Fifth Third Bank ramped up its modernization efforts in the second quarter as it looks toward automating its core platform to drive down expenses.   

The $211 billion bank aims to invest “in the core platform to bring automation,” which will bring intermediate positive expense outcomes, Chief Executive Tim Spence said during the bank’s earnings call today.

In looking toward automation, the company recorded technology and communication expenses of $114 million in Q2, up 16% year over year but down 3% quarter over quarter, according to the bank’s earnings presentation. Technological upgrade expenses are expected to remain elevated through 2023, Spence said.  

“Our guidance reflects continued investment in our digital transformation, which should result in technology expense growth in the low double digits for the year,” Jamie Leonard, chief financial officer at Fifth Third, said during the earnings call.  

As tech spend inched up, the bank worked to keep expenses down ahead of uncertain economic conditions, Spence said.   

The bank is reducing headcount, according to the earnings supplement. In the quarter, headcount fell 1% YoY to 19,225.   

However, even amid cost-cutting measures, compensation and benefits rose $650 million, up 11% YoY but down 14% QoQ, according to the earnings supplement.  

The increase in compensation and benefits was attributed to the June 2022 acquisition of Dividend Finance, according to the supplement.  

BY THE NUMBERS: In Q2, Fifth Third reported:  

• Net interest income up by 7% YoY to $1.5 billion;  
• Adjusted noninterest income up by 2% YoY to $749 million; and  
• Nearly 73% of the bank’s customers are digitally active. 

WHAT THEY ARE SAYING: According to Zacks Investment Management’s Equity Research, rising “noninterest expenses due to higher technology aimed at operational efficiencies are likely to hinder Fifth Third’s bottom-line growth.”  

The research firm said “strategic investments in areas such as technology and branch digitalization” will keep noninterest expenses elevated for the remainder of the year.  

FLASHBACK: In May, Fifth Third acquired embedded payments fintech Rize Money for an undisclosed amount as the bank looked to enhance its financial product offerings.  

STATE OF PLAY: Other banking behemoths, including Citibank, are also looking toward automation to make operations more efficient while bringing costs down, the bank reported last week during its Q2 earnings presentation.

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