Fifth Third's agenda: Southeastern growth, 'digitization'

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Strong commercial loan growth to start the year. Check. First bank acquisition in over a decade. Check. Vault to No. 4 in deposit market share in Chicago. Check.

So what’s next on Fifth Third Bancorp CEO Greg Carmichael’s agenda?

Though he kept many details close to the vest in an interview, Carmichael offered a rough outline of his priorities for the rest of the year:

  • Integrate all of the systems of MB Financial in Chicago, which it officially bought last month.
  • Move ahead on the bank’s planned expansion in high-growth Southeastern markets.

Investors and analysts are closely watching cost control at banks, but Carmichael said investment in technology — which is crucial to completing all of his major goals — is essential.

“We’re going to continue to invest in our digitization activities at the right pace, where we think we have a competitive advantage or need to invest to stay competitive,” Carmichael said in the interview, after the Cincinnati bank issued first-quarter results Tuesday. “We have a good strategy to do that.”

His tech spending goals are not completely clear, but the technology and communications line item in its first-quarter report gives an idea of the level of commitment: $83 million, a 22% increase from a year earlier.

Fifth Third should have most of MB Financial’s systems and processes fully converted by early May, he said. In March it completed its $4.7 billion purchase of MB, which was the largest bank M&A deal announced in 2018.

At the same time, the $167.8 billion-asset Fifth Third is poised to expand in Southeastern markets where it has identified growth opportunities, like Atlanta, Nashville, Tenn., and Charlotte, N.C.

Fifth Third has been in those markets since acquiring a number of Southeastern banks in the early 2000s and plans to add more branches and bankers to increase market share in those areas. To date, Fifth Third has opened about six of the 100-125 branches it plans to add in those markets over the next three years.

Over the past 12 months, Carmichael said, Fifth Third's deposits in those markets have grown at a rate of about 7% to 7.5%, or roughly twice the rate of growth it’s seen in its legacy markets.

The company has also added commercial bankers to target middle-market companies in those regions, and its wealth and asset management services have complemented that, growing faster than any other fee businesses in that region, Carmichael said.

“We have core corporate banking services, and we can then offer them a 401(k), we can do wealth planning for the C-suite, we can do investments for the CEO,” he said. “We don’t run a commercial bank over here and a wealth and asset management company over there. We really focus on, ‘We want to be your banking partner, we can bank your employees, we can do wealth and asset management for executive teams.’ ”

Fifth Third also plans to hire 200 new technology staffers this year, Carmichael said. Roughly half of those employees will work on acquiring, building and integrating new digital capabilities, while the other half will focus on strategy. He added that these new hires will be separate from its cybersecurity function, which the bank is also continuing to build out.

Currently, Fifth Third is making some digital improvements in its commercial bank, like automating accounts payable and accounts receivable services for its corporate clients.

Carmichael said Fifth Third has also been working its way through a list of opportunities where it can potentially build out digital tools to help solve problems for its customers.

For example, the bank recently acquired and relaunched the savings app Dobot to help customers who have difficulty saving. And it launched a student loan repayment app, as well as a referral partnership with CommonBond, for those struggling with student loan payments.

“We’re going to continue to develop apps of that nature that really address the pain points of our clients,” Carmichael said.

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