Fifth Third regains top CRA grade, an entree to M&A

It's official: Fifth Third Bancorp has received top marks from the Federal Reserve on its most recent Community Reinvestment Act examination as expected.

Fifth Third announced the results on Wednesday, saying in a press release that the Fed gave it an “outstanding” rating on its most recent exam. The Cincinnati company had said in a regulatory filing last month that it expected to ace the test, which covered the period between Jan. 1, 2014, and June 30, 2016.

The rating is significant for a number of reasons, perhaps most importantly because it opens the door for the $142 billion-asset company to pursue acquisitions. In July 2016, the company was downgraded to “needs to improve” for the 2011-2013 time frame, a rating that restricted its ability to buy banks.

During Fifth Third’s investor day in December, CEO Greg Carmichael sounded more open to dealmaking than he had in the recent past. The company’s most recent bank acquisition was in 2008, when it bought the $4.8 billion-asset First Charter Bank in Charlotte, N.C.

“I think strategic bank M&A absolutely makes sense at the right price and the right value,” Carmichael said at the Dec. 7 event, emphasizing that Fifth Third will remain “mindful and thoughtful” about how it deploys capital.

In announcing the CRA upgrade Wednesday, Fifth Third said that it earned particularly high marks for its responsiveness to the credit needs in its local communities. The company also showed “leadership” in making community development loans and investments, it said.

In the fall of 2016, Fifth Third announced a five-year, $30 billion community development plan in conjunction with the National Community Reinvestment Coalition.