Good morning. My name is Dushanka and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Second Quarter 2007 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Jeff Richardson, Director of Investor Relations of Fifth Third, you may begin.

Hello and thanks for joining us this morning. We will be talking with you this morning about our second quarter 2007 results, as well our outlook for the remainder of 2007. As a result, this call contains certain forward-looking statements about Fifth Third Bancorp, pertaining to our financial condition, results of operations, plans and objectives. These statements involve certain risks and uncertainties. There are a number of factors that could cause results to differ materially from historical performance, in these statements. Fifth Third undertakes no obligation to update this... these statements after the date of this call. Now I'm joined here in with by Kevin Kabat, our President and Chief Executive Officer; and Chris Marshall, our CFO. During the question-and-answer period, please provide your name and that of your firm to the operator. And with that, I will turn the call oven to Kevin Kabat. Kevin?

Thanks, Jeff. Good morning and thanks for joining us. I have a few comments and then I will turn it over to Chris, who will review our balance sheet, revenue and expense trends, and also talk about our outlook for 2007. First of all, we posted a good quarter, especially in this tough operating environment. We showed a strong revenue and net income growth, and expenses were well controlled. So there is a lot to feel positive about in our operating results during the quarter. I will let Chris walk through our reported results, so let me focus on our lines of business. In our payments business, as you probably know, we landed the U.S. Treasury Account several quarters ago, and we brought about half of the relationship on line in the later part of this quarter. We expect the remainder to come on over the next 6 to 12 months. Additionally, we signed Walgreens credit card processing business a couple of weeks ago, and we expect that to convert to our systems in the second half of third quarter. As you know, Walgreens is one the largest retailers in the country, and we now process for most of the large pharmacy chains in the U.S. I continue to feel very good about this business, and I expect to maintain our strong mid-teens growth rate here. The credit card business is one of our main strategic initiatives. We continue to see great results in terms of credit card account originations, which were up about 50% versus a year ago, and balances were up 22% sequentially and 57% versus a year ago. In commercial, our C&I growth remained solid at 6% over last year. This was mitigated by an absence of growth in our commercial real estate lending, which reflects both…

Thanks Kevin and good morning everyone. Well first I'd agree with Kevin that our financial results were pretty good for the second quarter. I am going to go through the details of the income statement in the balance sheet, then we will wrap up with our updated outlook for the full year. But first, let me just take a second here and summarize our EPS. As you have seen, our earnings per share were $0.69. That included $0.02 of benefit from the sale of single products, credit card accounts. All the accounts we sold were single product relationships here, because we were unable to effectively cross-sell them all because of natural customer attrition. Now as we've said before, strategically we are focused on building our credit card business by growing multi-product relationships through our retail distribution network. Those accounts as you know are cheaper to originate, intend to be more profitable and have a significantly lower risk. In fact that the portfolio that we just sold has a charge-off rate of more than double, our overall average charge-off rate. So given that strategy, you can expect us to continually sell these kinds of accounts going forward as they develop due to normal attrition, although estimating potential volumes will be very, very difficult for us. And offsetting that $0.02 was a penny of one-time cost associated with the expense initiatives I discussed with you last quarter. I am going to say a little bit more about expenses in a minute. But in general, I am very pleased with the progress we have made. By comparison, we had $0.65 of EPS last quarter and $0.69 in the second quarter, a year ago. If you remember, that last year's results included a $0.02 net gain associated with sale of MasterCard shares. Alright, let…

[Operator Instructions]. Your first question comes from the line of Mike Mayo with Deutsche Bank.

Good morning.

Good morning.

Good morning, Mike.

It's more than six months now with new leadership and I was just wondering any tweaks or evolution to the strategy overall, and if you can give us an update on merger appetite?

Mike, it feels like six years, not six months. But again, I think in terms of our focus, we continue to really look at our focus on continued productivity improvements in terms of the strategy. The strategy feels good to us and we're getting good, as Chris and I mentioned in terms of the course of our comments, we think we're getting good traction in those initiatives. Again our focus has been on improving productivity and focus there. So...and that will be ongoing Mike. I don't know if we ever will ever stop from that standpoint. So you can expect us to continue to tweak both our models and our strategies as we go forward, continuing to expand and look for opportunities for improvement as we move down the pipe from that perspective.

And deals?

In deals, yes. We continue to look aggressively in terms of the marketplace. Again we're staying... nothing has changed. Strategically though we discussed with you Mike in terms of, why don't we expand the footprint and some of the diversity, as well as opportunities that may exist within the footprint of taking our competitors. So, nothing's changed from our standpoint. Obviously pricing has continued to be a challenge, but we are always on a lookout though.

And then, you guided lower in the few line items there offset by the tax rate. So are you guiding lower for earnings overall or?

Mike this is Chris. We feel... the lower guidance is really a reflection of what we've seen year-to-date in most those categories and maybe a little more of prudence in terms of commercial real estate growth, than we were expecting at the beginning of the year. Other than that, we feel pretty good about the guidance, we have given. In the terms of earnings, we are pretty comfortable.

On that last topic, the commercial real estate growth I guess, there is some banks who said they initiated new appraisals for Michigan and that makes them to more significantly increase or reverse the potential problem loans. Have you done any recent appraisal in that market or what's that process? Thanks.

Yes, and that's a good question very timely for us. We just completed an extremely thorough review of our Michigan business and specifically went through loan by loan in certain areas like Detroit. We also had our... just went through regulatory review of the same portfolios and there were no adjustments there. So we feel good about... I think we are being very, very careful about those areas that we were very focused on, I mean that review, I feel good. We had an ongoing effort there, but the review that we just went through didn't result in any need to change any of our treatment of any of those portfolios.

Alright, Thank you.

[Operator instructions] Your next question comes from the line of Brent Erensel with Portales Partners.

Good morning. Brent Erensel with Portales Partners.

Goodmorning, Brent.

I have got a question on the margin. You mentioned a lot times that the share repurchase is affecting the margin. But you seem to ignore the impact of the yield curve and the non-performing asset increase. Could you talk about those dynamics and the second question, unrelated... on the U.S. Treasury business; if you talk about the revenue metrics there and possible profit dynamics?

Yes, Brent. Thanks for the question. Look, I am not sure what to say on the yield curve. It's tough for everybody. We don't expect big changes. So I am not sure how to respond to the question other than what is eagerly awaiting seems deepening, just like any other bank portfolio. With regard to NPAs, there is obviously growth in NPAs, more than $528 million. I guess to allay any, we are not any but some concern in that growth. I guess I'd say, of those NPAs 75% to 80% of them are a fully collateralized in terms of feedback by real estate or to some much smaller level orders, and a vast majority of that have been charged down, already charged down to what their fair market value is. So I think we are carrying them at the right amount and we don't expect there to be a significant hit to charge-offs as a result of that growth. I think that was the essence of your question.

Actually, if I could follow up right there; margins were down 7 basis points and you said that most of that was due to the share repurchases. But I am wondering, when you have increase in NPA sometimes there are interest reversals. And I am wondering if that had any impact on the margin?

No I guess, what we were... the only thing I was thing trying to tell you in the margin was the difference in our expectations from last quarter. Most of the other stuff we had already expected and forecasted for.

Great, okay that's helpful.

And then in terms of the... last part of your question had to do with U.S. Treasury business and I am sorry, Brent would you --

Just, if you talk about the revenue and profitability?

Specific revenue... we couldn't, I am not sure we could provide that to you account by account. I apologize. It is a big account, but we can't break up the revenue from each one of those accounts.

Fair enough, thank you.

The next question comes from the line of John McDonald with Banc of America Securities.

Good morning John.

Good morning guys. Because I think you kind of just answered the NPA question I had to ask. Your outlook there is just for some kind of modest increases in NPAs consistent with kind of what we saw this quarter, I guess?

Yes. That's what I would say today. It is a little bit harder for us to predict NPAs and over 90s and that stuff does move around a little bit more... in a little bit more lumpy fashion in charge-offs but that's what we are predicting.

Okay. And I know this is hard to predict as well. But any insight into kind of what charge-off range might look like over the cycle for you guys, you have been able to kind of have any insight on that, it sounds like pretty stable for the second half of the year, this year. But as we grow through the cycle any thoughts about what the range might be?

No. I wouldn't forecast beyond that at this point. No, I can't elaborate on that at this point John.

Okay. Okay. That's great. Thanks.

Alright.

[Operator Instructions]. At this time, there are no further questions. Mr. Richardson, are there any closing remarks?

Yes I'll just... this is Kevin, I just wanted to take a moment to thank everybody for your attention this morning, and tell you that we feel good about the quarter, we feel good about the efforts that we're really approaching, the strategies that we're attacking and really doing well in a very tough environment. And we will keep our focus and keep working on the things that we think will add long-term value for the company. So we appreciate your attention, and have a great day. Thanks everybody.

Thank you. This concludes today's conference call. You may now disconnect.