Fifth Third branch openings could soon outnumber closings

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Fifth Third is approaching a turning point in the evolution of its retail network, its CEO said Wednesday after the Cincinnati company reported quarterly results.

As part of its ongoing expansion into select Southeastern cities, the $170 billion-asset Fifth Third has generally shut more branches in legacy markets than it is opening in newer ones. Last year, for instance, it closed 30 branches in its traditional Midwestern territory while opening another 12 in Southeastern markets such as Nashville, Tenn., or Charlotte, N.C.

However, that pattern is expected to end — or even reverse — after 2020, Greg Carmichael said.

“We’ll tend to close more [this year] ahead of our building out … but probably not in 2021,” he said. “We may open more than we close” starting next year.


Carmichael’s comments came during an interview about where the bank is headed after its move into the South and completion last year of a big acquisition, MB Financial in Chicago. Fifth Third will focus on beefing up its digital capabilities, integrating MB’s operations and continuing its growth in Florida, Georgia, North Carolina and Tennessee, he said.

Fifth Third’s household base has grown close to 6% in those newer markets, Carmichael said, and deposits have increased around 7% — roughly twice the deposit growth in its legacy markets. Fifth Third has also been able to capitalize on M&A activity and subsequent disruption to recruit bankers in those markets, he said.

“There’s a lot of bankers who are reaching out or taking phone calls they wouldn’t take before,” Carmichael said.

The bank’s buildup of technological capabilities will involve updating its legacy infrastructure, pursuing fintech partnerships or acquiring fintechs, and developing new products and services for retail and commercial customers. One example is a financial risk management platform Fifth Third plans to offer its commercial clients, Carmichael said.

He said that Fifth Third expects to achieve its intended $255 million of expense savings from the MB Financial purchase by the end of the first quarter this year. He also said that Fifth Third has had particular success in cross-selling its wealth and asset management services to the legacy MB Financial portfolio.

Commenting on recent news that rival BMO Harris had picked up two Fifth Third executives and dozens of former MB employees, Carmichael said the departures were “exactly as we modeled.” He also said that Fifth Third has held onto clients following the closing of the deal.

“We completely expected that certain executive positions would select out of our model,” he said. “We kept over 80% of bankers we offered positions to. We haven’t seen any material client attrition.”

The MB deal helped to boost Fifth Third’s fourth-quarter net income by 61% year over year to $734 million. Earnings per share came to 68 cents excluding one-time items, short of analysts’ mean estimate of 72 cents compiled by FactSet Research Systems.

Net interest income increased 14% to $1.2 billion, reflecting an increase in its interest-earning assets, while the net interest margin narrowed 2 basis points to 3.27% in response to the declining rate environment.

Total loans increased 16% to nearly $110 billion, largely the result of its MB acquisition. Consumer loans increased 11% to $39.3 billion, driven by residential mortgages and indirect secured consumer loans. Commercial lending grew 19% to $70.5 billion, boosted by strength in commercial real estate loans and commercial and industrial lending.

Noninterest income increased 80% to just over $1 billion. However, it was affected by several one-time items, including a $37 million increase from a Visa total return swap valuation and a $345 million pretax gain resulting from a Worldpay tax receivable agreement with FIS. Excluding those items, noninterest income increased 21%, the company said.

Wealth and asset management revenue increased 18% to $129 million, primarily driven by higher personal asset management revenue. Corporate banking revenue rose 18% to $153 million. Mortgage banking revenue increased 35% to $73 million.

Noninterest expenses rose 19% to $1.2 billion, driven mainly by a 14% increase in employee compensation and benefits, which totaled $576 million. Net occupancy expenses rose 15% to $84 million, while spending on technology and communications increased 30% to $103 million.

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