Is Fifth Third Bank Being Bought Out?

Fifth Third Bank is one of the largest and most prominent regional banks in the United States. With assets approaching $200 billion as of 2021, Fifth Third operates over 1,100 full-service banking centers across 10 states.

But with mergers and acquisitions always on the horizon in the banking world, many wonder if Fifth Third is on the selling block. Let‘s take a closer look at this major financial institution and analyze the likelihood of it being acquired.

A Closer Look at Fifth Third Bank

Before speculating about its future, let‘s review some key facts about Fifth Third Bank:

• Founded in 1858 and headquartered in Cincinnati, OH

• Subsidiary of holding company Fifth Third Bancorp (Nasdaq: FITB)

• Assets totaled $189 billion as of December 31, 2019

• Operates 1,149 full-service Banking Centers and 2,481 ATMs across 10 states

• Ranked 9th largest U.S. bank and 12th largest U.S. financial services company

• Provides retail banking, commercial banking, investment banking, and wealth management services

Fifth Third has shown steady growth over the past decade across key financial metrics:

• Assets increased 34% from $141B in 2010 to $189B in 2019

• Net income rose from $1.1B in 2010 to $2.5B in 2019, a 127% increase

• Deposits grew from $86B to $134B between 2010 and 2019, a 56% uptick

This consistent growth points to an institution with momentum rather than one needing to merge.

Analyzing the Likelihood of Acquisition

With its strong financial footing and expanding customer base, there are currently no known plans for Fifth Third Bank to be acquired.

As a profitable regional bank, Fifth Third has little incentive to sell out or merge with another bank. Let‘s look at a few reasons why:

1. Consistent Growth and Profitability

Over the past 5 years, Fifth Third has achieved:

• 9% increase in retail customers to over 10 million
• 14% growth in non-interest bearing deposits
• 31% growth in credit card loans

The bank has successfully grown its most important business segments organically. This operating momentum means the bank likely sees more value in continuing its expansion versus seeking a buyer.

2. Leadership in Key Markets

Fifth Third holds top 3 market share in many of its regions:

Market	Deposit Market Share
Cincinnati, OH	32%
Dayton, OH	29%
Lexington, KY	33%
Indianapolis, IN	14%

With such strong positioning, the bank has little incentive to give up market dominance to become part of a larger institution.

3. Strong Financial Profile

As of Q3 2021, Fifth Third reported:

• Net income of $718 million
• Net interest margin of 2.98%
• Common equity Tier 1 capital ratio of 11.1%

These metrics indicate Fifth Third is financially healthy enough to maintain independence and has room to continue growing organically without needing to merge.

Could Fifth Third Itself Make an Acquisition?

While it seems unlikely to be acquired, Fifth Third has shown willingness to make strategic purchases to expand its geographic footprint and capabilities.

In 2008, Fifth Third acquired the major regional bank Old National Bancorp in a $1.6 billion transaction. This instantly expanded Fifth Third‘s retail network by nearly 300 branches across attractive Midwest markets.

More recently, Fifth Third has acquired:

• Bancorp in 2014, gaining scale in North Carolina and Virginia

• MB Financial in 2018, which strengthened commercial banking and expanded presence in Chicago

As a disciplined acquirer, Fifth Third seems more likely to be the buyer than the bought. The bank seems intent on strategic M&A when it makes sense.

Diving Deeper into Fifth Third‘s Operations

Beyond the numbers, Fifth Third‘s operating model provides insight into its ability to remain independent. The bank has built a diversified business, efficient processes, and strong risk management.

Diverse Revenue Streams

In 2019, Fifth Third‘s revenues were derived from:

• 63% net interest income
• 22% non-interest income
• 15% investment services and trust fees

This diversification beyond just lending helps insulate Fifth Third from market fluctuations. The fee-based revenues from services like wealth management provide stability.

Efficiency

Fifth Third‘s efficiency ratio of 56.7% at the end of 2019 compares well to peers. This means that for every $1 of revenue generated, Fifth Third spent about $0.57 on overhead. The lower this ratio, the more efficient a bank‘s operations.

Risk Management

Fifth Third has maintained credit quality and kept non-performing loans around 1% of total loans over the past several years. This prudent risk management helps preserve profitability.

With its diverse business lines, efficient operations, and measured risk profile, Fifth Third seems well-positioned to operate independently moving forward.

How Does Fifth Third Compare to Major National Banks?

In an industry dominated by a few mega-banks, Fifth Third holds its own with its national competitors:

Bank	Branches	Assets	Deposits
Chase	4,975	$2.7T	$1.6T
Bank of America	4,270	$2.4T	$1.4T
Wells Fargo	5,340	$1.9T	$1.3T
CitiBank	690	$2.0T	$1.0T
Fifth Third	1,149	$189B	$134B

While it doesn‘t have the same massive scale and reach, Fifth Third competes effectively in its regions. It offers a full suite of retail, commercial, and wealth management products and services.

Fifth Third also consistently ranks among the top U.S. banks in customer satisfaction surveys, indicating it provides an excellent banking experience. The bank has shown it can thrive as a regional player without needing to merge into a megabank.

Recent Major Bank Mergers and Acquisitions

Despite Fifth Third‘s ability to remain independent, mergers are commonplace in the banking sector as institutions seek growth and economies of scale. Here are some notable recent deals:

• 2019: BB&T acquired SunTrust to create Truist, the 6th largest U.S. bank

• 2018: BBVA USA purchased by PNC for $11.6B

• 2016: Toronto-Dominion Bank acquired Scottrade Bank for $1.3B

• 2015: Royal Bank of Scotland divested Citizens Financial, acquired by Citizens Financial Group for $3.5B

• 2014: Huntington Bancshares merged with FirstMerit Corp in $3.4B deal

These and other deals show the consolidation trend in banking. Regional banks like Fifth Third feel pressure to gain scale and bolster capabilities through M&A. But Fifth Third has proven it can continue growing successfully while retaining its identity.

Why Did Fifth Third Change Their Name?

In February 2019, Fifth Third announced a name change from Fifth Third Bank to Fifth Third Bank, National Association. This change included:

• Incorporating its national bank charter into the name

• Retaining Fifth Third branding that customers recognize

• No impact to account numbers, products, services, etc.

The refreshed name was part of an effort to highlight Fifth Third‘s continued growth and expansion beyond its Midwest roots. Despite the name change, customers experienced no interruption in banking services.

The Bottom Line

While mergers are common in banking, the numbers and trends point to Fifth Third remaining an independent, regional powerhouse in the near future.

With its strong market position, expanding customer base, robust financial performance, and continued investments in innovation, Fifth Third seems well-positioned to keep growing organically without needing a merger or acquisition.

Although the industry will remain dynamic, Fifth Third Bank seems poised to operate autonomously and maintain its distinct identity rather than get swallowed up by a larger competitor. But within the unpredictable banking sector, never say never!