Now on SOCC we're watching this morning Fifth third Bank Corp. The company meeting deposit expectations in the third quarter as it focuses on stability. The bank is also keeping its focus on expanding to the southeastern United States. Joining US now is Tim Spence, Fifth Third Bank Corp. Chairman, CEO and President. And you know, a lot of investors have
their eye on your market right now. Things seem to be improving and holding stable in terms of that interest income you're bringing in, but you're also looking to expand you're looking to grow at this point in time. According to Bloomberg's own estimates, the expense ratio just a little bit more than expectations. How do you Tim set expectations for investors on the growth rate you're putting forward.
Sure, and Shanelli, thank you for having me on this morning, and I have been looking forward to chatting with you folks. I think from my point of view, the way that you run a really great regional bank through the cycle as you focus on stability, profitability and growth in that order. So last year was an important proving ground with the challenges in liquidity that face so much of the sector. If Third had a very good run in that regard.
I think we grew deposits by five percent year over year, and the industry was down three The profitabilities remained really strong. We have the highest roe of any of the banks that have reported thus far, at least in our investor peer group, and it's been the most stable over the course of the past year. And the byproduct of that, then is you get to focus on growth. I think we have tried to be really diligent about maintaining consistent
expense growth. It's been the lowest of any of our investor peers over the last five years on an organic basis. But during that time we also been making big investments in the franchise, principally in the expansion into the Southeast. The investments that we continue to make in our commercial payments platform and then our own internal technology projects, and
those things are important. You have to do them over time because in a market that is as competitive as the US banking system is building a competitive moas a little bit like digging a hole in sand. If you
stop digging, it fills in a little bit. So we will continue to be focused on making and investments and strengthening the customer value proposition, expanding the reach and ensuring as we enter into what I think may be a pretty favorable environment for banks next year that we are positioned to benefit from the grandw.
No, I want to go back to what you were saying about that Southeastern expansion. Guys, this is a Cincinnati, Ohio based banking I know it. I know Matt Matt loves Ohio of course, from of course, I know we got.
A fellow Ohio and the Ohio.
So that Southeast expansion, I'm really curious about how you go about it. Is this a matter of investing in different branches and more people, or do you see yourself making an acquisition at any point in time as you make your expansion across the US little more.
Sure, the focus four fifth third really has been on building out existing markets organically. We entered the Southeast in South Florida specifically as far back as thirty years ago, and then the bank did make a series of acquisitions in the early two thousands that provided the initial entry
point in the platform. But all of the growth that we have benefited from over the course of the past few years has come from organic investments, either in building out our retail branch network, or in the hiring of experienced middle market banking and wealth management teams to ensure that we had the full complement of businesses. So we have built the second most branches in the Southeast over the course of the past five years and have then been able to benefit from that, in particular in an
environment where raising deposits was important. The FDIC releases a summary of deposits once a year in the third quarter that gives us kind of a view market by market into how we're doing. And we grew deposits in the Southeast by sixteen percent last year and gained market share in fourteen of the fifteen mssays we compete. So I feel really good about our ability to continue to grow in those markets achieve the top five share position that
we have targeted on an organic basis. Well, let's keep talking about the Southeast, because you highlight in your notes that you plan to accelerate your new branch opening so that by twenty twenty eight nearly half of your network will be in the Southeast.
So some big plans there. Can we talk about why what do you see in the Southeast?
Yeah, well, I think the thing that everybody sees in the Southeast has been the big demographic migration that many of the mid size markets in the Southeast have benefited from over a period of about the last ten or fifteen years. The pandemic certainly accelerated the growth in some of the markets, but even if you take the pandemic out the Southeast mid size metro areas, we're growing at a rate, call it, two to five times the rate
of US population. And the other reason that we like this sort of fifty to fifty mix is that I think a glowlobal financial crisis and then a global health pandemic caused people to forget that historically economic pullbacks recessions were really regional phenomenon, and we think there's a real benefit to having a fifty to fifty multi regional split just in terms of our ability to continue to drive diversification into the business and thereforeum more stable, consistent return
profile through the cycle.
All Right, I want to ask about you know, your customers, the business that you're dealing with, because we talk about the US economy as a monolith all the time. Three percent GDP adding I don't know, two hundred and fifty thousand jobs, three percent unemployed. Sorry, three percent inflation at the core. But obviously it's going to be different for the people at Skyline Chile. You know that you're dealing
with in Cincinnati every day. So what's your customer profile look like compared to sort of the medium that we talk about here in New York All the time?
You had me worried there for a minute, Matt, that you were going to ask me to com on the Skyline Chili Greater's ice cream collaboration.
Delicious.
Yeah, I'd had to know comment on that one. Yeah. Look, I think the economy is a little bit uneven right now. Maybe I'll start on the consumer side and then I'll hit businesses. If you look at the consumer population, and we really are a super prime lender in consumer, but we bank the full spectrum in terms of financial circumstances. In our deposit business, folks who had assets and who owned their homes going into the pandemic are benefiting from
really a historically favorable environment. Their wage growth has been pretty good, All asset values have performed well. They locked in fixed rate mortgages at a two and a half to three percent interest rate, and the byproduct to that is they continue to run at a level if you just look at the liquidity they have available that's well above and to spend, for the matter, at a level
that's well above what the historical trend would be. If, on the other hand, you look at the bottom core tile of the population in terms of income more likely to rent than they are to own, they're experiencing is
still pretty significant hardships, right. Inflation hit those folks hard, not just because you were talking about the increased cost of buying or ensuring a car, but you had rental inflation, which is the single largest expense that they face on a monthly basis, and then the run up in food prices,
and they have not kept up. In fact, the bottom core tile of the consumer population in terms of income, it's like twenty percent below pre pandemic levels in terms of the balance they carry in their checking account month to month, so they're tight. I think the same dynamic as materialized in businesses. More interest rates sensitive sectors like real estate have been challenged over the course of the past couple of years. More indebted companies have been challenged.
Companies that didn't have control over their supply chain or didn't have enough scale in their markets where they were able to pass on increases in costs, whether they were labor or otherwise. You know, have continued to struggle in terms of their ability to rebound. The good news is when you look at our footprint, we principally bank people who make things, or who move things or distribute things.
We have the lowest chair of commercial real estate relative to total loans of any of the banks are size. We don't have an outsized mortgage portfolio. And the byproduct of that is, you know, they have done pretty well and in fact, in many cases have actually benefited from the industrial policy here that's focused on more domestic manufacturing, more energy independence, and otherwise.
All right, Tim, thanks so much for joining us. Tim Spence there coming to us from Cincinnati and Fifth Third Bank