Fifth Third (FITB) Q2 FY26 earnings call: guidance and Q&A

Inquired about further efficiency gains post-Labor Day systems conversion and potential idiosyncratic revenue growth for Fifth Third as early as 2027.

Management confirmed being ahead of the $850 million synergy target and plans to redeploy additional synergies into revenue growth, not just incremental efficiency. Highlighted successful deposit campaigns in the Southwest ($2.5B vs $1B expectation), mortgage production in Comerica's footprint, and cross-selling Fifth Third products in Comerica's verticals. Expects accelerated household growth and fee production post-conversion.

“We are -- if you just look at it mathematically running a good bit ahead of the $850 million in synergies. Our plan, assuming that the environment holds the way that it has, has been to redeploy anything above the $850 million into supporting revenue growth, unless we just don't have opportunities to be able to do that.”

asked by Ebrahim Poonawala · answered by Timothy Spence

Asked about the normalized margin trajectory, deposit cost observations (competitive environment, customer behavior), and impact of Fed actions on pricing discussions.

Acknowledged a competitive environment, especially for consumer deposits, but emphasized Fifth Third's ability to manage overall deposit costs. Noted opportunities in Southwest markets due to low share and limited cannibalization. Commercial deposit competition is less intense.

“We would tell you the environment certainly is competitive, and that's not unexpected in what has now really shifted into a loan growth environment... We've tested a lot of different rate offers over the last 6 months in the first half of the year, and it certainly is getting more expensive to grow deposits.”

asked by Ebrahim Poonawala · answered by Bryan Preston

Asked how to think about the medium-term efficiency ratio given reinvestment of incremental synergies and AI investments, considering the goal of maintaining profitability.

Management feels good about year-end targets and expects to exceed original 2027 ROTCE and efficiency targets in Q4. The focus is on maintaining profitability and driving tangible book value per share growth by reinvesting in proven strategies like low-cost deposit growth and fee growth, rather than solely optimizing the efficiency ratio further.

“Our belief is that at the level of profitability we are running at today, that maintaining that level of profitability, which means showing enough operating leverage to continue to support the sort of 19% plus ROTCE through a little bit of additional operating leverage... is the best way for us to generate long-term value for shareholders.”

asked by Manan Gosalia · answered by Timothy Spence

Sought clarification on specific deposit growth assumptions for the medium term and key drivers, given the ongoing initiatives.

A mid-single-digit growth rate is a fair long-term expectation, aligning with loan growth goals. Highlighted "4 $10 billion deposit opportunities" (Southeast network, Southwest network, small business platform, tech/life sciences) totaling $40 billion over 5-7 years. Emphasized diversified franchise and strong consumer deposit performance.

“When we think about a mid-single-digit kind of growth rate, we think that's the trajectory that the company can be on for some time, and we can accelerate faster than that, depending on the speed that we want to deploy marketing dollars to grow more balances.”

asked by Ryan Nash · answered by Bryan Preston

Asked for expectations on deposit costs for the rest of the year, assuming no Fed hike, and the beta if a hike occurs.

Expects balanced growth to come from interest-bearing products, leading to stable to slightly up deposit costs even with flat Fed funds. If a Fed hike occurs, asset repricing would outweigh deposit cost increases, benefiting NII.

“From a cost perspective, we do think that more of the balanced growth, just given where we are from a rate environment perspective, will come in at an interest-bearing product. So I do think that you're in a stable to maybe slightly up rate perspective for deposit costs from here on out, even if you were in a flat Fed funds world.”

asked by Erika Najarian · answered by Bryan Preston

Inquired when the company might quantify revenue synergies from the Comerica deal, similar to how expense synergies were tracked.

Management is already tracking revenue synergies at a detailed level (e.g., 8% of new TM production from Comerica TMOs using Fifth Third products). The focus will shift post-conversion from protecting existing business to energizing growth. Expects to provide a view on growth from legacy Fifth Third strategies vs. new market applications in Q4 FY26 or early next year.

“What I would say is the focus will shift when we get past conversion from the sort of job 1, which is protect what we have and get the expense synergies out, to job 2, which is energize the combined team around the opportunities to drive growth.”

asked by Gerard Cassidy · answered by Timothy Spence

Asked for a consumer customer retention figure comparable to the 99.4% commercial retention.

Consumer franchise is net up at 102% of what it was at the beginning of the year. This includes a normalized attrition rate of 94-95% on the legacy book, coupled with significant new production.

“My understanding is that the gross and net is something like 94% or 95% attrition of customers -- or I'm sorry, retention of customers that were on the books at the beginning of the year, plus, call it, whatever that is, then 6 -- 5% to 6% top line above it, that gets you to the 102% overall.”

asked by Michael Mayo · answered by Timothy Spence

Asked what metrics shareholders should look for to gauge the success of new branch deployments, given the cross-currents of consolidation and expansion.

The primary metric is average deposits per branch. Highlighted the Southeast expansion where branch count increased 60% but deposits more than doubled, leading to increased average deposits per branch and better profitability. Expects a faster maturation for Comerica's Southwest markets, which currently resemble Fifth Third's Southeast in 2018.

“average deposits per branch are today, certainly the single best proxy for our sort of hitting breakeven and then achieving that ideal Jamie Dimon, $2 million to infinity and beyond sort of a run rate.”

asked by Benjamin Gerlinger · answered by Timothy Spence