Fifth Third Bank 2013 Annual Report Download - page 19

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
17 Fifth Third Bancorp
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TABLE 2: SUMMARY OF ACCELERATED SHARE REPURCHASE TRANSACTIONS   
     Shares Received from Forward
Contract Settlement Repurchase Date Amount ($ in millions) Shares Repurchased Settlement Date
A
pril 26, 2012 $ 75 4,838,710 631,986 June 1, 2012
A
ugust 28, 2012 350 21,531,100 1,444,047 October 24, 2012
November 9, 2012  125 7,710,761 657,914 February 12, 2013
December 19, 2012 100 6,267,410 127,760 February 27, 2013
J
anuary 31, 2013 125 6,953,028 849,037 April 5, 2013
May 24, 2013 539 25,035,519 4,270,250 October 1, 2013
November 18, 2013 200 8,538,423 (a) (a)
December 13, 2013 456 19,084,195 (b) (b)
J
anuary 31, 2014 99 3,950,705 (b) (b)
(a) The Bancorp expects the settlement of this transaction to occur on or before February 28, 2014.
(b) The Bancorp expects the settlement of these transactions to occur on or before March 26, 2014.
Preferred Stock Offerings and Conversion
During 2013, the Bancorp had two preferred stock offerings and
converted the outstanding Series G preferred stock into Fifth Third
common stock. A description of the preferred stock offerings and
conversion is below. For more information, see Note 23 in the
Notes to Consolidated Financial Statements.
As contemplated by the 2013 CCAR, on May 16, 2013 the
Bancorp issued in a registered public offering 600,000 depositary
shares, representing 24,000 shares of 5.10% fixed-to-floating rate
non-cumulative Series H perpetual preferred stock, for net proceeds
of $593 million. The Series H preferred shares are not convertible
into Bancorp common shares or any other securities. On June 11,
2013, the Bancorp’s Board of Directors authorized the conversion
into common stock, no par value, of all outstanding shares of the
Bancorp’s 8.50% non-cumulative convertible perpetual preferred
stock, Series G. On July 1, 2013, the Bancorp converted the
remaining 16,442 outstanding shares of Series G preferred stock,
which represented 4,110,500 depositary shares, into shares of Fifth
Third’s common stock. On December 9, 2013, the Bancorp issued,
in a registered public offering, 18,000,000 depositary shares,
representing 18,000 shares of 6.625% fixed-to-floating rate non-
cumulative Series I perpetual preferred stock, for net proceeds of
$441 million. The Series I preferred shares are not convertible into
Bancorp common shares or any other securities.
Senior Notes and Subordinated Notes Offering
On February 25, 2013, the Bancorp’s banking subsidiary updated
and amended its existing global bank note program. The amended
global bank note program increased the Bank’s capacity to issue its
senior and subordinated unsecured bank notes from $20 billion to
$25 billion. Additionally, on February 28, 2013, the Bank issued and
sold, under its amended bank notes program, $1.3 billion in
aggregate principal amount of unsecured senior bank notes. The
bank notes consisted of: $600 million of 1.45% senior fixed rate
notes due on February 28, 2018; $400 million of 0.90% senior fixed
rate notes due on February 26, 2016; and $300 million of senior
floating rate notes. Interest on the floating rate notes is 3-month
LIBOR plus 41 bps due on February 26, 2016. The bank notes will
be redeemable by the Bank, in whole or in part, on or after the date
that is 30 days prior to the maturity date at a redemption price equal
to 100% of the principal amount plus accrued and unpaid interest
through the redemption date.
On November 20, 2013, the Bancorp issued and sold $750
million of 4.30% unsecured subordinated fixed rate notes with a
maturity date of January 16, 2024. These fixed rate notes will be
redeemable by the Bancorp, in whole or in part, on or after the date
that is 30 days prior to the maturity date at a redemption price equal
to 100% of the principal amount plus accrued and unpaid interest
up to, but excluding, the redemption date.
Additionally, on November 20, 2013, the Bank issued and sold,
under its amended bank notes program, $1.8 billion in aggregate
principal amount of unsecured senior bank notes. The bank notes
consisted of: $1 billion of 1.15% senior fixed rate notes due on
November 18, 2016 and $750 million of senior floating rate notes
due on November 18, 2016. Interest on the floating rate notes is 3-
month LIBOR plus 51 bps. These bank notes will be redeemable by
the Bank, in whole or in part, on or after the date that is 30 days
prior to the maturity date at a redemption price equal to 100% of
the principal amount plus accrued and unpaid interest through the
redemption date.
Automobile Loan Securitizations
In March of 2013, the Bancorp recognized an immaterial loss on the
securitization and sale of certain automobile loans with a carrying
amount of approximately $509 million. As part of the sale, the
Bancorp obtained servicing responsibilities and recognized a
servicing asset with an initial fair value of $6 million.
In August of 2013, the Bancorp transferred approximately $1.3
billion in fixed-rate consumer automobile loans to a bankruptcy
remote trust which was deemed to be a VIE. The Bancorp
concluded that it is the primary beneficiary of the VIE and,
therefore, has consolidated this VIE. For additional information on
the automobile loan securitizations, refer to the Liquidity Risk
Management section of MD&A.
Legislative Developments
On July 21, 2010, the Dodd-Frank Act was signed into federal law.
This act implements changes to the financial services industry and
affects the lending, deposit, investment, trading and operating
activities of financial institutions and their holding companies. The
legislation establishes a CFPB responsible for implementing and
enforcing compliance with consumer financial laws, changes the
methodology for determining deposit insurance assessments, gives
the FRB the ability to regulate and limit interchange rates charged to
merchants for the use of debit cards, enacts new limitations on
proprietary trading, broadens the scope of derivative instruments
subject to regulation, requires on-going stress tests and the
submission of annual capital plans for certain organizations and
requires changes to regulatory capital ratios. This act also calls for
federal regulatory agencies to conduct multiple studies over the next
several years in order to implement its provisions. While the total
impact of the fully implemented Dodd-Frank Act on the Bancorp is
not currently known, the impact is expected to be substantial and
may have an adverse impact on the Bancorp’s financial performance
and growth opportunities.