Fifth Third Bancorp is on the hunt for fee businesses, particularly investment management and data processing companies, said P. Michael Brumm, the company's new head of mergers and acquisitions.
Mr. Brumm, chief financial officer for the past seven years, was appointed last week to the newly created position of executive vice president of corporate development.
The Cincinnati-based company also promoted Neal E. Arnold, senior vice president and treasurer, to succeed Mr. Brumm as CFO.
"Clearly this indicates they want a more focused strategy on acquisitions," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc.
In an interview, Mr. Brumm said he plans to focus on acquisitions to complement Fifth Third's data processing unit, Midwest Payment Systems, and its investment management and trust businesses.
The company has so far made no acquisitions in these areas. It is hard to identify logical targets, but given the conservative mindset at Fifth Third, analysts said they expect any acquisitions to be small.
Fifth Third, with $20.2 billion of assets, derives about one-third of its income from fee businesses. Mr. Brumm said his goal is to build on that foundation.
"We're in a consolidating industry and we're a very good consolidator," he said. Given its record as an active bank and thrift acquirer, "we do want to put more emphasis on our nondepository side," he added.
Mr. Brumm said the company could acquire mutual fund, brokerage, and/or money management firms. Data and transaction processing has been one of Fifth Third's fastest-growing businesses, but without acquisitions.
A 27-year veteran of Fifth Third, Mr. Brumm said as CFO he had recently been consumed by overseeing mergers.
Mr. Arnold, who joined Fifth Third in 1990, was a logical person to replace him, Mr. Brumm said.
"When a company gets to the size of Fifth Third-and its growth rate has been spectacular-sometimes you need to reshuffle management," said Joseph Stieven, an analyst with Stifel, Nicolaus & Co. "I see no change in direction of the company."
Mr. Brumm said he wants to make sure Fifth Third is aware of potential deals. "One difficulty is the sheer volume of transactions we look at," Mr. Brumm said.
Fifth Third will also seek to buy small commercial banks, but its interest in such deals would be greater if prices were lower, Mr. Brumm added. Most banks are prospering in the healthy economy, he said, and that means prices are often too high.
"The consolidation is going to continue, but honestly it's easier when banking is going through more normal cycles," he said.
And Fifth Third is interested in buying mortgage and leasing companies. It likes the mortgage servicing business and would consider buying a mortgage originator as well, Mr. Brumm said.
The company has also started a leasing business that has $3 billion of assets.
Fifth Third announced the acquisition earlier this month of Gateway Leasing Corp. of West Chester, Ohio, for an undisclosed amount. The relatively small purchase would be the first of a leasing company by Fifth Third.
