Fifth Third Sees Q3 at High End After Comerica Conversion

Key Points

• Fifth Third expects a strong third quarter, tracking toward the high end of its net interest income and fee-income guidance, the low end of expense guidance and the midpoint of its charge-off range.
• The bank completed its large Comerica systems conversion successfully, with customer attrition below expectations and gross commercial attrition under 1%. It reaffirmed its goal of $850 million in annual expense synergies by 2027, with gross savings potentially exceeding $900 million.
• Management plans to reinvest savings in growth, particularly across the Southeast and Southwest, while pursuing more than $500 million in revenue synergies through lending, deposits, wealth management and consumer banking expansion.

Fifth Third Bancorp NASDAQ: FITB said it is tracking toward the favorable ends of its third-quarter guidance ranges following the completion of its Comerica conversion over Labor Day weekend, with executives citing stronger deposit growth, stable customer retention and expense savings that are arriving faster than initially expected.

Speaking at Barclays’ Global Financial Services Conference, Chief Financial Officer Bryan Preston said the bank expects to finish the quarter at the upper end of its net interest income and fee-income guidance, at the lower end of its expense guidance and near the middle of its expected charge-off range.

“Quarter’s coming together nicely,” Preston said. “Loans are coming in as expected, and we’ve seen quite a strong quarter from a deposit growth perspective as well.”

Preston said the company remains positioned to meet the financial objectives associated with the Comerica transaction, including a return on tangible common equity above 19% and a run-rate efficiency ratio of 53% by 2027.

Comerica conversion completed

Chief Operating Officer Jamie Leonard called the Labor Day conversion the most complicated and largest transaction in Fifth Third’s history, but said the system migration was completed successfully. About 600,000 customers and nearly 300 branches were moved onto Fifth Third’s platform, according to the discussion.

Leonard said the conversion included core systems and employee infrastructure, while the wealth conversion is scheduled for Halloween and the human-resources systems conversion is planned for Jan. 1.

“I think this conversion was as close to perfect as I have seen at Fifth Third,” Leonard said, noting he has participated in nine bank conversions during his 27-year career. He said a lightning strike that damaged circuitry at one branch was among the limited operational issues encountered.

Customer activity following the conversion has been encouraging, Leonard said. The bank recorded 15% fewer inbound calls on the first Friday after the Comerica conversion than it received during the comparable period following its MB conversion in 2019, despite having a larger customer base and longer call-center hours.

Customer attrition has also remained below expectations. Preston said gross commercial attrition continues to run below 1%, while consumer and small-business attrition has been stable and muted. On a net basis, both the commercial and consumer businesses acquired through Comerica have grown over the past year, he said.

Expense savings and growth investment

Fifth Third reaffirmed its target for $850 million of annual run-rate expense synergies from Comerica by 2027. Leonard said the bank expects to achieve that amount and indicated gross expense savings are likely to exceed the stated target. Preston later said gross savings are “probably north of $900 million” at this point.

Rather than directing all incremental savings to the bottom line, management said it plans to reinvest in expansion opportunities, particularly in Texas, California and the broader Southwest. Those investments could include branches, marketing, middle-market and wealth bankers, capital-markets personnel and treasury-management capabilities.

Preston said the 53% efficiency ratio remains an appropriate long-term target because it provides capacity for continued investment while supporting industry-leading returns. If growth opportunities do not materialize as expected, more savings could flow to earnings, he added.

Revenue opportunities in deposits, lending and consumer banking

Management reiterated its expectation for more than $500 million in revenue synergies over three to five years. Preston said near-term opportunities include deposit campaigns, middle-market lending, asset-based lending, equipment finance and capital-markets services. Longer-term opportunities include wealth-management expansion and development of an innovation-banking business built on Comerica’s technology and life-sciences foundation.

Leonard said the most immediate consumer revenue opportunities are mortgage lending, home equity, investment services and preferred banking. Fifth Third expects to generate roughly five times the mortgage volume Comerica produced in 2025, supported by the hiring of 40 mortgage loan officers, he said.

The company is also accelerating its de novo branch strategy. Leonard said Fifth Third plans to open 55 branches in the Southeast this year, followed by 100 branches next year, split evenly between the Southeast and Southwest. The first Southwest wave is expected to include 150 locations, with 60 each in Dallas and Houston and the remaining locations in Austin.

Fifth Third’s existing Florida network has reached 218 branches and $13 billion in deposits, Leonard said, and the company views the state as a continuing growth opportunity. The bank’s de novo branches opened from 2018 through the end of 2025 have reached 125% of their deposit goal, he added.

Balance sheet, credit and capital outlook

Preston said net interest margin should remain in the mid-3.30% range during the third quarter before moving toward the 3.40% exit-rate target previously discussed by management. Strong deposit growth has temporarily increased cash balances, including approximately $2 billion of Comerica sweep balances added during the transition, he said.

Management described credit conditions as broadly healthy. Preston said commercial customers remain liquid and that Fifth Third’s prime and super-prime consumer lending focus has limited consumer credit pressure. The bank continues to avoid meaningful participation in non-depository financial institution lending and AI data-center lending, citing concerns about leverage, transparency and concentration risk.

On capital allocation, Preston said Fifth Third’s priorities remain a stable dividend and investment in organic growth. He said the company expects to return to a more normalized share-repurchase program in the fourth quarter.

Executives also said future acquisitions would need to accelerate the company’s existing strategy and be financially compelling. “M&A is not a strategy,” Preston said. “M&A has to accelerate the strategy.”

About Fifth Third Bancorp (NASDAQ:FITB)

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. Through its principal subsidiary, Fifth Third Bank, the company provides banking and financial services to individuals, businesses, governments and institutional clients.

Its offerings include checking and savings accounts, mortgages, home equity loans, consumer lending, credit cards, commercial loans, treasury management and other business banking services. Fifth Third also provides wealth management, investment advisory, brokerage, trust and asset-management services, as well as capital markets and investment banking capabilities for corporate and institutional customers.

Fifth Third Bank operates through a branch and digital banking network primarily serving communities across the Midwest and Southeast, including markets in Ohio, Michigan, Florida, Georgia, Illinois, Indiana, Kentucky, North Carolina, South Carolina, Tennessee and West Virginia.

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