Fifth Third Bank is modernizing its platform to better serve clients while cutting costs amid uncertain macroeconomic conditions.
“In the last four years, we’ve managed expenses to the lowest growth rate among peers, despite investing in growth by building more new branches, raising our minimum wage, modernizing our technology platforms and acquiring fintech companies,” Chief Executive Timothy Spence said during the bank’s third-quarter earnings call today.
The $206 billion bank reduced its headcount by 2% year over year to 18,804 in Q3 while maintaining an adjusted efficiency ratio of 55%, Chief Financial Officer Jamie Leonard said during the call.
For Q3, Fifth Third reported an 8% increase in its technology and communication spend to $115 million.
The bank’s non-interest expense increased 2% to $1.1 billion, driven by growth in compensation and benefits, occupancy and technology expenses, Leonard said.
THE BIG PICTURE: Fifth Third’s competitors, including Citibank, Wells Fargo and BNY Mellon, have trimmed their workforces while increasing investment in technology and automation.
Fifth Third acquired Dividend Finance, a fintech point-of-sale lender providing financing solutions for residential renewable energy and sustainability-focused home improvement, in May for an undisclosed amount.
It also acquired embedded payments provider Rize Money in May, for an undisclosed amount.
BY THE NUMBERS: In Q3, Fifth Third reported:
- Net interest income of $1.4 billion, down 4% YoY;
- The efficiency ratio stood at 55% compared to 53.7% in Q3 2022;
- Revenue of $2.1 billion, down 0.6% YoY; and
- Net income of $660 million, up 1% YoY.
FLASHBACK: The bank is using ChatGPT to update its chatbot’s natural language understanding model to keep up with growing adoption and advanced customer inquiries.
In January, Fifth Third introduced Early Pay for federal tax returns through its Fifth Third Momentum Checking digital banking platform, as it looks to provide more offerings to customers and enhance the digital banking experience.
FUTURE LOOK: The bank expects to hold close to $20 billion in cash and cash equivalents by the end of the year, CFO Leonard said.
“We want to hold excess cash as opposed to adding it to the investment portfolio,” Leonard said. The bank views cash as an asset allocation and aims to invest it cautiously, he added.
MARKET REACTION: Shares of Fifth Third Bank [NYSE: FITB] were up by 1.14% from market open to $24.29 as of market close today. Fifth Third has a market capitalization of $16.81 billion.
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