Fifth Third Bancorp at Morgan Stanley US Financials, Payments & CRE Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manan Gosalia - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Perfect. So Bryan, maybe just add a big picture, one of Fifth Third's biggest strategic initiatives that you've been focused on over the past several years has been growing your presence in the Southeast. I think you mentioned at the earnings of the bank to the southeast households by about 7% in the first quarter, you have $31 billion of deposits. And recently, Tim noted that you will be accelerating your branch build out of the next few years. So can you talk about the levers you see to deepen customer relationships in the Southeast and how you think Fifth Third is differentiating themselves?

Question: Manan Gosalia - Morgan Stanley - Analyst : And then can you also dig into the opportunity you see in Texas, that's a market we've been in since 2012, but at earnings it sounded like you were going to lean in further there. So what's the opportunity there?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. That's very helpful. Maybe to dig in on the guidance in the slide deck you put out yesterday. Is there anything you want to flag there? And I know you mentioned for 2Q fees are slightly lower expenses or lower NCOs are up, but there's -- it comes with the reserve release. So any anything you want to unpack there for to -- ?

Question: Manan Gosalia - Morgan Stanley - Analyst : And any more details on those charge-offs are there on the C&I side or CRE side and any specific industries? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 11:25AM, FITB.OQ - Fifth Third Bancorp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Very helpful. I want to dig in on the deposit and loan side. But just before that there've been a few headlines recently around CMBS losses. And specifically there was one large property in New York. I know CMBS makes up about 60% of [physical] securities book. So can you just talk about the quality of that CMBS book and any protections that you haven't place that?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Right. Perfect. So let start over to deposits. Add earnings you mentioned the biggest risk to the NII outlook. Here's a reacceleration in deposit competition. I think based on Tim's comments earlier and what you just said right now. It seems that deposit competition has eased a little bit so far in the second quarter. So can you dig a little bit more into the trends that you are seeing? And also talk about how you see deposit competition playing out through this year?

Question: Manan Gosalia - Morgan Stanley - Analyst : So maybe a couple of follow-ups. Say one is on the commercial and wealth side. You said you've got some pricing back. Does that mean that you're able to drop deposit rates lower because one of your peers yesterday was commenting that there might be a little bit more room to drop deposit rates even as the Fed stays higher for longer. Is that is that part of the preparation organic?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Okay. And then on the footprint and the geographical differences, I mean, I would say that the guys in deposits through this conference have been a little bit mix. You see more pressures and that's if not. So is there anything you're seeing either by type of bank thinking that maybe the large-cap banks are reacting differently than the regionals and I know you compete with both or is there any small differences in geography or customer type or anything else?

Question: Manan Gosalia - Morgan Stanley - Analyst : Anything you worry about the back half? And I know there's -- this whole dynamic between Q3 and [RRB], how do you expect that to play out?

Question: Manan Gosalia - Morgan Stanley - Analyst : So while we're on NII you reader reiterated the guide on NII to decline 2% to 4% in 2024. And you've also mentioned that you can hit that guide even if we get no rate cuts, which is basically where the forward curve is now, which is now one cut in December. What actions have you taken to make your NII more resilient to different rate scenarios?

Question: Manan Gosalia - Morgan Stanley - Analyst : Great. And then the other leg of the stool for NII is loan growth. And I know with the Fed H8 data, we can see loan growth is coming in weaker than consistently this conference with loan growth is weaker. I think Tim also highlighted recently, the loan growth has been tepid so far. Can you talk about what exactly you are seeing so far this quarter, what you're hearing from clients and what needs to happen for demand to improve here? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 11:25AM, FITB.OQ - Fifth Third Bancorp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Manan Gosalia - Morgan Stanley - Analyst : And why do you think you're seeing that competition and specific loan types in I know some of your peers are moving away from CRE into C&I. Is that part of the reason why spreads are compressing there?

Question: Manan Gosalia - Morgan Stanley - Analyst : Okay. And then for some of this loan demand to come back, I mean, does it really depend on the path of interest rates from here? Or is there any other dynamic that can spur loan demand?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. And anything about your Midwest footprint in terms of the benefits of onshoring and government spending, anything you're starting to see materialize already and what -- how much runway is there from here over the next few years?

Question: Manan Gosalia - Morgan Stanley - Analyst : Right. So I'm going to dig into regulation and then come to the audience in case there's any questions in the room. Bryan, with the events of last spring, there's clearly a lot of new regulations that have come down the pike for banks, your size. I want to start with long-term debt. You issued about $1 billion in long-term debt in January. How supportive is the environment today for you to continue to do that and how much you think you need to do this year?

Question: Manan Gosalia - Morgan Stanley - Analyst : And then what about LCR? You've -- I think you've already said you had 135% LCR from a [GC growth] perspective. I know the rules will get tough or any thoughts on what will happen with the rules LCR. And I think importantly, why holds so much more liquidity over and above where the toughest rules and regulations are on LCR today?

Question: Manan Gosalia - Morgan Stanley - Analyst : And your deposit pricing strategy as well.

Question: Manan Gosalia - Morgan Stanley - Analyst : Right, perfect. On capital, you're at [7.8%] CET1, including the impact of AOCI. Where do you think about managing that in the medium-term? And how should we think about buybacks as we get into the second half of this year?

Question: Manan Gosalia - Morgan Stanley - Analyst : So it's not just dish, it's not just starting share repurchases earlier, you think you can do a little bit more this year then -- ?

Question: Manan Gosalia - Morgan Stanley - Analyst : Alright. Perfect. And if loan growth doesn't come back as much as people were expecting. Does that give you a little bit more flexibility on the buyback side as well. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 11:25AM, FITB.OQ - Fifth Third Bancorp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Manan Gosalia - Morgan Stanley - Analyst : Alright. Perfect. Are there any questions in the room. All right, maybe I'll just wrap up with a quick one on the expense side. You've been guiding to about 1% expense growth in 2024. I know that will change now with the new guide, but how are you balancing investments on tech and growing your sales force while keeping your expense growth fairly low?

Question: Manan Gosalia - Morgan Stanley - Analyst : All right. With that, we're out of time, Bryan we've covered a lot of times. We covered a lot of stuff over the last 30 minutes, crisp and clear as always. Thanks so much for your time.