Good morning. My name is Janice, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp Second Quarter 2008 Earnings Conference Call. (Operator Instructions) Thank you. I would now like to turn the call over to Jeff Richardson, Director of Investor Relations.

Hello, and thanks for joining us this morning. We’ll be talking with you today about our second quarter 2008 results, our recent capital actions, and outlook for the remainder of 2008. 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 these statements after the date of this call. I’m joined here in the room by Kevin Kabat, our Chairman and CEO; Chief Financial Officer, Dan Poston; Chief Risk Officer, Mary Tuuk; and Jim Eglseder of Investor Relations. During the question-and-answer period, please provide your name and that of your firm to the operator. With that, I’ll turn the call over to Kevin Kabat.

Thanks, Jeff. Good morning everyone. Thanks for taking the time to join us on what I know is a very busy morning for everybody. I have a few opening comments about our core operating results plus some perspective on the significants of the quarter, including our capital actions and the impact of leveraged lease litigation reserves on results. And then I will hand it over to Dan and Mary who will review in detail our financial performance, our credit trends, and our outlook for the remainder of 2008. Let me start by saying that throughout this economic downturn we’ve not lost sight of our long-term goals and our objectives and it’s showing up in our operating results. We believe that our earnings power, our higher and strengthened capital levels, and our ability to generate capital are more than sufficient to allow us to manage through this cycle. We are well positioned to maintain our focus on producing continue strong operating results. We continue to make investments in our businesses to grow, diversify and leverage our platform, and we continue to support our customers in this difficult time. Strong operating results remain consistent with expectations and we are secure in our conviction that when this cycle turns, Fifth Third will be positioned to post bottom-line results outperforming the industry. Now for a few highlights from the quarter. Fee income growth continued to be robust. Electronic payment processing revenue of $235.0 million increased 10.0% sequentially and 15.0% from a year ago, driven by continued strong merchant processing results, the revenues were up 16.0%. Card issuer interchange revenue increased 20.0% from the previous year, driven by higher debit and credit card usage overall and higher dollars per use in debit. Electronic funds transfer revenue from our financial institutions clients grew 10.0% from the…

Thanks, Kevin, and good morning everyone. As Kevin highlighted, our core businesses continue to perform well in spite of the very challenging environment. But given the state of the industry, I am sure that capital and credit are the areas most people are going to want us to focus on today. So I am going to make just a few brief general comments before moving into those areas. I will comment on capital actions, and Mary will cover credit trends, and then I will finish up with operating trends and the outlook. With that in mind, there were a couple of items that impacted our results this quarter. The first is the charge related to our dispute with the IRS about leases that were originated between 1997 and 2004. This charge totaled $229.0 million, after tax, or $0.42 per share. Now this was a little lower than we estimated it could be last month, and the charge has two components. The first component is an increase to our tax expense of $140.0 million. The second component is $130.0 million pre-tax charge that reduced net interest income. These charges completely remove the previously recorded tax benefits of the disputed leases from our financials, as well as providing for any interest we may be charged if we lose our case. We continue to believe that we entered into good leases that should be respected for tax purposes, as we described in our 8-K last month and we are still pursuing our case in court. The second item impacting results would be the closing of the First Charter transaction. This transaction was relatively small. First Charter had about $5.5 billion in assets. But given the market for loan portfolios as of June 6, 2008, when we closed the transaction, the purchase accounting mark-to-market…

Thanks, Dan. I will start with charge-offs. Net charge-offs were 166 basis points for the quarter. That’s up 29 basis points from last quarter and in line with our expectations laid out last month. Of that, consumer net charge-offs were $167.0 million, or 204 basis points, versus $135.0 million, or 158 basis points, in the first quarter. Real estate-related lending continued to show the most weakness. Residential mortgage net charge-offs were up $29.0 million and home equity net charge-offs were up $13.0 million. These were offset by a $9.0 million decline in auto net charge-offs in from the first quarter, as expected due to seasonal trends. Mortgage losses of $63.0 million were driven by the effect of lower property values on foreclosures, a trend that we don’t see changing in the near term as HPA indices from Case Shiller and OFHEO continue to fall. And again, those higher losses were concentrated in Michigan and Florida, which accounted for 72.0% of our second quarter mortgage net charge-off. The rate of increase slowed in Michigan this quarter but we saw continued deterioration in Florida. Home equity losses continued to be high at $54.0 million, or 183 basis points of loans, with brokered home equity accounting for about ¾ of those losses. The brokered portfolio totals $2.5 billion and represents about 20.0% of our home equity loans. This portfolio is currently running off and you will recall that we shut down brokered home equity production last year. Brokered home equity annualized net losses were slightly more than 400 basis points of loans. This disproportionate split of losses is expected to continue as the brokered portfolio winds down. Charge-offs in credit card were up $1.0 million. Card losses remain relatively benign and below peers, although we would expect losses to continue to grow in…

Thanks, Mary. Now I want to walk through our results in a little greater detail and I will start with the balance sheet. It is worth noting before I get going that the results include First Charter beginning on June 6, 2008, the date of the acquisition, so the effect on average balances is less than a full quarter’s effect. On an average basis, loans and leases increased 3.0% from the first quarter, or 2.0% before the First Charter acquisition, and 11.0% from a year ago, or about 8.0% before acquisitions. End of period loans and leases were up 6.0% from the first quarter, or 3.0% excluding First Charter. Breaking that down, average commercial loans, excluding acquisitions, grew 7.0% sequentially, and 19.0% versus a year ago. The majority of that growth was in C&I loans. Commercial loan growth included about $1.0 billion in high quality commercial loans that were held for sale but that we moved to the portfolio in early April given the state of the commercial paper markets. Excluding that effect also, average commercial loan growth was 5.0% sequentially and 17.0% versus a year ago. Excluding acquisitions and held-for-sale activity, C&I loans grew 7.0% from the first quarter and 26.0% on a year-over-year basis. Commercial mortgage loans grew 5.0% sequentially and 11.0% from last year. And commercial construction loans were flat versus both periods. On the consumer loan side, excluding acquisitions, average loans were down 4.0% sequentially and 5.0% from a year ago. This reflects the economic environment, improved underwriting practices, and the sales and securitizations of loans in the first quarter. Excluding the effect of both securitizations and acquisitions, consumer loans were up 3.0% from a year ago. Breaking that down, auto loans were down 9.0% sequentially and down 20.0% compared with last year. This reflects the…

(Operator Instructions) Your first question comes from Brian Foran with Goldman Sachs.

Thanks for all this credit detail. This is actually extraordinarily helpful. I think we’re all trying to struggle with how to get arms around auto risk and when I look at your detail on the auto portfolio, it is actually surprising to me that the biggest differentiation is in the less than 100 and greater than 100% advance rates and the less than 60-month term and the greater tan 60-month term in terms of MPAs and charge-offs between those pockets even more so than the SUV versus the auto, which is what I think we all were afraid of. Do you expect that to continue over time and are those two metrics we should start to think about when we think about the riskiness of your auto book versus everyone else’s our do you think SUVs versus autos over the long term be a bigger differentiator?

A couple of comments that I would make with respect to our auto portfolio. First of all, if you look at our mix of new and used, it is very much in line with the industry. In addition, if you look at our mix of large trucks and SUVs, it’s also very much in line with the industry. And as part of the modeling that we performed, particularly with respect to the proportion of the portfolio that is comprised of the large truck and large SUV portion, we did shock that more specifically in our various planning scenarios to be able to account for what we might see, in a rise in energy costs or otherwise. So if you look at some of the other portfolio characteristics that you described, we do feel very, very good overall about the performance of the portfolio. And as we continue to provide more specific analysis into the different vintages of the portfolio, we do believe that it is performing very well and we continue to see that.

The only thing that we continue to watch as we’ve stressed the portfolios, obviously out of the box from the portfolio’s perspective and the economy today, cost of gas becomes a bigger driver related to the larger vehicles. If that shifts, in terms of a recession where unemployment becomes a greater concern, that can obviously have a broader impact and that’s what we really added to the stress and some of the assumptions as we looked at the stress in that portfolio. So that’s kind of the metrics we’re looking at as we go through the analysis.

Your next question comes from Michael Mayo with Deutsche Bank Securities. Michael Mayo – Deutsche Bank Securities : I’m just trying to understand the core trends a little more. You alluded to this. If you exclude First Charter from the results and exclude one-timers, I think you said net income went up 2.0%.

If you exclude First Charter and you exclude the one-timers we would have printed $0.05 in the quarter, which actually includes $0.02 merger-related charge, Mike. Michael Mayo – Deutsche Bank Securities : Right. So I’m just trying to look at core revenue trends. So net interest income would have increased 2.0% sequentially?

It’s in the release. I don’t have that right in front of me, Mike. Michael Mayo – Deutsche Bank Securities : So just bottom line is total revenues, excluding First Charter and excluding the one-timers, increased how much and how much did expenses increase excluding First Charter and one-timers?

I’ll tell you what, Mike. We’ll do that calc. It can be calced out of what we disclose in the release. So, you’re asking for revenue and we just need to do some quick math. Michael Mayo – Deutsche Bank Securities : Okay. And deposits. They went down 2.0% including First Charter?

Correct. And that’s on an average balance basis and First Charter contributed very little to that because the acquisition occurred so late in the quarter. Michael Mayo – Deutsche Bank Securities : Okay. So deposits down, can you give some color on that?

Overall, Mike, it’s really [inaudible] if you take a look at the deposit growth. Transaction deposits were up 6.0% on a year-over-year basis. Good account production and really where you saw some of the mix change is really where we actually decided not to match the aggressive CD rates, which we believed were higher than warranted given the value of those deposits. So, overall, we’re pleased with deposit production. We think we’re doing in it the right way and we think we’re doing it with relationships that we can build with value over time as opposed to simply high cost of funds single relationship only deposits. So it really goes back to the same type of conversation we’ve had regarding the every day great rate strategy over time. So, again, we think the deposits and transaction growth is strong and continues to be strong in terms of its core production. Michael Mayo – Deutsche Bank Securities : Okay. Let me get off that then. Are you done with your capital raises and what gives you confidence that you’re done with capital raises?

Mike, as we went through and evaluated our capital situation, and we tried to explain in terms of the extended information expressed today, we really evaluated all of our options. We didn’t make the decision lightly. And with the volatility in the market we wanted to be proactive and have the capital which allows us to weather a severe-stressed case, in case that happens. Not that we’re predicting it, but in case that happens. So, the strategy we have developed we believe provides the most long-term value for our shareholders and gets us through a very severe-stressed scenario that we’ve tried to outline for you in the call this morning. Michael Mayo – Deutsche Bank Securities : Maybe some of that goes to your outlook. You’re at a 166 basis points loan losses and you’re guiding to 160 basis points-170 basis points for the year. With First Charter. It’s not really apples-to-apples, right? So, maybe you can just give a little more color on your outlook compared to where you are in the second quarter.

If you look at our guidance for the remainder of the year, essentially what we are guiding you to is the fact that we do expect an increase in homebuilder charge-offs for the remainder of the year. And of that increase we would expect a larger proportion of that increase to occur within the third quarter. And we would give you that guidance based on our analysis of the migration of that portfolio. However, if you were to exclude home builder charge-offs, we would expect the remainder of losses to increase at a very modest pace.

The other thing we would say, Mike, is by and large the First Charter portfolio is performing as expected and really better than the overall portfolio so it’s a slight positive to us in terms of the magnitude of contribution. Michael Mayo – Deutsche Bank Securities : And just a little more color on your outlook which is appreciate. So your core margin, I guess that would be excluding First Charter, should that go higher from here?

Core margin went up 4 basis points if you exclude the effect of First Charter. And again, we’re expecting that to, as Dan said in the outlook, to stay relatively flat, maybe down slightly toward the end of the year is really what our expectation is.

Purchase accounting is going to add about 20 basis points to the annual net interest margin. Exclusive of that we do see some pressure on margins in the second half. Particularly from deposit competition, as banks prepare for what might be a rising rate environment, there will be increased competition for deposits and to extend maturities. The other thing I would point out in terms of the impact of First Charter, while we have the pickup that we described, relative to the purchase accounting accretion, before purchase accounting First Charter actually has a slight drag on margins. Their margin was running about 3.0% right before the acquisition. And then lastly LIBOR/Fed Fund spreads have been historically wide in the first half of the year and we’ve benefited somewhat from that. We expect that to narrow somewhat in the second half, especially with an assumed Fed rate increase.

I’ve just done some quick math here and I think the information is in the release, so don’t, I might have forgotten something here. But if you take NII and you add back the effect of the LILO charge, which was 130, you get to 874. If you subtract the purchase accounting accretion, and First Charter, if you think of, they added some NII for the 24 days that they were with us, but there’s funding costs associated with that, so there’s not a lot of NII effect of First Charter overall. You end up with NII being up about 2.0% and then fees. You’ve got Visa, BOLI, and securities gained last quarter, you have security losses this quarter. If you take those out, fees are up about 2.0%. First Charter added about a few million dollars, maybe $5.0 million for the quarter. So fees are up about 2.0% excluding First Charter, also. So revenue is up about 2.0% sequentially. Michael Mayo – Deutsche Bank Securities : And expenses under the same analysis?

Well, you didn’t ask for expenses so I haven’t done the math on that. But that is crystal clear in the release. Michael Mayo – Deutsche Bank Securities : Well, no, because you still have First Charter expenses.

No, it’s in there. I think Dan mentioned expenses were relatively flat, excluding First Charter and some of the other things, the Visa reversal last quarter and that sort of thing. Michael Mayo – Deutsche Bank Securities : Second bullet in your release is pre-tax pre-provision earnings for basically $745.0 million on a core basis. Do you think of that future kind of earnings as being a cushion for your loan losses? Does that factor into your analysis of how much capital you need?

Yes, we did take that into consideration. Our expectation as we’ve really kind of expressed all along is that we do have strong core earnings in the company, we’ve been able to continue that strong core growth and we expect to be able to continue that strong core growth. So, absolutely, that was taken into consideration as well. Michael Mayo – Deutsche Bank Securities : And under analysis, how much will you haircut that $745.0 million when you’re doing your analysis the next couple of years? Or do you not?

You will have to wait for the outlook, when we get to 2009. Again, we did that relative to trying to put a good capital plan together. We won’t give guidance for 2009 until we get closer to that mark. We will give you more information as it becomes more transparent to us, as we get closer.

The only thing I would add to that is we have talked a bit about the degree to which we stressed our credit scenarios as we built our capital plan and while we did stress them quite significantly, the core earning trends, we did not apply the level of stress to those because we didn’t feel like the uncertainty surrounding those items was the same as it was with respect to credit.

Your next question comes from Vivek Juneja with JP Morgan.

A couple of clarifications on the pre-tax pre-provision earnings. How much of that would go away from the business sale that you are incorporating into your capital raise? Does that include any of that?

One of the things that we’re very sensitive to, and obviously you missed it, is kind of not commenting in greater detail in what businesses are involved or aren’t involved, in terms of the sale. Our expectation in terms of the business evaluating in total is less than 10.0% of the Bancorp, as we mentioned in our script, and our earnings up front. So that’s about all the color I can give you right now.

And then the same one on the pre-tax pre-provision. You said you didn’t measure the credit impact, and I’m assuming the credit impact of additional non-performers or rising collection costs, those are not factored into that?

Right.

The expense impact of those. The only thing we excluded is the provision. So to the extent that we’ve incurred additional collection expenses and so forth or we’ve lost NII because of non-accruals, that would be impacting that overall result.

Going back to the auto-related question on SUVs and pickup trucks, what are you assuming in terms of recovery values? How much decline are you assuming in that?

In some cases we’re seeing decline as much as 62.0% in that portfolio, the large trucks and large SUVs.

There are no further questions.

We appreciate you time this morning. We know everyone must be on the key call. It’s a long earnings season and it’s a busy day. We recognize the steps we last month were difficult decisions that we don’t take lightly, but stronger capital and stronger reserves are necessary in this environment to deal with any potential possibility of negative trends in the industry, which may continue for an extended time and it’s our responsibility to ensure that’s the case. So, our people are focused in delivering and we are confident they will continue to do that and would like to thank those who are listening for their hard work during these difficult time. We are well positioned at this point and we are committed to delivering above industry performance. We continue to demonstrate that through strong operating results and the earnings power we continue to build will provide significant bottom line earnings power when this cycle turns, and it will. So thanks again for joining us. Talk to you next quarter.

This concludes today’s conference call. You may now disconnect.