Fifth Third Bancorp plans to lean into retail banking in the southeastern U.S. following a 5% decline in commercial transaction deposits during the second quarter.
The opening of more than 20 new branches throughout Florida, Tennessee and the Carolinas, as well as expanded digital banking services, “underpin” the bank’s strategy to counterbalance a nearly $6 billion loss of deposits from the first quarter, said Fifth Third CEO Tim Spence.
Compared with the same period last year, deposit growth at Cincinnati-based Fifth Third was flat. Average commercial transaction deposits decreased 5%, while average consumer transaction deposits rose by 7%.
During the quarter, Fifth Third chose to let corporate clients move nonoperational deposits elsewhere rather than aligning its deposit pricing with interest rate hikes from the Federal Reserve, Spence said in an interview after the bank’s earnings call.
“What we elected to do in the second quarter was to not chase rates that were either available in institutional markets or were being paid by banks that don’t have the same strength in funding positions,” Spence said. “So long as you maintain customer relationships, which we did, you can always get that back.”
Nonoperational deposits are rate-sensitive and are often the first funds that corporate clients move in search of better pricing. Northern Trust also
Spence said that Fifth Third plans to adjust its deposit rates “surgically” throughout the remainder of the year. “We are using rates either to reward clients that maintain broad relationships with the bank or as an acquisition lever,” he said.
Fifth Third’s commercial deposit balances are likely to decline by an additional $2 billion in the third quarter before stabilizing by the year’s end, Spence added.
But the $207 billion-asset bank expects to be able to show growth in consumer deposits, Spence said.
The “firepower” to support consumer growth will come from ongoing investments in the bank’s digital platform and its continued expansion in the Southeast, he said. In 2018, Fifth Third revived a Southeast expansion plan that it had put on hold after the 2008 financial crisis, announcing
Fifth Third reported second-quarter net income of $562 million, down 21% from the same period last year. The company’s earnings per share of 76 cents were below the 87-cent average of estimates from analysts surveyed by FactSet Research Systems.
The Consumer Financial Protection Bureau sent a mass email to thousands of the bank's customers and former employees to gather information about the possible creation of phony accounts. Critics — including a federal judge — say the CFPB asked leading questions and may have overstepped its bounds.
Net interest income rose by 11% to $1.3 billion, while Fifth Third's net interest margin climbed by 29 basis points to 2.92%.
But noninterest income fell by 9% from the same period last year to $676 million. Commercial banking revenue fell 14% to $137 million, and income from mortgage banking services dropped by 52% to $31 million.
Fifth Third’s total average loans increased 8% to $117.7 billion. Commercial loans grew 9% to $73.4 billion, and consumer loans rose 8% to $43.4 billion.
Shares in Fifth Third fell Thursday by 1.27% to $34.25.
