Fifth third drives expansion despite cost pressure

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In the expectation that pandemic-related credit problems could persist into next year, Fifth Third Bancorp in Cincinnati canceled another provision for large credit losses in the second quarter.

However, the head of the $ 185 billion company says it needs to balance risk management with the need to invest in its franchise long term, even in the short term. In an interview with American Banker after Thursday’s second quarter conference call, chairman and CEO Greg Carmichael said Fifth Third will not be withdrawing digital investments or long-planned branch expansion.

Fifth third chairman and CEO Greg Carmichael says he can handle this uncertainty and will not do anything that will adversely affect the success of [the] Franchise continues. “

“There is a lot more we don’t know than we know,” he said. “The only question is to deal with this uncertainty and not want to do anything that adversely affects the success of [the] Franchise continues. ”

Carmichael said Fifth Third will continue to invest in its commercial lending and mortgage platforms, as well as expanded accounts receivable and accounts payable capabilities for its commercial customers. He also said Fifth Third will continue its southeast expansion efforts as originally planned – about 100 stores in Florida, Georgia, North Carolina and Tennessee by 2022.

Even so, Fifth Third has closed around 50 stores in its core markets in the past 18 months to save costs. However, Carmichael said he wanted to review the aggregated data on the impact of the closings to date before taking any further action.

Fifth Third’s total net income declined 62% year over year to $ 163 million, largely as the company continued to add to its loan loss reserves. Fifth Third’s provision for loan losses totaled $ 485 million, compared to $ 600 million in the first quarter and $ 85 million in the second quarter of 2019.

Net interest income decreased 4% to $ 1.2 billion.

Total credit rose 8% to $ 118 billion, driven by commercial line draws, paycheck protection loans, and increased demand for indirectly secured consumer credit.

Noninterest income declined slightly to $ 650 million. Card and deposit service fees decreased on an annual basis, while commercial and mortgage banking revenues increased.

Fifth Third reduced noninterest expenses by 10% to $ 1.1 billion in the second quarter, driven by declines in marketing, card processing and other expenses.

Net write-offs rose $ 8 million from the previous quarter to $ 130 million, but were still lower than originally expected, executives said.

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