Fifth Third Bancorp Earnings Call NUGGETS: Commercial Loan Competition, Credit Outlook
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Commercial Loan Competition
Paul Miller – FBR Capital Markets: Yesterday there was a couple of your competitors were on a call, said that Ohio and the Midwest have some of the most competitive pricing out there for commercial loans. I was wondering if you could add some color to that.
Kevin T. Kabat – President and CEO: As we talked about last quarter, I think that comment was made by competitors as well and from our standpoint it is competitive, it continues to be competitive, although we feel like, from our perspective and the growth that we’ve had that and as we mentioned in terms of our comments earlier, pricing on new production has been relatively stable and we feel pretty good about kind of the value we are getting for prices paid from that perspective. So, again, from our standpoint it is competitive out there, we’re being disciplined, I think and sensible in terms of where we’re targeted and where we’re focused in competing, I think you see that relative to our commentary on the indirect auto paper for example, but we feel really good about the value we’re creating long-term for shareholders with the new business we’re putting on at this point so.
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Paul Miller – FBR Capital Markets: Just a quick follow-up, have you seen any slowdown in activity of loan demand given the recent news reports, but the fiscal cliffs and troubles in Europe or is it the Midwest little bit different?
Kevin T. Kabat – President and CEO: What I tell you Paul is that, we still see good solid growth. Our production continues to be good; our pipelines continue to be good. We have seen some of the higher quality larger credits going through the capital markets, where they can refinance debt at historically low levels, production continues to be good. I think there is generally a consensus out there and a tone of cautiousness in the marketplace and I think people are watching and paying attention to what’s going to happen later this year and some of the resolution of some significant issues that will have consequences on the economy directly in the first part of next year, but again from our standpoint, we’re still seeing good activity to drive the momentum that we’ve had continuing.
Todd Hagerman – Sterne Agee: Bruce, just a question on credit and your Outlook if you will, Kevin I think, you mentioned that in terms of the critical improvement, it seems to be accelerating more than what you had expected at this stage of the game. As I look at the metrics, NPLs seem to stabilizing a bit. The reserve release seems to be slowing down and your NPLs picked up a bit this quarter. I am just curious, given that scenario are we close to reaching an inflection point as it relates to provisions and the reserve release, which did slow this quarter relative to Q1?
Bruce K. Lee – EVP: First of all, I think we are starting to see a little bit of inflection between the NPLs, although we think they will continue to decline next quarter. Charge-offs will continue to decline as well. Reserve releases is formula driven, it clearly depends upon what our past history was of economic outlook and we would expect to see continued release although we do believe the pace will probably slow as the balance sheet continues to grow and put more new loans on the sheet.
Jeff Richardson – Director IR: This is Jeff. I think an inflection points suggest toning in other way and I what you’ve seen over the last two years and I think what we expect is consistent with that, which is improvement continues, the pace can’t – the pace must slow, but I don’t think we’re near an inflection point so much, we’re just seeing a continued improvement but at pace that reflects having gotten lots of problems behind us, but we still got more that will be able to get resolved in the future.
Todd Hagerman – Sterne Agee: The point being just in terms – I look at the balance sheet growth relative to the stabilization in some of the credit metrics that it appears that again that reserve release would intuitively begin to slow at this stage of the game?
Daniel T. Poston – EVP and CFO: Yes, I think that’s fair.
Todd Hagerman – Sterne Agee: Just quickly on the mortgage side, could you just quickly – on the statistics in terms of just the gain on sale margins, again extended this quarter. Just curious if you can make the comparison Q1 to Q2, exactly kind of what you’re seeing relative to the production in the mix?
Daniel T. Poston – EVP and CFO: Sure. Overall, our mortgage results continue to be at near record levels, driven by low interest rates and the HARP program. We saw really good results and we ramped up quickly to take advantage of the refi wave in the fourth and the first quarters. This quarter I think we saw a continuation of similar results from a spread standpoint. Our margins for the quarter were up, probably 40 to 50 basis points. That was driven by a number of things; the market conditions were very favorable obviously. We were also able to shift some of our capacity to the retail line of business, to the HARP program and less of our capacity was allocated to the wholesale channel. So, that had a positive impact on margins overall as we shifted some of that volume to the more profitable segments of the business. As I mentioned earlier, we ramped up pretty quickly in the fourth and first quarters and probably captured more than our fair share of business during that period of time. I think the environment has gotten more competitive as rates have continued to move lower and others have ramped up their capacity and that competition shows both in terms of competition for business, as well as for personnel. So, as we go forward I think we expect volumes in the third quarter as we mentioned to be slightly higher and perhaps that to have a slight dampening effect on overall margins, but for margins continue to remain very, very strong and for overall results to be slightly stronger in the third quarter than the second.
Todd Hagerman – Sterne Agee: So, I am assuming that implies not much change in terms of the rate environment in terms of your outlook?
Kevin T. Kabat – President and CEO: That’s correct.
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