Magazine article American Banker

Deposits Aside, Fifth Third Sees Room to Improve

Magazine article American Banker

Deposits Aside, Fifth Third Sees Room to Improve

Article excerpt

Fifth Third Bancorp's deposits grew in the second quarter for the third straight quarter, but executives said they are not entirely done remaking the Cincinnati company's retail banking operations.

"Deposit trends were good," George A. Schaefer Jr., the $106.1 billion-asset Fifth Third's chief executive and newly elected chairman, said Thursday during an earnings conference call with investors.

Total deposits rose 12% from a year earlier, and 2.2% from the first quarter, to $70.5 billion. Loans grew 9% from a year earlier and 1.6% from the first quarter, to $72.6 billion.

Core deposits rose 7% from a year earlier and 7% at an annual rate from the first quarter, to $59.7 billion at the end of June, Mr. Schaefer said.

However, he said he would like further improvement in deposit gathering. "Average transaction deposit growth trends remain positive but below our expectations."

The company expects those trends to improve this year, he said.

Fifth Third's profits fell 8% from a year earlier, to $382 million. However, a lower tax rate and a gain of 2 cents a share on the sale of MasterCard Inc. stock produced earnings per share of 69 cents, or 3 cents above the average of analyst estimates, according to Thomson Financial.

The net interest margin contracted 28 basis points from a year earlier and 7 basis points from the first quarter, to 3.01%. The company said the contraction, more than analysts had expected, was a side effect of rising deposit prices.

Kevin Kabat, Fifth Third's newly appointed president and its head of retail banking, said it would continue to work on gathering more deposits. "We feel really good about the strategy in place." However, "we know we have work to do ... on retention" of customers.

Last summer the company began to focus more on customer service, trying to improve retention, and it shifted from teaser rates on deposits toward better rates for customers who stay with Fifth Third longer. …

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