Fifth Third Bancorp

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. Chris Dahl, Head of Investor Relations. You may begin your conference.

Good morning, everyone. Welcome to Fifth Third Second Quarter 2023 Earnings Call. This morning, our President and CEO Tim Spence and CFO Jamie Leonard will provide an overview of our second quarter results and outlook. Our Treasurer Brian Preston and Chief Credit Officer Greg Schreck have also joined the Q&A portion of the call. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures, reconciliations to the GAAP results, and forward-looking statements about Fifth Third's performance. These statements speak only as of July 20th, 2023, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Jamie, we will open the call up for questions. With that, let me turn it over to Tim.

Thanks, Chris, and good morning, everyone. Before we get to the quarter, I'd like to welcome our new chief credit officer, Greg Schreck, to the call. Greg has been a part of Fifth Third for 35 years, and during that time, he's seen more than a few credit cycles. He previously held leadership roles in both credit risk and the line of business, including serving as our chief commercial credit officer for several years and as our head of leasing, asset-based lending, and structured finance. We're fortunate to have him as part of the Fifth Third executive team. Despite heightened market volatility over the past four months, Fifth Third has delivered consistent top quartile financial results while investing strategically to position the bank for the long term. Our operating priorities have been and continue to be stability, profitability, and growth in that order. Earlier today, we reported second quarter earnings per share of 87 cents, excluding items noted in the release, a 10% increase compared to the year ago quarter. Adjusted revenue increased 9%, reflecting our diverse fee sources and resilient balance sheet. Expenses increased 4%, excluding items noted in the release. And credit quality was strong, with net charge-offs and early-stage delinquencies remaining below normalized levels. Our key return metrics improved, even as we increased our capital levels and credit reserves. We generated an adjusted return on assets of over 1.2%, and adjusted return on tangible common equity, excluding AOCI, of 15.4%, and an efficiency ratio below 55% for the quarter. These will be important bellwether metrics for all banks as we adapt to impending regulatory changes. Deposits continued to be in focus for the entire sector in the second quarter. Fifth-thirds total period end deposits increased 1% sequentially and increased 2% year over year. as compared to a 5% decline for the H-8 over the same period. Our consumer banking and commercial banking business segments both generated period and deposit growth. Given the year-over-year decline in deposits system-wide, it's reasonable to ask how Fifth Third has continued to outperform. The answers are deliberate multi-year strategies to expand distribution in our Southeast markets, to launch innovative operational deposit-oriented solutions, like Momentum Banking and our Treasury Management offerings, and our sustained focus on primary household growth. We have added over 70 de novo branches in our Southeast footprint since 2019, more than any other bank except JPMorgan. As a portfolio, these branches are outperforming their original business cases on deposit production, with several producing at a rate of 200 to 300 percent of plan. In consumer, we generated year-over-year net household growth of 3% once again this quarter, continuing a strong multi-year trend and punctuated by 7% year-on-year growth in the Southeast and continued success in our momentum banking product. In commercial, we have added a record number of new quality middle market relationships this year, up 30% from 2022. Our embedded payments business, New Line, has also been a strong catalyst for deposit growth. We expect the environment in the back half of the year to remain highly competitive for deposits. While we will continue to protect our house relationships and manage to a strong and stable liquidity profile, we will not match a rational pricing competition in a way that prioritizes headline growth over profitability. Turning to pending regulation, we are taking steps to adapt our balance sheet in anticipation of higher capital and liquidity requirements across the industry. We finished the second quarter with a CET1 ratio of 9.5%, having accreted around 90 basis points of capital from retained earnings over the course of the past year. We are balancing three capital priorities, continuing to build capital at an accelerated pace, supporting a dividend increase in the third quarter subject to Board approval, and supporting clients to drive organic growth. We will continue to pause share repurchases until the final capital rules are published and new capital targets are established. We are also taking several actions to boost on-balance sheet liquidity and optimize returns, including reducing our indirect auto lending origination volumes by approximately 15% through the exit of non-core states, trimming outsized lines, and closely evaluating select areas of our corporate banking business. While we acknowledge the market's more optimistic outlook, we remain vigilant on the potential for a recession in 2024. Our commercial clients continue to perform well, but they are being cautious by slowing their growth plans. Many are closely watching the impact that regulation may have on credit availability and pricing. Consumers have held up well in aggregate, but there has been a divergence between homeowners who were able to lock in historically low mortgage rates and renters, who have had to face persistent inflation in their largest monthly expense. Compared to three years ago, homeowners in our deposit base have maintained strong deposit balances, whereas renters' deposit balances are down meaningfully. I want to thank our nearly 20,000 employees for their unwavering commitment to serving clients in our communities. Last year, you volunteered more than 117,000 hours to community organizations, and you provided leadership to roughly 1,200 not-for-profit boards. Due to your hard work, we have already delivered nearly $30 billion of our 10-year $100 billion commitment to provide affordable housing, access to essential services, and renewable energy. In June, we celebrated Fifth Third's 165th anniversary. Given the current pace of technological and regulatory change and the logical questions about market structure and competitive models that follow, it was an interesting time to reflect on our history and what it could tell us about this moment. Since Fifth Third's founding in 1858, the company has withstood a civil war, two world wars, two global health pandemics, and 33 recessions. The company adapted its business model to take advantage of technological innovations, including the telephone, electric light bulbs, the automobile, and the internet. We were an early adopter of the wire and ACH windows, anchored the rollout of the credit card networks in the Midwest, invented the networked ATM, and we're one of the 15 initial launch banks for Zelle. We witnessed the creation of the OCC, the Federal Reserve, and the FDIC, and have continued to thrive through many different regulatory regimes. I believe that companies that stand the test of time develop a character of their own that extends beyond the people who work there. Fifth Third's character is rooted in hard work, ingenuity, an insistence on excellence, and a sense of responsibility for the communities we serve. I'm as confident as ever in Fifth Third's positioning, our ability to outperform through the cycle, and to deliver innovations that improve lives for all our stakeholders. And frankly, I'm just thankful to be part of the team that will steward the bank into the future. With that, I'll now hand it over to Jamie to provide more details on our financial results and outlook.