Deposits still fell last quarter at the Cincinnati-based bank, but by a smaller percentage than at some other banks. Meanwhile, deposit costs rose, but not by enough to prevent the bank from posting a year-over-year increase in net income.
Fifth Third started taking steps last year — when the Federal Reserve was earlier in its rate-hiking campaign — that positioned it to weather the banking crisis.
"We've been in a more defensive position for probably nine months now as it relates to deposits," Fifth Third CEO Tim Spence said Thursday in an interview following the bank's earnings call. "We believed that we were reaching the point in the cycle where deposit funding really mattered."
During the first quarter, Fifth Third's interest-bearing deposit costs rose by 172 basis points from the same period last year, and by 64 basis points from the fourth quarter. The bank's interest expenses of $696 million were up 40% from the previous three months.
But interest income also climbed in a rising-rate environment, and Fifth Third reported quarterly net interest income of $1.5 billion. That metric was down 4% from the fourth quarter of 2022, but up 27% compared to the same period last year.
Meanwhile, the $205 billion-asset bank reported total deposits of $163 billion — down 4.5% from the first quarter of 2022, but nearly flat compared with the fourth quarter.
Fifth Third recorded quarterly net income of $558 million. That result was down 24% from the fourth quarter of 2022, but up 13% from the year-earlier quarter.
Looking ahead, the bank lowered its guidance for full-year adjusted revenue growth to no more than 8%. It had previously been 9%-10%. Guidance for full-year net interest income growth, which was previously 13%-14%, was lowered to a high end of 10%.
In recent days, some other regional lenders have reported lower deposit volumes during the first quarter.
At Fifth Third, deposit volumes are expected to remain stable during the second quarter and could possibly show growth by the end of the year, Spence said. He added that the bank's forecast is dependent on how economic conditions play out.
"If cracks in the economy start to materialize and appear more profound than the current outlook for sort of a run-of-the-mill recession, then that might cause us to be more defensive on capital and credit," Spence said.
