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Speaker 1: Now on SOCC we're watching this morning Fifth third Bank Corp.

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Speaker 1: The company meeting deposit expectations in the third quarter as

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Speaker 1: it focuses on stability. The bank is also keeping its

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Speaker 1: focus on expanding to the southeastern United States. Joining US

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Speaker 1: now is Tim Spence, Fifth Third Bank Corp. Chairman, CEO

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Speaker 1: and President. And you know, a lot of investors have

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Speaker 1: their eye on your market right now. Things seem to

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Speaker 1: be improving and holding stable in terms of that interest

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Speaker 1: income you're bringing in, but you're also looking to expand

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Speaker 1: you're looking to grow at this point in time. According

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Speaker 1: to Bloomberg's own estimates, the expense ratio just a little

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Speaker 1: bit more than expectations. How do you Tim set expectations

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Speaker 1: for investors on the growth rate you're putting forward.

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Speaker 2: Sure, and Shanelli, thank you for having me on this morning,

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Speaker 2: and I have been looking forward to chatting with you folks.

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Speaker 2: I think from my point of view, the way that

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Speaker 2: you run a really great regional bank through the cycle

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Speaker 2: as you focus on stability, profitability and growth in that order.

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Speaker 2: So last year was an important proving ground with the

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Speaker 2: challenges in liquidity that face so much of the sector.

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Speaker 2: If Third had a very good run in that regard.

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Speaker 2: I think we grew deposits by five percent year over year,

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Speaker 2: and the industry was down three The profitabilities remained really strong.

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Speaker 2: We have the highest roe of any of the banks

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Speaker 2: that have reported thus far, at least in our investor

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Speaker 2: peer group, and it's been the most stable over the

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Speaker 2: course of the past year. And the byproduct of that,

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Speaker 2: then is you get to focus on growth. I think

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Speaker 2: we have tried to be really diligent about maintaining consistent

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Speaker 2: expense growth. It's been the lowest of any of our

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Speaker 2: investor peers over the last five years on an organic basis.

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Speaker 2: But during that time we also been making big investments

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Speaker 2: in the franchise, principally in the expansion into the Southeast.

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Speaker 2: The investments that we continue to make in our commercial

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Speaker 2: payments platform and then our own internal technology projects, and

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Speaker 2: those things are important. You have to do them over

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Speaker 2: time because in a market that is as competitive as

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Speaker 2: the US banking system is building a competitive moas a

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Speaker 2: little bit like digging a hole in sand. If you

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Speaker 2: stop digging, it fills in a little bit. So we

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Speaker 2: will continue to be focused on making and investments and

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Speaker 2: strengthening the customer value proposition, expanding the reach and ensuring

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Speaker 2: as we enter into what I think may be a

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Speaker 2: pretty favorable environment for banks next year that we are

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Speaker 2: positioned to benefit from the grandw.

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Speaker 1: No, I want to go back to what you were

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Speaker 1: saying about that Southeastern expansion. Guys, this is a Cincinnati,

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Speaker 1: Ohio based banking I know it. I know Matt Matt

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Speaker 1: loves Ohio of course, from of course, I know we got.

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Speaker 2: A fellow Ohio and the Ohio.

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Speaker 1: So that Southeast expansion, I'm really curious about how you

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Speaker 1: go about it. Is this a matter of investing in

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Speaker 1: different branches and more people, or do you see yourself

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Speaker 1: making an acquisition at any point in time as you

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Speaker 1: make your expansion across the US little more.

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Speaker 2: Sure, the focus four fifth third really has been on

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Speaker 2: building out existing markets organically. We entered the Southeast in

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Speaker 2: South Florida specifically as far back as thirty years ago,

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Speaker 2: and then the bank did make a series of acquisitions

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Speaker 2: in the early two thousands that provided the initial entry

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Speaker 2: point in the platform. But all of the growth that

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Speaker 2: we have benefited from over the course of the past

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Speaker 2: few years has come from organic investments, either in building

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Speaker 2: out our retail branch network, or in the hiring of

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Speaker 2: experienced middle market banking and wealth management teams to ensure

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Speaker 2: that we had the full complement of businesses. So we

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Speaker 2: have built the second most branches in the Southeast over

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Speaker 2: the course of the past five years and have then

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Speaker 2: been able to benefit from that, in particular in an

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Speaker 2: environment where raising deposits was important. The FDIC releases a

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Speaker 2: summary of deposits once a year in the third quarter

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Speaker 2: that gives us kind of a view market by market

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Speaker 2: into how we're doing. And we grew deposits in the

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Speaker 2: Southeast by sixteen percent last year and gained market share

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Speaker 2: in fourteen of the fifteen mssays we compete. So I

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Speaker 2: feel really good about our ability to continue to grow

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Speaker 2: in those markets achieve the top five share position that

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Speaker 2: we have targeted on an organic basis. Well, let's keep

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Speaker 2: talking about the Southeast, because you highlight in your notes

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Speaker 2: that you plan to accelerate your new branch opening so

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Speaker 2: that by twenty twenty eight nearly half of your network

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Speaker 2: will be in the Southeast.

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Speaker 1: So some big plans there. Can we talk about why

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Speaker 1: what do you see in the Southeast?

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Speaker 2: Yeah, well, I think the thing that everybody sees in

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Speaker 2: the Southeast has been the big demographic migration that many

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Speaker 2: of the mid size markets in the Southeast have benefited

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Speaker 2: from over a period of about the last ten or

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Speaker 2: fifteen years. The pandemic certainly accelerated the growth in some

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Speaker 2: of the markets, but even if you take the pandemic

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Speaker 2: out the Southeast mid size metro areas, we're growing at

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Speaker 2: a rate, call it, two to five times the rate

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Speaker 2: of US population. And the other reason that we like

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Speaker 2: this sort of fifty to fifty mix is that I

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Speaker 2: think a glowlobal financial crisis and then a global health

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Speaker 2: pandemic caused people to forget that historically economic pullbacks recessions

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Speaker 2: were really regional phenomenon, and we think there's a real

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Speaker 2: benefit to having a fifty to fifty multi regional split

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Speaker 2: just in terms of our ability to continue to drive

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Speaker 2: diversification into the business and thereforeum more stable, consistent return

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Speaker 2: profile through the cycle.

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Speaker 3: All Right, I want to ask about you know, your customers,

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Speaker 3: the business that you're dealing with, because we talk about

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Speaker 3: the US economy as a monolith all the time. Three

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Speaker 3: percent GDP adding I don't know, two hundred and fifty

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Speaker 3: thousand jobs, three percent unemployed. Sorry, three percent inflation at

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Speaker 3: the core. But obviously it's going to be different for

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Speaker 3: the people at Skyline Chile. You know that you're dealing

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Speaker 3: with in Cincinnati every day. So what's your customer profile

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Speaker 3: look like compared to sort of the medium that we

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Speaker 3: talk about here in New York All the time?

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Speaker 2: You had me worried there for a minute, Matt, that

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Speaker 2: you were going to ask me to com on the

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Speaker 2: Skyline Chili Greater's ice cream collaboration.

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Speaker 3: Delicious.

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Speaker 2: Yeah, I'd had to know comment on that one. Yeah. Look,

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Speaker 2: I think the economy is a little bit uneven right now.

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Speaker 2: Maybe I'll start on the consumer side and then I'll

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Speaker 2: hit businesses. If you look at the consumer population, and

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Speaker 2: we really are a super prime lender in consumer, but

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Speaker 2: we bank the full spectrum in terms of financial circumstances.

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Speaker 2: In our deposit business, folks who had assets and who

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Speaker 2: owned their homes going into the pandemic are benefiting from

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Speaker 2: really a historically favorable environment. Their wage growth has been

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Speaker 2: pretty good, All asset values have performed well. They locked

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Speaker 2: in fixed rate mortgages at a two and a half

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Speaker 2: to three percent interest rate, and the byproduct to that

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Speaker 2: is they continue to run at a level if you

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Speaker 2: just look at the liquidity they have available that's well

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Speaker 2: above and to spend, for the matter, at a level

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Speaker 2: that's well above what the historical trend would be. If,

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Speaker 2: on the other hand, you look at the bottom core

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Speaker 2: tile of the population in terms of income more likely

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Speaker 2: to rent than they are to own, they're experiencing is

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Speaker 2: still pretty significant hardships, right. Inflation hit those folks hard,

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Speaker 2: not just because you were talking about the increased cost

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Speaker 2: of buying or ensuring a car, but you had rental inflation,

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Speaker 2: which is the single largest expense that they face on

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Speaker 2: a monthly basis, and then the run up in food prices,

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Speaker 2: and they have not kept up. In fact, the bottom

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Speaker 2: core tile of the consumer population in terms of income,

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Speaker 2: it's like twenty percent below pre pandemic levels in terms

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Speaker 2: of the balance they carry in their checking account month

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Speaker 2: to month, so they're tight. I think the same dynamic

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Speaker 2: as materialized in businesses. More interest rates sensitive sectors like

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Speaker 2: real estate have been challenged over the course of the

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Speaker 2: past couple of years. More indebted companies have been challenged.

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Speaker 2: Companies that didn't have control over their supply chain or

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Speaker 2: didn't have enough scale in their markets where they were

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Speaker 2: able to pass on increases in costs, whether they were

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Speaker 2: labor or otherwise. You know, have continued to struggle in

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Speaker 2: terms of their ability to rebound. The good news is

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Speaker 2: when you look at our footprint, we principally bank people

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Speaker 2: who make things, or who move things or distribute things.

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Speaker 2: We have the lowest chair of commercial real estate relative

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Speaker 2: to total loans of any of the banks are size.

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Speaker 2: We don't have an outsized mortgage portfolio. And the byproduct

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Speaker 2: of that is, you know, they have done pretty well

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Speaker 2: and in fact, in many cases have actually benefited from

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Speaker 2: the industrial policy here that's focused on more domestic manufacturing,

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Speaker 2: more energy independence, and otherwise.

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Speaker 3: All right, Tim, thanks so much for joining us. Tim

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Speaker 3: Spence there coming to us from Cincinnati and Fifth Third

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Speaker 3: Bank