After his first year as chief executive, Greg Carmichael has begun to lay out a clear plan for Fifth Third Bancorp to grow in the coming years.
A key part of his vision lies 500 miles southeast of the company's Cincinnati headquarters, on the eastern side of the Appalachians.
During a recent interview, Carmichael said Fifth Third is rapidly expanding in its middle-market lending and wealth management activities in the Charlotte, N.C., metro area. The bank's business in this regional market, which also includes parts of South Carolina and Virginia, has grown about twice as fast as its operations across Rust Belt, he said.
Carmichael — who once led the bank's operations in Charlotte — said Fifth Third is doubling down in the Southeast, recruiting staff and clients from its competitors. The timing may be right for the company to capture market share, given the disruption caused by recent M&A, as well as the fallout from the Wells Fargo scandal, analysts said.
"We know who our competitors are," Carmichael said, referring to the megabanks in the region. "We're a different bank in the space that we focus on — the middle market, in particular."
Charlotte, of course, is the headquarters site of a number of big names in banking. It is home to Bank of America. Wells Fargo, which is based San Francisco, has 12,000 employees in the city.
Other competitors have been expanding in North Carolina. The $20 billion-asset F.N.B. Corp. of Pittsburg entered the state in July, agreeing to buy the $7 billion-asset Yadkin Financial in Raleigh, N.C.
Additionally, JPMorgan Chase has recently expanded its middle-market operations across the Southeast, including in the Carolinas.
Fifth Third is "certainly big enough and they are capable" to take market share in the Southeast, said Chris Marinac, an analyst with FIG Partners in Atlanta. Fifth Third entered the market in 2008, through its acquisition of the $5 billion-asset First Charter Bank.
But Marinac said it remains to be seen whether Fifth Third can demonstrate the necessary focus. Succeeding in a highly competitive market such as Charlotte requires developing long-term relationships and cross-selling clients other corporate products, such as interest rate swaps.
"It's what we do as an industry," Marinac said, noting that cross-selling has gotten a bad rap since the Wells Fargo fiasco.
Fifth Third does not break out the performance of its various markets. Still, the company said it has expanded lending to midsize companies - those with between $500 million and $10 million in annual revenue — by 25% between 2011 and 2015. That's roughly in line with overall commercial loan growth over the same period.
Carmichael said, anecdotally, that Fifth Third has been successful in wooing new clients. On a business trip to Charlotte earlier this week, he had dinner with 12 C-suite executives, all of whom are Fifth Third clients who until recently banked with competitors.
"You have new companies moving into [Charlotte], but we're also taking a lot of relationships," he said.
Carmichael would not say whether Fifth Third is actively courting customers who are leaving Wells Fargo in disgust. But he said that it would be a "logical" outcome if his bank gained business as a result of the scandal.
"Given the unfortunate situation that's occurred there, [customers] are assessing their banking relationships," Carmichael said.
Expectations for growth across the Southeast offer a bright spot after what has otherwise been a mixed year for Carmichael.
Carmichael took over as CEO last November, succeeding Kevin Kabat. Before taking the helm, he served for three years as president, and had also held the title of chief operating officer since 2006.
His path to the C-Suite has been nontraditional. Before joining Fifth Third in 2003, he spent nearly two decades working in technology, and held senior-level roles at General Electric.
"He brings interesting background," said Chris Wolfe, an analyst from Fitch Ratings, noting that Carmichael's familiarity with large-scale technology projects may give him an edge over some of his competitors. "When we think about where banking is headed, [technology] becomes increasingly a part of it"
In his first 12 months as CEO, Fifth Third has faced pressure from analysts to scale back on expenses, as the company — like many regional lenders — faces pressure from low rates. The $143 billion-asset company has ramped up spending on technology, investing in new systems to make faster lending decisions.
During the third quarter, expenses rose 3%, to $973 million, mostly from a jump in tech spending.
Carmichael has steadily scaled back his expense forecasts throughout the year, due to what he described as "creative" contract negotiations. But he has refused to scale back tech spending, arguing that making big investments now will ultimately help the company take out costs down the road.
"We have to make investments to support the change in the way our customers want to bank," Carmichael said, adding that he feels "very comfortable" boosting expenses, despite the pressure on revenue.
There have been other challenges, as well. This summer Fifth Third received a downgrade in its Community Reinvestment Act rating to "needs to improve." The downgrade restricts its ability to buy banks.
Carmichael said Fifth Third isn't currently in the market for a bank deal anyway. Instead, he wants the company to focus on increasing shareholder returns and boosting its stock price.
"We want to get our currency trading at a higher premium before we make those types of acquisitions," he said. "But we fully expect they'll be in our future at some point." Also, Fifth Third is not restricted from buying portfolios or nonbanks.
Fifth Third also attracted a slew of media attention this summer, after the company fired Heather Russell, its chief legal officer. A report in The Wall Street Journal later revealed that Russell was terminated for having a personal relationship with Timothy Mayopoulos, chief executive of Fannie Mae. She was recently hired as an attorney at the law firm BuckleySandler.
"Any time you have a situation like that, in a very visible position of that nature, it creates speculation," Carmichael said. He said he has "absolutely" no regrets about how it was handled, and wasn't surprised by the media attention.
"It's interesting news for people — not for me, but for other people," he said.
Looking back on his first year, Carmichael said he is proud of the team he has put in place.
Fifth Third last year hired Lars Anderson, a former Comerica executive, as its chief operating officer. Tim Spence also joined as chief strategy officer from Oliver Wyman.
Carmichael also said he is proud of the profitability plan that he recently unveiled, branded as "Project North Star."
The multiyear initiative outlines a plan to boost profitability through a mix of lower costs and higher consumer lending.
Carmichael said that announcing financial targets through a splashy, branded plan isn't typically his style. But as a new CEO in the industry, it gave him a way to communicate his plans for the company to analysts, investors and employees.
"You have a new CEO stepping into the chair and the whole organization and the external constituents want to understand what I'm about and where we're going," he said. "'Where are you taking the bank? Where are you taking the bank?'"
A number of Carmichaels peers, such as U.S. Bancorp CEO Richard Davis, have eschewed grand plans for trimming expenses. Carmichael said that down the line, when he is better known in the industry, he may follow their lead.
"You know, if I had been the CEO for 10 years, and was just taking on an expense program, I wouldn't be out there talking to the investment community about a Project North Star," he said. "I would just be doing it."