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F500-2021-358-Fifth Third Bancorp

The Cincinnati-based bank has origins dating back to 1858 as the Bank of the Ohio Valley, and today operates more than 1,100 branches in 11 states across the Midwest and Southeastern U.S. Fifth Third slid 33 spots in the rankings in 2020, as the pandemic curbed loan and deposit growth and low interest rates hamstrung its interest income. But its shares rose more than 50% in the first five months of 2021, as its business lines benefited from a broader post-COVID economic recovery.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-325-Fifth-Third-Bancorp

This Cincinnati financial services company continues its rise on the <em>Fortune</em> 500 thanks to a string of acquisitions. It divides its business into four segments: commercial banking, branch banking, consumer lending, and wealth management.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Fifth Third Bancorp, through its holding Fifth Third Bank, offers banking and financial services for consumers and small businesses, including residential mortgages, brokerage services, insurance, and wealth management. It operates over 1,000 banking locations in the Midwest and Southeastern regions of the U.S.

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Fifth Third Bancorp (FITB): Company Profile, Stock Price, News, Rankings

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Fifth Third Bancorp

fifth third bancorp

Thank you for standing by, and welcome to the Fifth Third Bancorp Fourth Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Matt Curoe, Senior Director of Investor Relations. You may begin.

Good morning, everyone. Welcome to Fifth Third's Fourth Quarter 2025 earnings call. This morning, our Chairman, CEO, and President, Tim Spence, and CFO, Bryan Preston, will provide an overview of our fourth quarter results and outlook. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results, as well as forward-looking statements about Fifth Third's performance. These statements speak only as of January 20, 2026, and Fifth Third undertakes no obligations to update them. Following prepared remarks by Tim and Bryan, we will open up the call for questions. With that, let me turn it over to Tim.

Good morning, everyone, and thank you for joining us today. At Fifth Third, we believe great banks distinguish themselves not by how they perform in benign environments, but rather by how they navigate uncertain ones. Our priorities are stability, profitability, and growth in that order, which we achieve by obsessing over the details in our day-to-day operations while consistently investing for the long term. This disciplined approach has delivered shareholder returns that rank among the best in our peer group over the last three, five, seven, and ten-year time frames. Today, we reported earnings per share of $1.04, or $1.08 excluding certain items outlined on page two of the release. We achieved an adjusted return on equity of 14.5%, an adjusted return on assets of 1.41%, and an adjusted efficiency ratio of 54.3%, all among the best of all banks, regardless of size, who have reported thus far.

Adjusted fourth quarter revenues rose 5% year over year, driven by 6% growth in net interest income, 8% growth in commercial payments fees, and 13% growth in wealth and asset management fees. Fourth quarter average loans increased 5% year over year, driven by 7% growth in consumer loans and 7% growth in middle market and business banking C&I loans. Average core deposits grew 1% year over year, driven by 5% growth in consumer DDA and 3% growth in commercial DDA. Net charge-offs were 40 basis points for the quarter, the lowest level in the past seven quarters, and non-performing assets decreased for the third consecutive quarter. Our CET1 ratio increased to 10.8%, and tangible book value per share grew 21% year over year, thanks to strong earnings performance and the continued pull-to-par of our AFS portfolio. The fourth quarter capped the year of milestones for Fifth Third.

In the Southeast, we opened 50 new branches, including our 200th branch in Florida and our 100th branch in the Carolinas. To put this in context, if Fifth Third Florida were a standalone bank, it would have the 44th largest branch network in the U.S., and Fifth Third Carolinas would have the 78th largest. de novo branches continue to deliver deposit growth that is 45% higher than peer de novo branches. Net new consumer households grew 2.5% year over year, with the Southeast growing households by 7%, highlighted by 10% growth in Georgia and 9% in the Carolinas. Our sustained investments in digital transformation continue to set Fifth Third apart as well. In 2025, our consumer mobile app was recognized by J.D. Power as the top mobile banking app for user satisfaction among regional banks.

We shipped over 400 updates to the app during the year, including features such as direct deposit switching, a financial wellness hub with cash flow insights and spending analysis, and free estate planning capabilities through our partnership with Trust & Will. In small business, a little over a year ago, we asked our FinTech, Provide, to lead all of small business for Fifth Third. Since then, Fifth Third has become a top 20 national SBA lender for the first time anyone can remember, and finished number two in J.D. Power's 2025 National Small Business Banking Satisfaction Study ahead of all other regional banks. In commercial payments, our software-enabled managed services, Big Data Healthcare, Expert AR and AP, and DTS Connect, and our embedded payments platform, Newline, continue to grow rapidly. One in every three commercial clients we added in 2025 was a payments-only client with no credit extension.

Newline revenues more than doubled compared to the fourth quarter of last year, and deposits increased by $1.4 billion. Newline's product team also finished the year strong, launching a Model Context Protocol server to enable secure, standardized access to our API and documentation to AI agents. This is a key building block to support future Agentic Commerce applications and a first among U.S. banks. In commercial, we delivered new quality relationships, granular loan growth, and recurring fee revenue in the middle market as we continued to add our end talent in strategic growth markets and to benefit from hiring in prior years. New client acquisition increased 40% across all regions compared to 2024. Our emphasis on the Southeast, Texas, and California markets led to a 12% increase in RMs, producing 14% growth in C&I loans.

In wealth and asset management, fourth quarter wealth fees increased 13%, and assets under management reached $80 billion for the quarter. The strong performance was broad-based. Fifth Third Wealth Advisors' AUM and fees increased 50% from a year ago. Fifth Third Securities generated record fees, and our private bank had its second highest level of gross AUM flows in recorded history. We continue to deploy technology and apply lean manufacturing principles to drive savings and enhance scalability. In 2025, our value streams approach $200 million in annualized run rate savings. Cross-functional teams continue to be focused on reducing waste and improving quality, which strengthens our execution and provides funding for continued investment in our growth strategies.

We are excited about our momentum as we enter 2026, or as our partners at Kennesaw State like to say, "There's a lot of action at the fraction." As we announced last week, we have received all material regulatory and shareholder approvals to complete our merger with Comerica. 99.7% of Fifth Third votes and 97% of Comerica votes cast were in favor of the merger, an overwhelmingly positive result and a recognition of the value this combination will create. We expect to close on February 1st. 2026 will be a busy year as we focus on successful conversion and delivering $850 million in expense synergies. Looking ahead, I am even more confident in our ability to realize the benefits of the combination, which will support continued peer-leading returns and efficiency in 2027 and beyond.

I am also excited to get to work delivering more than $500 million in revenue synergies over the next five years across four areas of focus. First, scaling Comerica's middle market platform and vertical expertise. Second, deepening Comerica's commercial and wealth management client relationships to reach Fifth Third levels of client wallet share. Third, building out Comerica's retail banking business with the Fifth Third Playbook and 150 Texas de novo branches. And fourth, creating a differentiated innovation banking business by combining Comerica's tech and life sciences vertical and Fifth Third's Newline platform. Before I turn it over to Bryan, I want to say thank you to our team, both at Fifth Third and our new Comerica colleagues, for the way you support our customers and our communities, and for your commitment to getting 1% better every day.

I'm grateful to everyone who will work so hard in the coming months to ensure that 2026 is a success for the bank and its clients. I also want to say thank you to those individuals from both companies whose hard work brought us to this point, but who will not be continuing with us on this journey. All of you combined are what has made our company the special place that it is. With that, I'll turn it over to Bryan, who will provide more detail on the quarter and on our outlook for 2026.

Thanks, Tim, and good morning. Our results show what disciplined execution delivers in an uncertain environment: record full-year NII of $6 billion and $9 billion in total revenue, improving asset quality, and top quartile returns and efficiency. With a resilient balance sheet and an operating model built to deliver repeatable organic growth and scale benefits, we are positioned to generate growth and shareholder value as we integrate Comerica. Diving into our fourth quarter performance, we achieved an adjusted return on assets of 1.41%, our highest level since 2022, and a return on average tangible common equity, excluding AOCI, of 16.2%. Disciplined expense management resulted in an adjusted efficiency ratio of 54.3%, a 50 basis point improvement from the fourth quarter of 2024. Adjusted PPNR for the quarter was over $1 billion, a 6% increase from the prior year.

Our strong profitability enabled us to return $1.6 billion of capital to our shareholders in 2025, while also growing our tangible book value per share, including the impact of AOCI, 21% compared to the previous year. Looking at the balance sheet and NII, net interest income was $1.5 billion for the quarter, a 6% increase over last year, as net interest margin expanded 16 basis points, finishing the year at 3.13%. Loan growth, proactive liability management, and repricing benefits on fixed-rate assets contributed to the strong NII performance throughout the year. Average loans grew 5% year over year. In commercial, average loans grew 4%, and excluding CRE categories, increased 5% year over year. Improving the granularity of our loan portfolio remains a priority. In middle market, we continue to add relationship managers in high-growth markets, which contributed to the 7% year-over-year increase in average middle market loans.

In small business, we have extended the technology of Provide to all of small business lending. This expansion, combined with its core practice finance activities, drove a $1 billion increase in balances over last year. While on a sequential basis, commercial average balances were flat due to a decrease in utilization, commercial production accelerated during the fourth quarter, rising 20% sequentially to a multi-year high. Indiana and the Carolinas led regional growth, and in our verticals, production was strongest in technology, healthcare, and metals, material, and construction. The utilization decrease coincided with the government shutdown during October and November, but stabilized in December at 35%, down from 36.7% in the third quarter. Corporate banking and CRE were the primary drivers of this decrease in utilization.

Industry loan growth continues to be concentrated in lending to non-depository financial institutions, which represented approximately 60% of total industry loan growth and virtually all non-real estate and non-consumer-related loan growth in the second half of 2025. We continue to prioritize granular, relationship-based middle market and small business lending. Shifting to consumer, loans grew by 6% on an average basis compared to last year. Auto and home equity lending accelerated in 2025, growing 11% and 16% respectively. In the fourth quarter, we achieved the number two origination market share in HELOC within our footprint, up from number four in the prior year, driven by improved branch performance and digital engagement. We expect home equity production to remain robust due to the strength of home prices, lower front-end interest rates, and low housing turnover.

Turning to deposits, average core deposits increased 1% over last year, driven by 4% DDA growth, partially offset by slower growth in interest-bearing products as we managed funding costs in 2025. Interest-bearing deposit costs were 2.28% in the fourth quarter, down 40 basis points year-over-year, representing a 50% beta during 2025. As I mentioned on last quarter's call, we are focused on strong deposit growth as we prepare for the close of the Comerica merger. This resulted in a 3% sequential increase in average transaction deposits due to our growth bias and normal seasonality. As Tim highlighted, consumer household growth remained robust at 2.5% and continues to translate into strong consumer DDA performance, which increased 5% in 2025.

Our proactive balance sheet management has enabled us to maintain a strong liquidity position and reduce overall funding costs as we prepare to integrate Comerica's balance sheet, which has a lower concentration of retail deposits. Growth in granular insured deposits provided flexibility to reduce wholesale funding, which declined 14% sequentially. This favorable mix shift lowered the cost of interest-bearing liabilities by 17 basis points.

Our Southeast de novo investments continue to deliver high-quality, low-cost retail deposits. Southeast consumer deposits increased by 4% sequentially, accounting for over 50% of the total consumer deposit growth for the quarter. Overall, our total cost of deposits in the Southeast is below 2% and generates a spread of more than 175 basis points relative to the Fed Funds rate. We opened 50 Southeast branches in 2025, including 27 branches in the fourth quarter. Additionally, we have now secured all locations for our Southeast de novo program.

We also have 43 locations in Texas with letters of intent either complete or in process as we begin to transition our de novo program to these new high-growth markets. We ended the quarter with full Category 1 LCR compliance at 123%, and our loan-to-core deposit ratio was 72%, down 3% from the prior quarter. Now on to fees. Adjusted non-interest income, excluding security gains and the other items listed on page four of our release, grew 3% sequentially and year-over-year. Wealth fees increased by 13% over last year, driven by $11 billion in AUM growth and strong retail brokerage activity. Capital market fees increased 5% sequentially, reflecting seasonal strength in M&A advisory. Commercial payment fees increased 8% year-over-year and 6% sequentially. This fee performance was driven by core treasury management activity and Newline-related fees. Newline-related deposits reached $4.3 billion, up $1.4 billion from a year ago.

The securities losses of $5 million were from the mark-to-market impact of our non-qualified deferred compensation plan, which is offset in compensation expense. Moving to expenses, page five of our release details certain items that had a larger impact on our non-interest expenses this quarter, including a $50 million contribution to the Fifth Third Foundation, $13 million in merger-related expenses, and a $25 million benefit from the adjustment to the FDIC special assessment during the fourth quarter. The larger contribution to the foundation this year relates to increased community investments we will make as part of the Comerica merger and tax planning in response to tax law changes impacting 2026. Adjusting for these items, non-interest expense increased 4% compared to the year-ago quarter and 2% sequentially, reflecting ongoing strategic investments in technology, branches, marketing, and sales personnel.

Savings from our value stream programs through automation and process redesign continue to help fund these investments. As Tim mentioned, our value streams reached $200 million in annualized run rate savings. Our normal course daily focus on these operating disciplines has resulted in a 54.3% adjusted efficiency ratio in the fourth quarter and a 55.9% efficiency ratio for the full year, while still investing for growth and maintaining strong regulatory standing. Shifting to credit, the net charge-off ratio was 40 basis points for the quarter, in line with our expectations and an improvement of 6 basis points from the fourth quarter of last year. Portfolio NPAs were down $4 million sequentially, and the NPA ratio remained at 65 basis points. Since the first quarter of last year, portfolio NPAs are down 20%, and commercial NPLs are down 30%, consistent with our expectations from early 2025.

Commercial charge-offs were 27 basis points, down 5 basis points from the prior year. Overall, we are seeing stable trends across industries and geographies in our commercial portfolio. Consumer charge-offs were 59 basis points, down 9 basis points from the prior year, with improvements across nearly all asset classes. The overall consumer portfolio remains healthy, with non-accrual and over-90 delinquency rates stable to improving across all loan categories. ACL, as a percentage of portfolio loans and leases, remained at 1.96%, and the ACL, as a percentage of non-performing assets, was also stable at 302%. Provision expense included a $6 million reduction in our allowance for credit losses, primarily reflecting the small decrease in end-of-period loan balances. Our baseline and downside cases assume unemployment reaching 4.7% and 8.4% in 2026. We made no changes to our scenario weightings during the quarter.

Moving to capital, CET1 ended at 10.8%, up 20 basis points, reflecting the strength of our capital generation and our decision to pause share repurchases until the Comerica transaction closes. The pro forma CET1 ratio, including the AOCI impact of the securities portfolio, stands at 9.1%. Since the first quarter, our unrealized loss on the AFS portfolio has decreased by 20%, despite only a 4 basis point decrease in the 10-year Treasury rate. This outcome is the result of our strategy to invest in bullet or locked-out structures, which represent 60% of the fixed-rate securities in our AFS portfolio. We expect continued improvement in the unrealized losses, given the high degree of certainty to our principal cash flow expectations as a result of our investment portfolio strategy.

While 2025 was a more eventful year from a macroeconomic and policy uncertainty perspective than we expected, we are pleased with our disciplined operating performance and our ability to deliver on our financial commitments. Our full-year net interest income of $6 billion is 2.5% above our prior record, and our full-year operating leverage of 230 basis points is above the range we projected entering the year. We opened 2026 with strong business momentum and a clear focus on the critical actions necessary to deliver a successful integration of Comerica. Now moving to our current outlook, as we announced last week, we expect to close the Comerica transaction on February 1st, with systems conversion anticipated around the end of the third quarter. Additionally, our outlook uses the forward curve at the start of January, which assumed 25 basis-point rate cuts in March and July.

We expect full-year NII to range between $8.6 and $8.8 billion. As part of the integration, we expect to take actions to better position the combined balance sheet within our rate risk appetite, including investment portfolio and hedge repositioning. We do not expect material one-time charges related to these actions. Based on the current rate outlook and our planned balance sheet actions, we expect NIM to increase approximately 15 basis points upon the close of the transaction. That increase is driven by 4 to 5 basis points of pickup from discount accretion on marked investment securities we will retain, another 4 to 5 basis points from repositioning the remaining securities with new positions, and 3 to 4 basis points from cash flow hedge repositioning. The remaining 2 to 3 basis points of improvement is driven by a combination of funding synergies and balance sheet mix.

We also aim to accelerate retail deposit growth with targeted analytical marketing in the legacy Comerica branches to improve the combined company's funding profile. We expect full-year average total loans to be in the mid-$170 billion range. This increase is primarily driven by broad-based improvement in C&I. Our outlook assumes that commercial revolver utilization remains relatively stable throughout 2026. Full-year adjusted non-interest income is expected to be between $4 and $4.4 billion, reflecting continued revenue growth in commercial payments, capital markets, and wealth and asset management. We expect full-year non-interest expense to be between $7 and $7.3 billion, excluding the impact of anticipated CDI amortization and the $1.3 billion in estimated acquisition-related charges. This guidance assumes the realization of 37.5% of the $850 million of annualized run rate expense synergies in 2026.

In total, our guide implies full-year adjusted revenue and adjusted PP&R, excluding CDI amortization, to be up 40%-45% over 2025 and another 1-200 basis points of positive operating leverage. We expect to exit 2026 at or near the profitability and efficiency levels consistent with the 2027 targets we announced with the acquisition. Moving to credit, we expect 2026 net charge-offs to range between 30 and 40 basis points, reflecting ongoing normalization of credit trends and the impact of the incorporation of Comerica's loan portfolio. Finally, turning to capital, we currently expect CET1 capital post-close of the Comerica acquisition to remain near our 10.5% target, subject to final purchase accounting marks and the timing of one-time merger-related charges. We continue to believe 10.5% is an appropriate target for our CET1 ratio for the combined company.

Our capital return priorities remain paying a strong, stable dividend, organic growth, and then share repurchases. We expect to resume regular quarterly share repurchases in the second half of 2026, with the amount and timing dependent on balance sheet growth, final purchase accounting marks, and the timing of merger-related charges. Given the magnitude of the impact of the merger on the first quarter, we are not providing first-quarter guidance at this time. We will provide our customary outlook on our first-quarter results in early March. In summary, we are excited about the opportunities to drive growth and profitability in 2026 as we continue our strategic investments and successfully integrate Comerica. These actions position us to deliver best-in-class performance in 2027 and beyond, creating lasting value for our shareholders and our clients. With that, let me turn it over to Matt to open up the call for Q&A.

Thanks, Bryan. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 in your telephone keypad. As a reminder, we ask that you please limit yourself to one question and one follow-up. Your first question today comes from the line of Ebrahim Poonawala from Bank of America. Your line is open.

I guess, Tim, maybe just going back to Comerica, from the outside in, it feels like there are three or four areas of optionality for Fifth Third, and you can choose to answer whatever you think is most impactful.

But when we stack rank, being able to do more with Comerica clients, the Texas expansion, and then leaning into their tech and life science practice, just give us a sense of where's the biggest opportunity, what's more near-term versus longer-term. Thank you.

Yeah, great question, Ebrahim, and thanks for it. I think you have to think about these things in terms of time frames, right? Because what I would say the most immediate near-term opportunity is going to come from some of the things we can do tactically in both leaning into Comerica's existing customer base, as well as what our analytically-driven deposit marketing and product strategies will allow us to do in Comerica's branch network, followed by this sort of medium-term opportunity here, which is the build-out of the Texas markets from a retail distribution perspective.

And then what I'll say is a medium to long-term opportunity, but a very exciting one, which is the ramp-up of the innovation banking business. So I had the opportunity in the fourth quarter to do five different in-person town halls with Curt Farmer. And at those town halls, we saw probably a quarter of Comerica's total employees. And then Curt and Peter Sefzik and the other business leaders were kind enough to make certain that I had the opportunity to meet several of the top client coverage people in each of the markets. And I will tell you, in every conversation, there was an example of a place where either funding constraints or competition for investment dollars on the technology front or otherwise had inhibited the ability of Comerica to get the sort of natural growth that they're capable of generating.

And you actually see that when you look back at the period prior to March Madness. They were generating pretty solid top-line growth and C&I balance growth when they were not in a period where they were making some of these investments to get to be a category 4 bank or in a position where they were making hard trade-offs as it related to balance sheet size and margin and otherwise. So day one, when we get through legal day one on February 1, we are literally doing a bottoms-up review name by name to say, where are there places that the broader balance sheet capacity or the ABL and equipment leasing product capabilities will allow Comerica to lean more? Where are there places where there are investment committee policies at Comerica's clients that were inhibiting the amount of corporate cash that could come onto the balance sheet?

Where are there places where there were technology investments that Fifth Third had been able to make that support commercial payments that will be able to get near-term growth? As we go through that first annual renewal cycle, that sort of natural renewal cycle that happens in C&I, I expect we'll see that unlocked. Second thing, the branch distribution is an important part of the strategy at Fifth Third, obviously, but it's one of three legs of the stool. The other two being the disruptive product offerings that we have and the digital marketing and digital indirect marketing, excuse me, because mail continues to play a prominent role in what we do. But we're going to drop a million pieces of mail within the first two weeks of legal day one to support consumer deposit marketing across Comerica's western markets.

It'll be the first million of what'll probably be 13 or 14 million pieces of mail that will go out over the course of the year. That'll be the first consumer deposit marketing campaign that the Comerica branches have seen in more than a decade, okay? We've demonstrated the ability that we have to use rate as a mechanism to drive early connectivity with new households and then to be able to manage margin over time across the Southeast. That is going to happen quickly.

I think the third thing I just would highlight here is the point Bryan made in his script, which is we have over 40 of the 150 locations we intend to build already secured because the development partners who have been such a big part of the Southeast build-out, people who are doing the strip center developments that are anchored by grocers like Publix, as an example, are also doing the new strip centers that are being anchored by high-end grocers like H-E-B and others across Texas, and because of the success we've had with them in the Southeast, they came to us after the announcement and gave us a lot of early opportunities, so the brick and mortar will actually come out of the ground faster in Texas than it did when we started the Southeast expansion.

And it's all the same models, the same selection criteria, the same discipline around what we're willing to pay relative to what we think we can generate over the first five to six years that the branches are open that are driving all of those decisions. So that's going to be the early stuff. The blue sky opportunity here is innovation banking because that will continue, whether it's technology, AI, software, the things that are coming out of the valley, or life sciences and the transformation that's going to go on in healthcare over the course of the next decade. Those sectors really are the driver of the American economy. We think we have a unique value proposition there because of the payments capabilities. And the broader balance sheet's going to allow us to grow that business without creating a concentration risk issue.

So I wouldn't be surprised to see that business become materially larger than it is today. We just have a little bit of work that we've got to do to ensure that we have the right guardrails around the right product offerings and the right level of coverage.

Thank you. That was an in-depth answer. I'll step off. Thank you.

Your next question comes from a line of Gerard Cassidy from RBC. Your line is open.

Tim, following up on your Comerica comments, can you give us an update on the integration? How is it progressing? And when will the customer conversion occur? Now that the legal closing has occurred, I think it was two months ahead of schedule. Just what the timeline is?

We are way ahead of where I think we had hoped to be at this stage and, frankly, way ahead of where we were at the same time with MB. The big driver here, obviously, is that we received all the critical regulatory approvals less than 70 days after filing our application. So that is what is making it possible for us to get to legal day one at the beginning of February. There really haven't been any surprises that have come out, which I think is you would hope that given the thoroughness of the diligence that was done. But we feel really good on that. And then the other thing that I don't know that I appreciated would have the impact that it's had is the First Republic process was a sobering one for us because it came together so quickly.

And when First Republic didn't work out for Fifth Third, we decided we were going to make sure that in the event that another opportunity materialized, that we'd be ready. So we did some work on what we called 2Xing the bank, which focused on both systems capacity but also manual processes, with the real question being, would anything break if the bank doubled in size? And then also just started the work to close the gap assessment that we had done on category 3 readiness. And obviously, Comerica doesn't double us, but it's a big step larger. And the things that we needed to make sure that we got done in order to support that, we're already done. So that's a long way of saying we're going to get closed earlier. We're in a good position from a systems and processes perspective.

I think we're going to move the conversion up to Labor Day from what would have otherwise been a mid-October time frame. That's going to be super important because we just want to be able to get the benefit of all Fifth Third's technology and both revenue and expense synergies. But it's also, I think, going to be really useful for you all because the same way that the fourth quarter of 2025 was like the last clean look that you were going to get at what the old Fifth Third was capable of delivering, the fourth quarter of 2026 should give you a very clear look at what the new Fifth Third is capable of delivering.

In fact, as Bryan referenced, I think we're confident we can hit the return targets that we laid out in the deal model for full year 27 in the fourth quarter at 26 in terms of the return on tangible common equity of 19% and an efficiency ratio that was 53-ish% or maybe a little better given seasonality. Very helpful. Thank you. Yeah. Gerard is going to give you any more perspective. I think the only thing that Jamie's more excited about than Miami Redhawks basketball being undefeated in the top 25 is the progress that we've been making on the integration. So things are going really well right now.

That's good to hear. Good. And then as a follow-up, but maybe going back to the existing business, Tim, you guys talked about the success you're having in the middle market commercial area, hiring new managers in growth markets, new technology. You also pointed out, I think you said one out of three of the payments customers, the commercial customers, don't have commercial lines of credit with them. Can you give us a view on the C&I loan growth? I think you said also that the average balances were flat in the quarter due to decreased utilization. What do you see? When does the utilization turn more favorable? And what do you see for the C&I loan growth?

Yeah, that's right. There are sort of the puts and the takes in this one, right?

The good news is production's been great and middle market utilization dipped during the government shutdown but rebounded nicely through the end of the quarter. I consider the fact that people are actively seeking to take us out of CRE exposure to be a market strength. It's just reflective of the quality of what we've originated there. The big decline in utilization, as Bryan mentioned, came from the corporate banking portfolio. What we're hearing anecdotally, which is supported by the sort of early returns this year, is that a lot of that was cleaning up balance sheets in an effort to get into a position where our corporate banking clients could get borrowing costs down in anticipation of either making big capital investments this year because of the tax reform or even more prominently to be able to support M&A activity.

It's probably worth mentioning in the first couple of weeks here, we've seen C&I loan balances come up, call it $800 million-$900 million already since January 1, which really is being driven by utilization and some of the fourth quarter production funding up. The wild card here at the end of the day is going to be what, for lack of a better term, we're calling chronic postponement syndrome internally, which is the tendency for our clients to postpone really large capital investments in the face of uncertainty. They all feel, I think, on balance, they feel the same or better about 2026 than they did about 2025. I think they're all excited about tax reform. Rates have been helpful, but they really have been sort of a salve to the accumulated increase in costs more than anything else in terms of the business.

But they want to believe that they're making multi-year investments into an environment where the rules of the road are going to be stable. And so the question really is going to be, do they feel like they have that stability, or do they feel like there's a risk that the window closes to make those investments, or do we just continue to deal with this chronic postponement syndrome as a drag on broader utilization and CNI activity? So that's sort of where we are. And you didn't ask it, but normally you do. I think the other drag for us was the NDFI balances were actually down $600 million or $700 million in the fourth quarter, where they were the principal driver of growth for CNI across the banking sector. So we started with low exposure, actually declined as opposed to getting growth from that category.

I appreciate all those insights. Thank you, Tim.

Your next question comes from a line of Scott Siefers from Piper Sandler. Your line is open.

Morning, guys. Thanks for taking the question. Hey. Bryan, thank you for all the detail on the actions you're going to be taking with the balance sheet at the close. Maybe could you talk about what the company's rate sensitivity is going to look like after you complete those actions you discussed around the close? And then I guess just as the follow-up, will those immediate post-close actions kind of get you to 100% of where you'd like the balance sheet to be, or would it take a little more time from there, just given the need to more fully kind of transform Comerica's deposit base? In other words, how does that all evolve in your mind?

Yeah. Thanks, Scott. We're always targeting to be relatively rate neutral, especially in the normal environment. We're just not in a position where we feel like we want to make big bets. Certainly, the balance sheet becomes a lot more asset sensitive given the merger. You think about our C&I loans. We're going to go from about two-thirds of our C&I portfolio floating rate to closer to 80% of our commercial portfolio floating rate. So we are going to take some action through some swaps and some hedges. We'll probably still be a little bit asset sensitive when all is said and done, but we'll be in a good manageable position that'll be in line with our rate outlook. The work clearly won't be done at that point. We've talked a lot about the balance sheet mix that we've been striving for over the last couple of years.

We talk about a 60/40 commercial to consumer mix from a loan perspective and a 60/40 consumer to commercial mix perspective on the deposit front. Both of those areas are going to continue to take a lot of investment to get us back to those levels. And that'll be a multi-year journey for us. And it's part of the reason you hear us talking in particular on the deposit front around the investments in marketing and in the build-out of the Texas franchise because those will be big drivers for us. Today, the Southeast is contributing to almost half of our consumer deposit growth. And we're confident that Texas is going to be able to deliver a lot of long-term consumer deposit growth for the franchise. And so we feel good about the positioning.

The balance sheet is going to continue to grow and put us in a stable position that gives us a lot of optionality to manage the rate environment.

Yeah. All right. So Bryan and I were talking before the call. Our expectation going in is we're going to grow Texas households at north of 10% on an annualized basis. It may take a couple of quarters post-conversion to get the ramp, but there is no reason why we can't grow Texas at least the rate that we've grown the Southeast, given the starting points are remarkably similar if you look back in time at where Fifth Third started. So there's the power of the DDA growth in our company between the Southeast and Texas and Direct Express.

What we can get done on commercial payments is going to be huge in terms of managing the balance sheet for strong, strong profitability.

Yep. Okay. Perfect. Tim and Bryan, thank you both very much.

Your next question comes from a line of John Pancari from Evercore ISI. Your line is open.

Just on the deal, just want to see if there have you made any changes to your initial assumptions tied to the Comerica transaction outside of timing, but any changes to the assumptions that you provided at the announcement, the cost-save expectation, the restructuring charges, or the related marks or P&L impacts?

Yeah. No material changes to any of the assumptions inherent in the transaction. I'd say the only major items was the timing of close, pulling forward the conversion date.

We do think that ultimately we're going to likely be able to deliver a little bit better than the 37.5% of the $850 million in 2026, given some of those timing changes. But we also do intend to invest a little bit more in growth as well. So we might be approaching $400 million of end-year expense saves in 2026 if all goes well, but we're hoping to reinvest maybe $40 million of that. The original expectation was going to be around $320 million of expense saves in 2026. So we're obviously feeling very good about what we're seeing from a progress perspective on the integration. And beyond that, the loan marks and the balance sheet marks are all very similar from what we would have expected.

Got it. All right. Thank you for that, Bryan.

And then separately on the loan growth side, I appreciate the color you gave on the decline in the line utilization in the quarter. That decline seems more pronounced than many of your peers. And I hear you on the shutdown and some of the balance sheet cleanup, but anything company-specific that you'd say that exacerbated that? And then just separately, also on the loan growth front, if you could maybe give us a little more color around the greatest drivers of growth that you see in the commercial portfolio after the combination is completed with Comerica?

Yeah. Good question. I mean, John, it's got to be a little bit idiosyncratic and a little bit compositional, right? At this time last year, we had a big uptick in line utilization in the fourth quarter when other people didn't have it.

And we tried to talk down enthusiasm on what that meant for 2025, and we gave back a little bit of the utilization in the first quarter, and other people kind of got it. I think there are two visible things. One, NDFI as a percentage of total commercial loans is way lower here than it is for most of our peers. And the NDFI loans tend to fund and stay funded at a level that's higher than what standard working capital revolving lines of credit would be. Secondarily, leverage lending here has continued to decline over time, and that's funded term debt principally for most of the industry and a smaller share of the overall balance sheet. And then I think lastly, and we've talked about this, but clearly we're believers in the value of technology to transform the business. It's transformed the way Fifth Third operated.

But we're also very aware of the fact that there's literally never been a tech infrastructure build-out where there was an overbuilding, whether it was cell towers or fiber or e-commerce distribution centers during COVID. And so we've been a little bit more cautious about just how broadly we were willing to play in data center and data center-linked activity. And there again, that's debt that's funded up pretty quickly in places where the loans are being made. So I think there's a possibility there's some of that. But one way or the other, utilization is not a thing we control. What we can control is originating high-quality credit and making sure we have the right team on the field. So that's the thing that we've been focused on.

And as we think about where do we see the growth coming from with the Comerica acquisition, it really is an extension of the middle market play that has been driving success for us for the last couple of years. We've been growing middle market loans consistently. And even this year, it grew middle market 7%, as we highlighted in our prepared remarks. And we just see so much opportunity there, as well as leaning into the specialty verticals where Comerica has just had so much success historically. There's just some great synergies there between their core business and our core business on the things that we're good at. That's going to create a lot of opportunity for us as we think about what loan growth could look like going forward from here.

Got it. All right. All right. Thanks, Bryan. And thanks for the color, Tim, as well. Yep.

Your next question comes from a line of Mike Mayo from Wells Fargo. Your line is open.

Hi. Hey. So it sounds like you're all pulled up on your merger prospect. Now it's just a matter of executing, I guess. But just to clarify, you said you look to get your 2027 targets in the fourth quarter of 2026 now. Is that right? Yes. Yes. Okay. So you have earlier closing, earlier targeted conversion, earlier metrics. So is there any change in your targeted EPS accretion for this year? I think you just said kind of maybe just a little bit of accretive, and then you get the big accretion in 2027. Any changes to those numbers? It would seem like that would be implied to go higher.

It would basically be achieving the accretion earlier. So we are expecting we talked about 9% EPS accretion in 2027.

We would expect to be able to deliver 9% EPS accretion from the deal in the fourth quarter of 2026.

Okay. And then I'm just maybe your middle name is Tim Digital Spence. Tim, I think of you as the digital banker, but I hear you talk about 13 million pieces of mail. I mean, that sounds very last century of you. You got billboards too, and it sounds very old school. So does that still work? It's just kind of intriguing.

There may be a billboard or two out there. Mike, the benefit of direct mail is that you can literally pick down to the individual household who receives the offer and who doesn't, right?

Whereas in a digital environment, you have a lot more data on folks, but you are still, at the end of the day, optimizing around the segments of the population and to some extent some path dependency around traffic. So we actually have a JV that we have been running with one of the leading digital marketing firms to help us think through the way that we deliver a best-in-class digital acquisition funnel. It's a significant share of new household origination. If you look at marketing-linked household origination, it's probably 50/50 digital and direct mail today. But when it comes to rate offers, you want to basically get in front of the people that you want to communicate with and not necessarily just the rate shoppers, which is what you tend to find at the affiliate marketing websites when you're leading purely with rate and not a broader value proposition.

And we can't frankly go digital until we get through conversion with Comerica because they don't have the ability to open digital accounts online. So there's nothing we can do with the Comerica brand until we get there. But mail still works. It works in credit cards. It works in checking. It's the reason that you see the J.P. Morgans of the world continuing to use it in addition to folks like Fifth Third. And there may be a billboard or two somewhere, but I promise you if we have one, it'll be a digital billboard. How about that?

No, I mean, whatever works. I mean, I guess you're saying it's mail, it's digital, it's branches. So for the last 110 branches that you need to secure, it seems like you kind of telegraphed that. Maybe, I don't know, how long will that take to get your other 110 or 150 de novo branches?

Oh, it's the opposite of the slowly but suddenly. I think in this case, it's suddenly and then slowly because the benefit we have here is we have been building for so long in the Southeast with strip center developers who are also doing a lot of building in Texas that we were going to see a lot of the low-hanging fruit fast because we have these development partners who saw the announcement and picked up the phone and said, "Hey, I'm doing four of these in Dallas and two in Austin and one in Houston and otherwise. And do you guys want the outlot?" So they know our specifications. They know what we expect from a zoning perspective.

They know how well we perform as a strip center tenant and what we expect in our contracts for ground leases or purchases, and therefore, we were always going to get more locations earlier. We're not going to compromise the selectivity, and as we fill in hotspots on the map, by definition, it just takes a little bit longer to get the last handful of these locations, but it's a robust market. It's just stunning to think that an MSA at the size of Dallas or Houston could be growing at the rate that they are, and all that new development creates lots of opportunities to build branches where you would want to have them today versus where they were when they were built 30 years ago.

I look forward to the investor day in Dallas in a year or two. Thank you.

Your next question comes from a line of Erika Najarian from UBS. Your line is open.

Hey. Just one follow-up question for me and I really want to know what Jamie's middle name is if yours is Digital Tim.

Right now, it's RedHawk for what that's worth. RedHawk. It's RedHawk at the moment.

So, Bryan, I'll make yours liquidity then and speaking of, we heard a lot about the longer-term and medium-term deposit plans, but just wondering how we should think about average deposits that's underpinning your net interest income outlook for the year and how we should think about, given Tim's comments about targeted rate offers, how we should think about deposit costs underpinning the 2026 outlook.

Fifth Third Bancorp (FITB) Q4 2025 Earnings Call Transcript

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