Fifth Third Bancorp (FITB) is focusing on retail deposits as the foundation of its balance sheet funding strategy, according to Tayfun Tuzun, Executive Vice President and Chief Financial Officer. He was speaking at the BancAnalysts Association of Boston Conference, held at the Langham Hotel in Boston, MA.
The Cincinnati, Ohio-based bank, which operates 1,300 branches in the Midwest and Southeast, has total year-to-date revenue of $1.7 billion, and year-to-date average loans of $16.6 billion, Tuzun said. But in the current rate environment, Fifth Third is taking a conservative approach. Short-term borrowing is no longer viewed as prudent, Tuzun said.
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Instead, Tuzun said, “We believe there is more certainty on retail deposits…They provide a more stable source of liquidity, relative price advantage, and favorable regulatory treatment.”
As such, the bank is redesigning its retail distribution strategy and growing its regional wealth management and brokerage services. The streamlining saw record results in the third quarter for fees from its wealth management business, Tuzun said.
Fifth Third is now positioning itself for the future, Tuzun said. The company has “backed off commercial lending a bit, where structure and pricing moved beyond our comfort levels,” he said.
“The goal is to maintain flexibility,” Tuzun said, noting that the loan-to-core deposit ratio of 97% in the third quarter of 2014 keeps the company better positioned for rising rates and liquidity rules. The company is seeing deposit growth in all 16 affiliates, Tuzun said.
The overall goal moving forward is to “operate with lower leverage and higher liquidity than in the past, but that will create shareholder value with low volatility,” Tuzun said.
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