Fifth Third's Southeastern expansion effort is making headway, execs say

Fifth Third Bancorp is continuing its now four-year-old push into the Southeast, with plans to open 30 to 35 branches throughout the Carolinas, Georgia, Florida and Tennessee in 2023. 

The strategy, which the $205.5 billion-asset Fifth Third first outlined in mid-2018, "has been effective for us," President and CEO Tim Spence said Wednesday during a presentation at the Goldman Sachs U.S. Financial Services Conference. "We're gaining share in both households and deposits, and the new branches are achieving breakeven in the two- to three-year range."

At the same time, Fifth Third, headquartered in Cincinnati, expects to close as many as 25 branches, primarily in the Midwest, where deposits have grown more slowly than the Southeast markets the company is targeting. According to Fifth Third, its Southeast deposits are growing at a 7.3% annual clip, compared to 2.4% in the Midwest.

In all, Fifth Third's growing Southeast franchise is responsible for about $27 billion of deposits and $18 billion of loans, according to a recent investor presentation. 

While much of its recent branch-building efforts have focused on the Carolinas, including Charlotte and the Raleigh-Durham-Chapel Hill Research Triangle in North Carolina, along with Greenville and Charleston in South Carolina, Fifth Third plans to accelerate de novo growth in Florida beginning in 2023.

"Next three years, a disproportionate share of the builds are going to happen in the central and northeastern Florida corridors of Tampa and St. Petersburg, Orlando and Jacksonville," Spence said. Longer-term plans also call for expansion in Nashville, Tennessee and in Atlanta, the region's largest city. 

"We continue to chip away in Atlanta, where we have a long-standing presence," Spence said. "We have a lot of runway in front of us in terms of what we're going to do."

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Fifth Third's branch plans, with more openings than closures slated for 2023, highlight the apparent slowdown in the rate of branch consolidation that has emerged as the pandemic has receded. With exposure-conscious customers shifting more business online, consolidation surged in 2020 and 2021. This year, however, the pace of closures has slowed dramatically according to a recent tally by S&P Global Market Intelligence. 

Fifth Third is targeting approximately 35 annual de novo branch openings through 2025.

Just as its Southeast expansion program is proceeding per plans, Fifth Third remains on target to hit its fourth-quarter financial projections, though loan growth is outpacing deposit growth,  Chief Financial Officer James Leonard said Tuesday. 

"We'll be at the high end of the range from a loan growth perspective — and it's not line utilization, it's customer acquisition, especially in the commercial verticals and middle market," Leonard said. "On the deposit side, we'll be at the low end of the range, but we're still growing. …We'll probably be up 1%."

In October, after Fifth Third reported its third-quarter results, including net income of $631 million, Leonard forecast fourth-quarter loan growth would be stable to up 1% on a linked-quarter basis, while deposits would increase 1% to 2%. 

Pre-provision net revenue was forecast to jump 11% to 12% and "we continue to believe that is where we will shake out," Leonard said. "The business is performing very well and very much as we expected —a little bit of a boring finish to the year."

Boring or not, investors seemed OK with Fifth Third's direction. Shares were up 2.45% late in the trading session Tuesday at $33.03.