Fifth Third Bank 2013 Annual Report Download - page 50

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
48 Fifth Third Bancorp
Noninterest expense increased $44 million driven by salaries,
incentives and benefits which increased $48 million primarily as a
result of higher mortgage loan originations.
Average consumer loans and leases increased $1.1 billion from
2011. Average automobile loans increased $526 million due to a
strategic focus to increase automobile lending throughout 2011 and
2012 through consistent and competitive pricing, disciplined sales
execution, and enhanced customer service with our dealership
network. Average residential mortgage loans increased $795 million
as a result of higher origination volumes. Average home equity loans
decreased $87 million due to continued runoff in the discontinued
brokered home equity product. Average consumer leases decreased
$126 million due to runoff as the Bancorp discontinued this product
in the fourth quarter of 2008.
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Investment Advisors
Investment Advisors provides a full range of investment alternatives
for individuals, companies and not-for-profit organizations.
Investment Advisors is made up of four main businesses: FTS, an
indirect wholly-owned subsidiary of the Bancorp; ClearArc Capital,
Inc. (formerly FTAM), an indirect wholly-owned subsidiary of the
Bancorp; Fifth Third Private Bank; and Fifth Third Institutional
Services. FTS offers full service retail brokerage services to
individual clients and broker dealer services to the institutional
marketplace. ClearArc Capital, Inc. provides asset management
services and previously advised the Bancorp’s proprietary family of
mutual funds. Fifth Third Private Bank offers holistic strategies to
affluent clients in wealth planning, investing, insurance and wealth
protection. Fifth Third Institutional Services provides advisory
services for institutional clients including states and municipalities.
The following table contains selected financial data for the Investment Advisors segment:
TABLE 17: INVESTMENT ADVISORS
For the years ended December 31 ($ in millions) 2013 2012 2011
Income Statement Data
Net interest income $ 154 117 113
Provision for loan and lease losses 2 10 27
Noninterest income:
Investment advisory revenue 384 366 364
Other noninterest income 22 30 9
Noninterest expense:
Salaries, incentives and benefits 159 161 164
Other noninterest expense 294 276 257
Income before taxes 105 66 38
A
pplicable income tax expense 37 23 14
Net income $ 68 43 24
A
verage Balance Sheet Data
Loans and leases $ 2,014 1,877 2,037
Core deposits 8,815 7,709 6,798
Comparison of 2013 with 2012
Net income was $68 million in 2013 compared to net income of $43
million for 2012. The increase in net income was primarily due to
increases in net interest income and 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 $37 million from 2012 due to an
increase in FTP credits resulting from an increase in interest
checking deposits.
Provision for loan and lease losses decreased $8 million from
the prior year. Net charge-offs as a percent of average loans and
leases decreased to 9 bps compared to 53 bps for the prior year
reflecting improved credit trends during 2013.
Noninterest income increased $10 million compared to 2012
due to an increase in investment advisory revenue, partially offset a
decrease in other noninterest income. The increase in investment
advisory revenue was primarily driven by increases in securities and
brokerage fees and private client service fees due to strong
production and an increase in equity and bond market values. The
decrease in other noninterest income was due to a decrease in gains
on sales of held for sale loans and the impact of the gain on the sale
of certain FTAM funds in the third quarter of 2012.
Noninterest expense increased $16 million compared to 2012
due to an increase in other noninterest expense primarily driven by
increases in corporate allocations and fraud losses.
Average loans and leases increased $137 million compared to
the prior year primarily driven by increases in average residential
mortgage, average other consumer and average commercial and
industrial loans, partially offset by a decrease in average commercial
mortgage loans. Average core deposits increased $1.1 billion
compared to 2012 due to growth in interest checking as customers
have opted to maintain excess funds in liquid transaction accounts
as a result of the low interest rate environment.
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
2011. Net charge-offs as a percent of average loans and leases
decreased to 53 bps compared to 132 bps for 2011 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.