Fifth Third Bancorp in Cincinnati is heading west to ramp up its commercial lending.
On an earnings call on Tuesday, Chairman and CEO Greg Carmichael said that the $146 billion-asset bank is planning to hire experienced, middle-market bankers in Denver, Dallas and Houston as part of broader expansion into fast-growing metropolitan areas that are home to lots of midsize firms. The bank set up a middle-market lending operation in Southern California in 2017 and now has more than a dozen bankers there.
"We look at how attractive [the market] is, how many middle-market companies are in that market, we look at our ability to bank that successfully and continue to find the right talent,” Carmichael said in an interview. “When we find that combination and it fits really well, we execute on it."
Carmichael said that this formula has served Fifth Third well in other cities where it has no retail presence, such as St. Louis and Greenville, S.C. He added that Texas and California are particularly attractive markets for expansion because Fifth Third’s chief operating officer, Lars Anderson, knows the markets well, having worked at Comerica and BB&T before he joined Fifth Third in 2015.
There are risks to making loans outside of a bank’s footprint, of course, but Carmichael said that Fifth Third is mitigating those risks by only hiring bankers with deep, local connections.
“What we’re doing is not what was done in the past where you’re bringing bankers into the market who don’t know the market, don’t have a strong client base. That’s what banks were trying to do 10 years ago,” he said. “This is where we have bankers with 20-plus years of experience and loyal customers that will follow that banker. We’re very cautious.”
Fifth Third has plenty of company among banks seeking growth outside of their traditional markets. PNC Financial Services Group in Pittsburgh
Growth has been tough to come by for many regional banks in recent years, though
Fifth Third’s growth plan is “part of the new era in this industry,” Marinac said. “They’re not doing acquisitions to get to Colorado, they’re simply hiring key players where they can.”
On top of its middle-market ambitions, Fifth Third is
He also said Fifth Third would be interested in acquiring more fee-based businesses, a key strategic priority in the company’s profit improvement plan,
M&A advisory fees and syndication revenue led a 69% increase in corporate banking fee income, which totaled $130 million in the fourth quarter. Overall noninterest income was flat year over year.
Net interest income increased 13% from the same quarter in 2017 to $1.1 billion, and the net interest margin widened by 27 basis points to 3.29%. Commercial loans and leases rose 4% to $59.2 billion, while consumer loans stayed flat at $35.5 billion.
Overall, Fifth Third earned $432 million in the fourth quarter, or 64 cents per share, matching the mean estimate of analysts surveyed by FactSet Research Systems.
Though Fifth Third is interested in smaller, nonbank deals, Carmichael emphasized its first priority is closing on its acquisition of MB Financial in Chicago,
“There are strategic opportunities we’re evaluating, but job one is MB Financial,” he said. “We wouldn’t do anything from an acquisition perspective that would impede our ability to successfully get that transaction closed. … If there are other opportunities that materialize that fit a strategic need, we would take advantage.”