Fifth Third ramps up small-business lending in Chicago

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Having just completed an acquisition that more than doubled its deposits in Chicago, Fifth Third Bancorp is committing another $2 billion to community development initiatives in the nation’s third-largest city.

The Cincinnati bank, with $146 billion of assets, said this week that the bulk of the funds will be used to make loans to small businesses that operate in low- and moderate-income neighborhoods. The rest will be used to fund affordable housing and other community projects.

The $2 billion is on top of $30 billion Fifth Third has already pledged to a host of affordable housing, small-business and community development programs throughout its 10-state footprint. Since 2016, when the initiative was announced, Fifth Third has invested about $3.6 billion in Chicago.

The acquisition of Chicago-based MB Financial, which closed in late March, gave Fifth Third the No. 4 deposit share in the Chicago metropolitan statistical area, at roughly 6.5%. It had previously held less than 3% of the market’s deposits, according to Federal Deposit Insurance Corp. data.

Of the total $5.6 billion Fifth Third has now committed to Chicago, about $2.5 billion has been or is earmarked for small-business lending. About $1.6 billion is pledged for community development lending and another $1.4 billion is being used to make home loans, primarily to low- and moderate-income households. Fifth Third has also allocated $213 million to invest in projects through its community development corporation.

Chicago is now Fifth Third’s largest market, and Byna Elliott, the bank's chief corporate community and economic development officer, said “it just made sense” to increase its community development commitment there “based upon our increased size and visibility in that market.”

She added that small-business lending is the primary focus simply because Chicago is home to so many businesses, and many are in need of capital.

Elliott said that Fifth Third is focusing specifically on businesses that have annual revenues of less than $1 million and operate mostly in low- to moderate-income neighborhoods. Small businesses owned by women and underrepresented groups, as well as those that will hire previously incarcerated people, will also be a priority, she added.

While Fifth Third is not focused on any particular sector, Elliott said that it likes construction, tech and professional services firms because those businesses can scale up and eventually create more jobs for others.

John Taylor, the president and founder of the National Community Reinvestment Coalition, said he was impressed with Fifth Third’s program and praised those particular details in its small-business lending commitment.

“Those are the kinds of jobs that are not necessarily going to be replaced by robotics or other computers. Those jobs pay livable wages for the most part,” he said. “And it’s a very progressive action on their part, to ensure that they’re creating opportunities for returning citizens.”

The NCRC has a long track record of connecting banks with activists and community development groups to ensure that banks aren’t neglecting underserved communities as they expand in existing markets or move into new ones. It helped to secure large community development commitments from the likes of KeyCorp in Cleveland, First Horizon in Memphis, Tenn., and Huntington Bancshares in Columbus, Ohio, after those companies announced big acquisitions.

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Small business Small business lending Corporate philanthropy M&A Fifth Third Bancorp