As part of Fifth Third Bancorp’s (FITB - Free Report) re-evaluation of the branch network, the banking giant is exploring the cities which are underserved, and taking steps to open new branches. Per a bizjournals article, the bank's CEO, Greg D. Carmichael, and Florida regional president — David Call — have planned to open new branches in the Tampa Bay region, in a bid to expand footprint in various key markets.
Notably, Fifth Third, one of the largest banks of the United States, has filed plans with regulators for the opening of 15 new branches. These include five to be opened in Florida, with two in Sarasota, and one each in Orlando, Bonita Springs and Jacksonville.
Reasons for Opening New Branches
"This has been a great market for us," Carmichael noted about the Florida and the Tampa Bay area. "In 2019, we'll be more aggressive," he further added.
The decision of opening new branches is commensurate with the area’s increasing population, expected growth, and market needs as per small business and commercial customers.
"As the population continues to grow and more businesses move to Florida, we want to make sure we are appropriately sized," Carmichael stated. It indicates the bank’s aim to increase commercial and industrial lending, along with the strong commercial real estate market in the state. On the other side, for consumers, the issuance of credit cards and other loans rises.
Per Call, the business lending climate in overall Florida, particularly Tampa, is very strong, with more than $7 billion in assets. The bank has various options of providing banking and wealth-management services for expansion of businesses to proprietor and middle-market companies in such regions.
If there are any factors that make companies wary of borrowing now, when the U.S. economy is strong and markets are reaching new highs, it is uncertainty, Carmichael mentioned. "But, there are more upsides and positives than negatives," he said. "We believe the tax reform is very beneficial to corporate America and to business in particular. The rate environment is still good for CapEx expenditures,” noted the bank’s CEO.
Change to Digitization
In this era of digitalization, Fifth Third’s customers are being able to withdraw money using its mobile banking app, instead of a physical card. Further, the bank has officially initiated cardless technology at more than 2,500 ATMs across 10 states. This advanced technology will enable customers to use ATMs without physical debit cards.
"Over 50 percent of our customer base is millennials," Carmichael mentioned further. As a result, "60 percent of all our banking happens in digital channels," he said. “Five years ago, it was only 20 percent digital. That shift in how banking is done "allows our customers to bank the most convenient and efficient ways," he added.
Among others, Charlotte-based Bank of America (BAC - Free Report) has also incorporated cardless technology into its ATMs. In 2016, this Wall Street biggie rolled out 8,000 cardless ATMs. Later, the bank added 500 ATMs. San Francisco-based Wells Fargo (WFC - Free Report) also integrated cardless technology into its 13,000 ATMs, in 2017. Apart from BofA and Wells Fargo, JPMorgan (JPM - Free Report) is also headed toward rolling out cardless ATMs.
Customers have been increasingly using smart phones for financial transactions. Furthermore, banks have been witnessing tremendous growth in the number of active mobile users. Hence, in order to capitalize on this trend, these firms are now rolling out the cardless ATM technology. In addition, this is in sync with the industry-wide focus on right sizing branch networks and enhancing customer satisfaction. Nevertheless, expansion of footprint by opening new branches in underserved areas is expected to be a catalyst for banks.
Introduction of digital technology remains cost effective for banks. Additionally, increasing competition from financial technology firms (FinTech) has been driving banks to digitize their operations.
Therefore, banks are trying all possible ways to enhance customer experience, reduce expenses and improve profitability.
Currently, Fifth Third carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Fifth Third gained 14.5% over the last six months, outperforming 3.1% growth recorded by the industry.
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