Good morning. My name is Pamela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bank Earnings Conference Call. [Operator Instructions] I will now turn the call over to Jeff Richardson, Director of Investor Relations. You may begin.

Thanks, Pamela. Good morning. Today, we'll be talking with you about our full year and fourth quarter 2012 results. This call may contain certain forward-looking statements about Fifth Third 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. We've identified some of these factors in our forward-looking cautionary statement at the end of our earnings release and in other materials, and we encourage you to review them. Fifth Third undertakes no obligation and would not expect to update any such forward-looking statement after the date of this call. I'm joined on the call by several people: Our CEO, Kevin Kabat; and CFO, Dan Poston; as well as Greg Schroeck from Credit; Tayfun Tuzun from Treasury; and Jim Eglseder from 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. Kevin?

Thanks, Jeff. Good morning, everyone. We know it's a busy morning for you. Before we go through the quarter, I want to make some comments about 2012 as a whole. While the interest rate and regulatory environment certainly were not favorable, Fifth Third results demonstrated the many core strengths of our company. We worked hard to position ourselves to take advantage of opportunities when they returned and had the infrastructure in place to execute. We focused on the long term when it was difficult to do so. Those results show up in some areas very clearly, such as mortgage banking, where revenue was up 41%, and corporate banking revenue, up 18% this year. Less obvious is the important work we've done in areas where year-over-year revenue is down, but where quarterly results are trending up, such as deposit service charges and card processing revenue. Overall, net income of $1.6 billion, the second highest in the company's history, and net income to common shareholders increased 41% over last year. Earnings per diluted share were $1.66, also up 41% from a year ago. For the year, we posted a return on assets of 1.34% and a return on average top -- tangible common equity of 14.3%, up from 11.4% in 2011. I'm pleased with our ability to produce these results in the midst of a relatively weak economic recovery and significant regulatory changes. We remain committed to our markets, which is demonstrated through our strong deposit and loan growth results. For the full year, average transaction deposits increased 8% and loans grew 6%, including a very strong fourth quarter. Credit quality metrics showed continued and significant improvement, with charge-offs for the year down 40% and nonperforming assets down nearly 30%. And we returned nearly $1 billion in capital to shareholders while maintaining,…

Thanks, Kevin. I'll start with Slide 4 of the presentation. For the quarter, we reported net income of $399 million. Net income to common shareholders was $390 million and diluted earnings per share of $0.43 increased 13% from last quarter's $0.38. Fourth quarter results included $157 million gain on the sale of Vantiv shares and $134 million charge on the termination of FHLB debt. Quarterly results also included $19 million in unrealized losses on Vantiv warrants, $15 million in charges associated with the Visa total return swap and an additional $29 million of pretax charges related to the increase in our mortgage repurchase reserve. Finally, we recognized a $10 million benefit in the tax line during the quarter related to the termination of leases. I'll touch on each of these later in my remarks, but in total, the items I just outlined reduced after-tax earnings by $16 million or about $0.02 per share after tax. All in all, it was a strong quarter for Fifth Third and that gives us a solid foundation as we enter 2013. I'll discuss our outlook toward the end of my remarks. Turning to Slide 5. Tax equivalent net interest income decreased $4 million sequentially to $903 million, and the net interest margin was 3.49% versus 3.56% last quarter. You'll recall that in the fourth quarter, net interest income benefited from several nonrecurring items that, in total, contributed $10 million to NII and 4 basis points to the margin. Excluding the impact of these items on the sequential comparisons, net interest income increased $6 million and the net interest margin declined 3 basis points. Net interest income benefited from lower interest expense due to the full quarter effect of the redemption of trust preferred securities that occurred in the third quarter and also from the…

[Operator Instructions] And your first question comes from the line of Ken Usdin with Jefferies. Ian Foley - Jefferies & Company, Inc., Research Division: It's actually Ian Foley for Ken. First question on the commercial loan growth, obviously, huge growth towards the end of the quarter. Was wondering if you could provide any details on just timing and how that could impact 1Q growth rates.

Let me just start and then Dan can finish in terms of talking about forward perspective. It was strong in the end of -- and you noticed in terms of our end of period loans. We got -- it was very broad, came from a wide swathe across our geographies. It was strong, particularly in terms of healthcare, energy, manufacturing. We feel very good about that. Pipeline was good, and we were able to really work hard through year end to accommodate our clients and our client needs. That, as Dan mentioned, really does give us a good foundation and a good jump-off point relative to starting the quarter. So that feels pretty good. I don't know if there's anything else, Dan, you'd like to say in terms of that point.

No, not a lot more. As Kevin said, fourth quarter was very strong, some of that may have been some acceleration of some transactions. But overall, we expect that we will continue to post quarterly loan growth that's consistent with what we've seen over the past several quarters. And you can see our annual expectations for loan growth are for mid to high single-digit growth for the year, and I'm not sure we're necessarily expecting there to be significant variations during the year. So I think we would expect continued consistent solid loan growth throughout 2013.

And the only other thing I would just conclude with in terms of that point, look, we've made a lot of investment in this space. Our folks are doing a very good job. We've brought in some real talent to supplement the strategic focuses that we've had. We've talked about the energy vertical, for example. Healthcare continues to be a very, very strong and very good line of business for us and vertical for us as well, and we feel good about the manufacturing business going on around us. So again, I think that we're well positioned to take advantage of where we're seeing some strength in this modest but continuing slow recovery. So I think we're well positioned to take advantage of that. Ian Foley - Jefferies & Company, Inc., Research Division: All right. And my second question is a follow-up to the loan growth guidance. Just wondering if you could put that in context of overall earning assets and how you expect loans to earning assets to shift over the next year?

We continue to favor loan growth over growth in the investment portfolio. We don't believe that the current environment provides good risk return trades-offs for our shareholders to grow the investment portfolio. So earning asset growth almost exclusively will reflect loan growth looking forward. Ian Foley - Jefferies & Company, Inc., Research Division: But do you think you would actually pull down the securities portfolio as a result of the loan growth, given that deposit growth is stable to up modestly?

No, I expect the investment portfolio size to remain stable.

Your next question comes from the line of Brian Foran with Autonomous.

I think the fee growth guidance is clearly better than most people have baked in, and you give good color and helpful detail on -- by line item. I guess, maybe if you could just -- if I could ask as a follow-up where the main points of uncertainty are? Mortgage, you feel pretty confident about the first quarter. And I guess a sub-question would be if you could just remind us how you book revenue and if it's mostly at funding or rate lock that's feeding into that confidence. And then just more broadly, I mean, with all the moving parts in fees, what are the 1 or 2 things we should watch for deltas as we move through the year?

Yes. Clearly, there's probably more uncertainty with respect to mortgage results than any of the other line items, and we've booked the majority of revenue at rate lock, but there is some revenue that is booked upon the sale of those loans. I think in the other fee categories, we are expecting growth uniformly through all of our line items. And I think as Kevin mentioned, that growth is primarily driven by investments and actions that we've taken over the past several years. So we continue to see very solid results in corporate banking. We changed our focus or increased our focus on mid-corporate lending, and we've had concerted efforts to be in a position to be in the lead position on transactions. That has resulted in a greater fee income contribution and more opportunities for corporate banking revenues. You're seeing that in our results, and I think our expectation is you will continue to see that into 2013. On the consumer side, obviously, the fees over the last several years have been impacted by a number of regulatory headwinds. I think we've turned the corner there. We talked about that in the third quarter, that we thought consumer deposit fees have bottomed out. I think that's been proven out by our fourth quarter results, where deposit fees were up 5%. We're expecting continued growth there. We've got our -- the full implementation of our new set of deposit products is coming online in 2013. Obviously, there's some uncertainty with respect to that program. But we've been piloting that for some 6 months now, and we have a high degree of confidence in our ability to produce the kind of results that are embedded in our guidance, given the results of those pilots. So overall, we're feeling pretty good.

As a follow-up, I was wondering if I could ask about auto lending. And I know you focus on prime industry statistics we look at, I mean, to suggest underwriting standards are easing quite a bit across that market, but it's harder to get a broad perspective, I guess, or 10 kind of years of perspective of whether the market just kind of rebased to a more normal level or whether people are getting over their skis a little bit. So I guess just what are you seeing on the ground from a competitive standpoint? Is the market just normalizing, or is it getting a little bit looser than you'd like in auto?

I think credit conditions in auto, in the market, are easing up a little bit because the competition at the very high-end level of FICO spectrum is very, very strong. So the risk return trade-off's of, in the sort of 775, 780-plus type FICO scores is driving margins down. And the other thing to keep in mind is that this product behaved very well from a credit perspective through the credit crisis. I think originators have some confidence as to the expected credit behavior. On our side, we have not changed our underwriting standards much. I mean, we continue -- we have a platform that is probably capable to originate more loans, but we've kept the discipline in the business to make sure that we don't compromise credit standards and we book loans that provide a good risk return trade-off. So the overall profile of our originations has not changed. We are aware of some of the market trends that you are pointing to, but I'm confident that going, moving forward in 2013, we'll keep the same type of discipline in the business.

If I could sneak in a very quick last one, the NIM doing worse in the first half of the year than the second, is that just the timing of CD repricing and deposit repricing more broadly? Or is there some kind of expected inflection in asset yields as well?

So if you look, historically, you will see that first quarter -- Q4 to Q1 change is most likely going to be similar this year compared to last year. There is some support in the second half from CD -- consumer CD repricing in Q3 and Q4. In general, Q1 tends to be a bit weaker from a fee perspective, that goes into the margin line, and we would expect that to stabilize in the second half, based -- and we're not currently assuming any meaningful -- as Dan stated, any meaningful improvement in the rate environment. So with ongoing current conditions, we don't see anything unusual than what we typically see in Q1 this year.

The only thing I would add to that is we saw the impact on the rate environment from QE3 in the third quarter of 2012. That has had an impact on margins over the latter part of 2012, and that's not fully baked into our portfolios at this point, but that will become more and more baked into the portfolios as we move through the first half of 2013. And absent any other kind of event that has a large impact on rates, we would expect that the impact of that would begin to subside as we move into the latter part of the year.

Your next question comes from the line of Ken Zerbe with Morgan Stanley.

Just a question on the rep and warranty expense that you took this quarter on the earlier vintages. How well do you feel that you're able to capture the potential charges associated with that? Meaning, are we -- do you feel that we are basically done with those earlier vintage charges at this point, or is this just the first step among several, potentially?

Well, the -- I think it's important to recognize that our reserving methodology is not to attempt to estimate the total losses from repurchase activity over the entire life of the portfolio. Our reserving methodology is to reserve for those losses that we can estimate based on the current conditions. So we've moved to a point over the last couple of quarters where we have far more insight into what Freddie Mac is going to do with respect to requesting files [indiscernible] postulate whether to put a loan back to us and what decisions they will be making in that regard. So we've increased our reserves to the extent that we can now estimate put-back activity into the future, which we were unable to do before. But that doesn't mean that we have made those estimates for the entire life of the portfolio. We're making those estimates based upon which loans we think have currently exhibited behavior and are currently nonperforming in Freddie Mac's eyes and that they will ultimately put back to us. So it's a look into the next several quarters or years in terms of what they might do with loans that have nonperforming characteristics today, but it's not trying to project how that portfolio will perform years into the future. So hopefully, that's answers your question.

Yes, no, it does, actually. It helps a lot. Just as a follow-up question, maybe a little more broad. It seems that you were fairly optimistic when it comes to C&I growth in 2013. Obviously, auto is just as competitive. When you think about the potential categories where we could see growth, is C&I the best in terms of, sort of the, I'd say I guess, risk reward or in terms of the yield versus the risk that you're taking on that, where you see more opportunity to grow versus other categories?

Yes. Ken, this is Kevin. I would tell you that, that statement or that assumption is true. We do feel very good about the risk reward and the value that we're seeing, particularly as you see, and as we were able to report this quarter, some of the commercial fee revenue that we had. That should give you comfort and an indication of our confidence of driving the right business and the right value for the risks that we're taking. It certainly does for me, so...

The only other thing I would point out from a risk reward perspective is that I think that what Kevin just said is probably all the more true when you consider the fee income opportunities. So a lot of our C&I growth is a result of our mid-corporate strategy, and I think you have the dynamic that I alluded to earlier with respect to the fee income opportunities on that business being far greater than they are in many other categories of our loan portfolios.

Your next question comes from the line of Jefferson Harralson with KBW. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc., Research Division: My question is a follow-up to the last one and maybe it's too similar, so feel free to pass it by if it's too similar. But in just listening to all the conference calls this quarter on loan growth, it feels like we've had a lot of small and midsized businesses sell to, either family members or whatever, and get a lot of -- and we had a lot of leveraged financed volume that's driving a nice kind of a late quarter C&I growth. Is that kind of what you're seeing here? And is -- and I just want to make -- as you guys are guiding to a much higher nice loan growth, I just want to know what the drivers are to that loan growth in your guidance, because it seems like a big piece of this quarter might be fairly temporary, or am I thinking about that incorrectly?

Yes. Certainly, we did see some activity that was M&A transactions and the like that may have had some tax motivation in terms of tax changes. But I would say that while that was a contributor to our growth, I think it was not the key driver to our growth. So I wouldn't anticipate that the absence of those kinds of transactions going forward would have any risk of impacting our guidance. So if you look at our guidance, certainly, our guidance is not that we will replicate the fourth quarter every quarter going forward. Fourth quarter was strong. That was one of the reasons it was strong. But the absence of those kinds of transactions is fully baked into our guidance as we go forward. Jefferson Harralson - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. And then for the '13 guidance, I guess, what has to go right for that to -- for the guidance to come true?

From our standpoint, the assumptions that we've made relative to our guidance, I think, we articulated, which is really kind of the continued modest recovery that we're having. That has to go through. From our standpoint, we have to execute well. We've made the right investments. I think we're well positioned. We're scoring in the areas where we've specifically put investment against. To be able to do that, we've got to continue that momentum and that execution, and I think that's entirely within our strength and control. So it feels really good, and we've got to also continue to be very disciplined relative to credit quality. We know there will be continued competitive pressure from that standpoint, and I think we're very mindful of all the factors of success in being able to do that. We wouldn't have given the guidance if we didn't feel confident at this stage that these are the things that we're dealing with in this environment and have been able to demonstrate in the past year as well.

Your next question comes from the line of Paul Miller with FBR Capital Markets. Jessica Ribner - FBR Capital Markets & Co., Research Division: This is Jessica Ribner for Paul. Just taking a look at your gain-on-sale margins, it looks like it fell about 50 basis points quarter-over-quarter. That was just a rough back of the envelope calculation. We were wondering what that was a result of?

You are right. I think it probably did decline somewhere in that range. I think the dynamic there is that third quarter margins were at record highs. Some of those margins were driven by the level of HARP refinance activity and the margins on that business. I think margins were also driven in the third quarter by the fact that you had a pretty significant rate impact as a result of some of the QE3 announcements during the third quarter. So as those became -- as that rate environment became more baked into all of the market rates and the rate offerings, I think those margins lowered a bit. So I think that's the dynamic there. Jessica Ribner - FBR Capital Markets & Co., Research Division: And do you foresee another drop like that between fourth quarter and the first quarter, or do you think it's going to level off a little bit?

I think it's going to level off a little bit. I think, in general, our guidance for mortgage for 2013 reflects both the fact that volumes and gain-on-sale margins will come in a little bit.

Your next question comes from the line of Kevin St. Pierre with Sanford Bernstein. Kevin J. St. Pierre - Sanford C. Bernstein & Co., LLC., Research Division: I appreciate the color on the capital plan submission. I was just wondering if you could help us understand the conservatism with Tier 1 common, Basel I, 9.5%, Basel III 8.8% presumably well above where you need to be in 2019. Is your conservatism rooted in your experience from 2012, or is it keeping some dry powder on hand in case strategic opportunities arise? What's driving the conservatism?

Well, I don't think it's related to our experience in 2012. That was more of a qualitative issue, as we've discussed, and I think we're talking about conservative -- conservatism here in terms of kind of quantitative measures. And I think the largest driver of that conservatism are things that others have talked about as well, and that's just simply the way the process is constructed. There is a considerable amount of uncertainty as banks submit their plans with respect to what the models that the regulators will be using look like and what kind of results they will produce. I think it's safe to say that everyone in 2012 experienced the situation, or nearly everyone, the situation where the capital plan that they submitted and the capital ratios that, that produced were adjusted downward by the regulators once the regulators ran their models. So we don't know what those models look like. We don't know how big those adjustments may be, and therefore, we're required to bake a fair amount of conservatism into what we submit in order to allow for the potential for those kinds of adjustments as we go forward. We would anticipate that over time, that either those adjustments will get smaller or that we will be better able to predict them, or both. But as we sit here today, there's a significant amount of uncertainty, and therefore, we can't take the risk that what we submit kind of is inconsistent with the result that they're going to have. Kevin J. St. Pierre - Sanford C. Bernstein & Co., LLC., Research Division: All right, that's helpful. And then just quickly on the reserves. You pointed out you're 3.2x annualized charge-offs, peer median closer to 2x. Should we expect you to main that kind of -- maintain that kind of coverage over annualized charge-offs, or do you find -- do you think you'll drift closer to where the peers are?

I suspect we may drift closer to where peers are. Our reserve methodology is not driven off of achieving a multiple -- a certain multiple of charge-offs. It's more a result of the models that we run in order to establish our reserves. So that ratio is largely determined by kind of the different pace, perhaps, of improvements in levels of charge-off versus levels of nonperforming loans. So we may still have allowances that are elevated by the fact that we have higher levels of nonperforming loans that we still need to resolve, yet charge-off performance has improved more quickly, and therefore, that ratio changes a bit over time. So I suspect, over time, it may be closer to peers than it is right now.

Your next question comes from the line of Jennifer Demba with SunTrust Robinson.

It sounds like you've had a fair amount of success off the bat with the energy team. I'm wondering if you're contemplating hiring any other specialty lending teams. And then my second question revolves around M&A. I'm wondering, Kevin, what you're seeing out there in the landscape right now and if you think there maybe could be some opportunities for Fifth Third to participate in that market in 2013.

Yes. Jennifer, a couple of quick items. One is, right now, we're very pleased with the investments made and focused on making sure we drive the full benefit of those investments. And so there isn't anything imminent relative to an expansion of our verticals and the concentrations that we've done in those specialties. So we feel good about that, so nothing that I'm here to announce or talk about today. On the M&A front, what I would tell you is, look, it's -- it is a challenging time. I think those that can demonstrate that they can return and make a good return in this challenging environment should see some opportunities begin to emerge. I don't know how soon that happens. Our expectation, what we've talked about, is that we think that's more likely to be an end of the year, maybe even into next year kind of orientation, as people really kind of evaluate what levers they have to pull and what strengths they get to play within this environment. So we're going to be mindful. We're going to be disciplined. We're going to be watchful relative to that, but we're not certainly anticipating something imminently on that front either.

Your next question comes from the line of Steve Scinicariello with UBS.

Just curious, from a big-picture perspective, as you look at 2013 and all of the many opportunities that Fifth Third has, I was just kind of curious how you would potentially rank order some of them in terms of whether it's just continuing to take market share on the C&I side or the enhancements that you've made on the retail side to drive further fee income and -- or continue to play capital. I mean, as you kind of look at the opportunity set for 2013, how would you rank order those kind of benefits that could flow to you over the course of this year?

Yes, this is Kevin. What I would tell you is, look, our orientation is to make sure that we continue to look at those opportunities and leverage them appropriately. I'd -- I would tell you that we feel good about a number of them that you just mentioned. And that certainly, as we look at the business itself and our operating model, investments, the changes and the opportunities before us, we still feel good about in that perspective. Clearly, you're seeing the results of some of those investments begin to materialize, strong C&I, strong commercial growth, strong commercial fee income. In terms of that, we think that's going to be a continued opportunity for us. Mortgage, we will ride and continue to do well in for as long as the refi opportunity continues. But we also like the purchase component of what we drive in that business. It's a good contributor and we double that relative to -- in footprint deposit products and cross-sell that we do from that standpoint. We feel good strategically about how we've positioned our deposit simplification program and the benefits there. Dan talked a little bit about that, and I think that's something further out that we should continue to benefit. And we have a good solid platform design for the environment that we're in today that we can grow and move forward with. And we still think that the repositioning that we've done relative to the other businesses are opportunities for us, as well as our geographies and what our affiliates are doing and our operating model from that perspective. So there are a lot of strengths that we focused on, that we've continued to hone from that standpoint, but I don't feel the luxury of necessarily segregating some out. We're pulling the levers on all of them, and I think it really comes down to our ability to continue to execute, which we feel good about it and plays to a strength of this organization. So that's how I would sum it up for you.

Your next question comes from the line of Erika Penala with Bank of America Merrill Lynch.

This is Ebrahim Poonawala on behalf of Erika. Quick question, just going back to your Vantiv stake. If you can -- I guess, Dan, just talk through the thought process in terms of retaining that stake. Obviously, Vantiv's trading at a much higher PE and relative to the PE assigned to the Fifth Third stock. If you can talk through, in terms of rationale of holding onto that stake versus monetizing that and buying back the stock at current levels, where it's still relatively cheaper in tangible book value basis versus waiting it out much longer.

Yes. I think we've talked about this a number of times before. Looking at our Vantiv stake from a big-picture perspective over time, we would -- we believe and continue to believe that holding a significant minority stake in another public company is probably not the strategy that we would like to follow longer term. I think the need for us to monetize that or the desire for us to monetize that quickly is moderated or mitigated pretty significantly by the fact that we know that company very, very well. So we have a lot of ties with that company. They were a part of Fifth Third for a long time. We created the company. And therefore, our comfort level that we really know and understand that company and understand its current operations and its current prospects, is very high, and therefore, it gives us the flexibility to accomplish our longer-term objective over time and in a very considered, kind of over a longer timeframe. So we would expect that we would continue to monetize that investment over time as we deem appropriate, but it's not something that we would expect to accomplish quickly or to do in an undisciplined, unthoughtful kind of way.

Understood. And I guess just one question, following up on your net charge-off guidance of 55 to 60 basis points. I guess just looking forward, where do you think net charge-offs bottom out, given obviously, the marks you've taken over the last few years. Are we close to a bottom in 2013, or can you see charge-offs grind lower into '14, below 50 basis points?

Yes. I think from an -- there's really 2 different questions, one of which is the question that you ask is the kind of where they bottom out, the other question is where do they normalize, and I think those are 2 different numbers. From a normalization perspective, based on historical results and based on our knowledge of the portfolio and how our underwriting has changed over the last several years, we would expect that kind of normalized charge-offs are probably in the 40-basis-point range, plus or minus. In terms of where charge-off rates bottom out, they're likely to go below that normalized level at some point and then kind of come back up to a normalized level ultimately. So we think on a longer-term basis, 40 basis points, plus or minus, may be a normalized level, we may well hit levels that are somewhat below that ultimately, and I wouldn't -- obviously, we don't expect that this year. We're talking 55 to 60 basis points for this year. So I would expect charge-off rates to continue to come down into '14 or perhaps even '15.

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets.

Sorry to belabor this, but just one clarification, Dan, for you, on the word conservatism or conservative on the CCAR request. Just want to understand what that means. Does that mean not -- does conservative mean not trying to touch some of your excess capital, or does conservative mean not reaching for the high end of that targeted payout range that you've held pretty consistently?

Yes. I think conservative means that if you look at where our capital ratios are, you look at where regulatory minimums are, look at where our internal targets are, we're not trying to get from point A to point B in all 1 year. So we recognize we have excess capital. There are many uses for that excess capital as we go forward. One of which would be to return that to our shareholders. But we've said that our expectation is that the capital plan that we put together will result in our capital ratios remaining fairly stable. So in that respect, we're not drawing down that excess capital by virtue of this capital plan in any kind of significant way, rather, we are seeking to prevent the continued buildup of excess capital at this point in time. And part of that is because we may well have uses for excess capital in the future, but frankly, probably the more immediate reason is we don't believe that the process and the regulatory environment now is conducive to us kind of draining that capital out of the balance sheet at this point in time.

At this time, we have reached out the allotted time for questions. Do you have any closing remarks?

We do not. Thank you.

And this concludes today's conference call. You may now disconnect.