Fifth Third Bank 2013 Annual Report Download - page 23
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
21 Fifth Third Bancorp
NON-GAAP FINANCIAL MEASURES
The Bancorp considers various measures when evaluating capital
utilization and adequacy, including the tangible equity ratio, tangible
common equity ratio and Tier I common equity ratio, in addition to
capital ratios defined by banking regulators. These calculations are
intended to complement the capital ratios defined by banking
regulators for both absolute and comparative purposes. Because
U.S. GAAP does not include capital ratio measures, the Bancorp
believes there are no comparable U.S. GAAP financial measures to
these ratios. These ratios are not formally defined by U.S. GAAP or
codified in the federal banking regulations and, therefore, are
considered to be non-GAAP financial measures. Since analysts and
banking regulators may assess the Bancorp’s capital adequacy using
these ratios, the Bancorp believes they are useful to provide
investors the ability to assess its capital adequacy on the same basis.
The Bancorp believes these non-GAAP measures are
important because they reflect the level of capital available to
withstand unexpected market conditions. Additionally, presentation
of these measures allows readers to compare certain aspects of the
Bancorp’s capitalization to other organizations. However, because
there are no standardized definitions for these ratios, the Bancorp’s
calculations may not be comparable with other organizations, and
the usefulness of these measures to investors may be limited. As a
result, the Bancorp encourages readers to consider its Consolidated
Financial Statements in their entirety and not to rely on any single
financial measure.
U.S. banking regulators approved final capital rules (Basel III
Final Rule) in July of 2013 that substantially amend the existing risk-
based capital rules (Basel I) for banks. The Bancorp believes
providing an estimate of its capital position based upon the final
rules is important to complement the existing capital ratios and for
comparability to other financial institutions. Since these rules are
not effective for the Bancorp until January 1, 2015, they are
considered non-GAAP measures and therefore are included in the
following non-GAAP financial measures table.
Pre-provision net revenue is net interest income plus
noninterest income minus noninterest expense. The Bancorp
believes this measure is important because it provides a ready view
of the Bancorp’s earnings before the impact of provision expense.