with various employee compensation plans. These repurchases are not
included in the calculation for average price paid and do not count against the maximum number of shares that may yet be repurchased under the Board of Directors’ authorization.
2013 Stress Tests and CCAR
On October 9, 2012, the FRB published final stress testing rules
that implement section 165(i)(1) and (i)(2) of the Dodd-Frank Act.
The 19 bank holding companies that participated in the 2009 SCAP
and subsequent CCAR, which includes Fifth Third, are subject to
the final stress testing rules. The rules require both supervisory and
company-run stress tests, which provide forward-looking
information to supervisors to help assess whether institutions have
sufficient capital to absorb losses and support operations during
adverse economic conditions.
The FRB launched the 2013 stress testing program and CCAR
on November 9, 2012. The CCAR requires bank holding companies
to submit a capital plan in addition to their stress testing results. The
mandatory elements of the capital plan are an assessment of the
expected use and sources of capital over the planning horizon, a
description of all planned capital actions over the planning horizon,
a discussion of any expected changes to the Bancorp’s business plan
that are likely to have a material impact on its capital adequacy or
liquidity, a detailed description of the Bancorp’s process for
assessing capital adequacy and the Bancorp’s capital policy. The
stress testing results and capital plan were submitted by the Bancorp
to the FRB on January 7, 2013.
The FRB’s review of the capital plan will assess the
comprehensiveness of the capital plan, the reasonableness of the
assumptions and the analysis underlying the capital plan.
Additionally, the FRB will review the robustness of the capital
adequacy process, the capital policy and the Bancorp’s ability to
maintain capital above the minimum regulatory capital ratios and
above a Tier 1 common ratio of 5 percent on a pro forma basis
under expected and stressful conditions throughout the planning
horizon. The FRB will also assess the Bancorp’s strategies for
addressing proposed revisions to the regulatory capital framework
agreed upon by the Basel Committee on Banking Supervision and
requirements arising from the Dodd-Frank Act.
The FRB has indicated that it expects to disclose on March 7,
2013 its estimates of participating institutions results under the FRB
supervisory stress scenario, including capital results, which assume
that all banks take certain consistently applied future capital actions.
The FRB has indicated that it expects to disclose on March 14, 2013
its estimates of participating institutions results under the FRB
supervisory severe stress scenarios including capital results based on
each company’s own base scenario capital actions. The FRB will
also issue an objection or non-objection to each participating
institution’s capital plan submitted under CCAR. Additionally, as a
CCAR institution, Fifth Third is required to disclose our own
estimates of results under the supervisory severely adverse scenario
using the same consistently applied capital actions noted above, and
to provide information related to risks included in its stress testing;
a summary description of the methodologies used; estimates of
aggregate pre-provision net revenue, losses, provisions, and pro
forma capital ratios at the end of the forward-looking planning
horizon of at least nine quarters; and an explanation of the most
significant causes of changes in regulatory capital ratios. These
disclosures are required by March 31, 2013 and are to be sent to the
FRB and publicly disclosed.