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DATE

Friday, April 17, 2026 at 9 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Timothy N. Spence
  • Chief Financial Officer — Bryan D. Preston
  • Vice Chair — Matt Curoe

TAKEAWAYS

  • Earnings per Share -- $0.15 GAAP and $0.83 adjusted, reflecting Comerica acquisition impacts and merger-related items.
  • Revenue -- $2.9 billion, up 33%, with the Comerica transaction contributing to results.
  • Adjusted Net Income -- $734 million, up 38%, driven by strong integration execution and disciplined expense management.
  • Net Interest Income (NII) -- $1.94 billion, exceeding March expectations, primarily benefiting from Comerica's addition and securities portfolio actions.
  • Net Interest Margin (NIM) -- 3.30%, up 17 basis points, with additional basis points expected from the full-quarter Comerica impact in Q2.
  • Commercial & Industrial (C&I) Loan Growth (Legacy) -- 6%, with the strongest activity in manufacturing and construction sectors.
  • End-of-Period Loans -- $178 billion, up 2% sequentially from the pro forma combined year-end balance, showing broad-based growth.
  • Line Utilization (Commercial) -- 40.7%, 120 basis points higher compared to the pro forma combined year-end level, demonstrating increased client activity.
  • Consumer and Small Business Loan Growth -- 7%, led by auto, home equity, and the Provide fintech platform.
  • Consumer Household Growth (Legacy) -- 3%, with 8% growth in the Southeast and 10 new regional branches added.
  • Average Core Deposits -- $207 billion, while end-of-period core deposits reached $231 billion, and noninterest-bearing balances climbed to 28% of deposits.
  • Total Deposit Costs -- 1.58%; interest-bearing deposit costs were 2.15% (down 27 basis points), indicating improved funding mix and reduced funding costs.
  • Adjusted Noninterest Income -- $921 million, with Wealth and Commercial Payments each generating $1 billion annualized fee income run rates.
  • Wealth Management Fees -- $233 million, supported by $119 billion of total AUM (up $10 billion or 15%) and retail brokerage revenue up 15%.
  • Commercial Payment Fees -- $218 million, with Direct Express contributing $14 million and NewLine revenue up 30%; NewLine deposits increased to $5.5 billion.
  • Capital Markets Fees -- $134 million, up 11% sequentially, fueled by commodity/FX hedging and bond underwriting.
  • Adjusted Noninterest Expense -- $1.77 billion; adjusted efficiency ratio was 61.9% and included seasonality and Comerica integration effects.
  • Merger-Related Expenses -- $635 million, comprising the largest driver of noninterest expense increases in the quarter.
  • Annual Cost Synergy Guidance -- $360 million of net cost savings anticipated in 2026, with an $850 million annualized run rate by Q4; expense benefit ramps into Q4 after system conversion and branch consolidation.
  • Net Charge-Off Ratio -- 37 basis points, lowest in two years, with commercial NCOs at 26 basis points and consumer at 58 basis points (down 5 basis points).
  • Nonperforming Asset Ratio (NPA) -- 57 basis points, improving from 65 basis points previously.
  • Allowance for Credit Losses (ACL) as % of loans -- 1.79%, down due to Comerica acquisition; ACL as % of NPAs rose to 316%.
  • Tangible Common Equity (TCE) Ratio -- Increased to 7.3%, with tangible book value per share up 1% sequentially and 15% year over year.
  • Common Equity Tier 1 (CET1) Capital Ratio -- 10% (current), with proposed rule pro forma estimate of 9.6% and new operating target set at 10%-10.5%.
  • Liquidity Coverage Ratio (LCR) -- 109% and loan-to-core deposit ratio at 76%, demonstrating robust liquidity management.
  • Average Wholesale Funding -- Declined by 3%, despite Comerica balances, favorably shifting the mix and lowering cost of liabilities by 36 basis points.
  • Comerica Integration Status -- System conversion on track for Labor Day weekend; organizational design and leadership decisions complete; all key product gaps identified, and customer deliverables set.
  • Cost Synergy Progress -- Integration activities progressing on milestones, with realized savings building steadily and major impact expected in Q4 post-conversion.
  • Deposit Growth in New Markets -- Recent marketing campaign in Texas, Arizona, and California revealed "roughly 3x the response rate" seen in legacy markets, and is projected to generate $1 billion in deposits from a single campaign.
  • Commercial Payments Client Expansion -- Managed services solutions demoed to over 100 Comerica clients, with 65 identified as likely to adopt.
  • Texas Branch Expansion -- Letters of intent for 81 of 150 planned de novo Texas branches in negotiation or secured; first branded branches opening soon in Dallas and Fresno.
  • Risk Concentrations -- Shared national credits now 26% of loans, NDFI exposure kept at 7%, while software/data center lending exposure is less than 1% of total loans.
  • Credit Portfolio Decisions -- Private credit and business development company exposures held under 1% by design, due to "deliberate" risk avoidance rather than missed opportunities.
  • Unrealized Losses in Regulatory Capital -- Decreased by 16% over 12 months, improving pro forma capital ratios by 25 basis points despite upward movement in the ten-year Treasury rate.
  • Outlook: Net Interest Income (NII) -- Full-year guide raised to $8.7 billion-$8.8 billion, assuming unchanged rates through 2026 and ongoing asset sensitivity.
  • Outlook: Noninterest Income -- Anticipated at $4.0 billion-$4.2 billion for the year, supported by growth in key fee businesses.
  • Outlook: Noninterest Expense -- Estimated at $7.2 billion-$7.3 billion, including $360 million net expense synergies and $210 million CDI amortization.
  • Outlook: Full-Year Loan Growth -- Expected average total loans to be in the mid-$170 billion range.
  • Outlook: Credit -- Net charge-offs projected at 30-40 basis points for the year; macro baseline assumes 4.5% unemployment in 2027.
  • Outlook: Q2 2026 Guidance -- Loans expected at $178 billion-$179 billion, NII of $2.20 billion-$2.25 billion, NIM up 3-5 basis points, noninterest income at $1.00 billion-$1.06 billion, and noninterest expense at $1.87 billion-$1.89 billion.
  • Capital Return -- Plan to resume regular quarterly share repurchases in 2026, with future timing and size dependent on growth and remaining merger costs.

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RISKS

  • CEO Spence identified technology conversion during the Comerica integration as "the single largest point of risk in a transaction," specifying the potential for service disruption if conversion is not executed carefully.
  • Management cited geopolitical risks, with a "qualitative adjustment" made to provisioning to reflect "the direct impact of elevated energy and commodity costs as well as the broader implications for economic growth, inflation, and unemployment."
  • Midwest consumer deposit markets characterized as more competitive, with higher deposit gathering pressure than in the Southeast, potentially impacting margin and cost strategies.

SUMMARY

Fifth Third Bancorp (FITB +1.81%) provided explicit confirmation that integration of its Comerica acquisition is progressing on schedule, with key milestones such as organizational alignment, data readiness, and marketing model recalibration now completed. Management increased full-year NII guidance to $8.7 billion–$8.8 billion based on realized synergy capture, favorable deposit response, and new market expansion success that is materially enhancing fee and core customer growth outlooks. The company disclosed that both its wealth and commercial payments businesses are now at $1 billion annualized noninterest income run rates, marking a strategic shift toward more diversified revenue sources and less concentration in traditional lending. Capital and funding metrics strengthened further, including a 1% sequential rise in tangible book value per share, a 10% CET1 ratio, and reduction in wholesale funding and unrealized losses, while management stated that no material increase in employee attrition has occurred thus far in the merger process.

  • Management identified a "super positive" response to its Texas deposit growth campaign, reporting three times typical direct marketing response rates and projecting $1 billion in new deposits from a single effort.
  • System conversion and technology integration remain on track for Labor Day, unlocking digital product cross-sell and new household growth tactics unavailable to Comerica previously.
  • Fee-generating product innovation, such as Plaid launching on NewLine and expanded managed services to Comerica clients, is opening new revenue pipelines already visible in quarterly results.
  • The company affirmed it will balance rate neutrality and asset sensitivity dynamically depending on rate curve evolution, with up to $40 billion of exposure available to reposition if interest rate direction changes.
  • Management directly rejected strategic participation in private credit and concentrated tech infrastructure lending, citing a deliberate focus on relationship-based lending and higher collateral transparency.

INDUSTRY GLOSSARY

  • NDFI: Nondepository Financial Institution, refers to loan exposures to non-bank entities such as fintechs, funds, and specialty lenders.
  • HELOC: Home Equity Line of Credit; revolving consumer loan secured by home equity.
  • CDI Amortization: Core Deposit Intangible Amortization; the scheduled reduction in book value assigned to acquired deposit relationships.
  • ROTCE: Return on Tangible Common Equity; net income available to common shareholders divided by average tangible common equity.
  • ERBA: Expanded Risk-Based Approach, a proposed regulatory capital methodology offering differentiated risk-weighting for diverse assets.
  • Lead-left: Position of administrative agent or coordinator in a syndicated loan or capital markets transaction, typically signifying the bank’s dominance or primary negotiation role.

Full Conference Call Transcript

Timothy N. Spence: Good morning, everyone, and thank you for joining us today. At Fifth Third Bancorp, we believe great banks distinguish themselves based on how they perform in uncertain environments, not in benign ones. We prioritize stability, profitability, and growth, in that order. We deliver them by finding ways to get 1% better every day while investing meaningfully in the future. Today, we reported earnings per share of $0.15, or $0.83 excluding certain items outlined on page two of the release. Results reflect the February 1 closing of the Comerica acquisition. Revenue was $2.9 billion, up 33% year-over-year, and adjusted net income was $734 million, up 38%. Credit performance was in line with expectations, with net charge-offs at 37 basis points.

Both NPAs and criticized assets improved modestly. In the quarter, we closed the largest M&A transaction in Fifth Third Bancorp’s history. We delivered an adjusted return on assets of 1.12% and an adjusted return on tangible common equity of 13.7%. Our tangible common equity ratio rose to 7.3% and tangible book value per share increased 1%. We are the only bank among our peers who have reported to date to increase both of these key metrics during the quarter. Fifth Third Bancorp’s legacy strategies are continuing to produce broad-based growth while we execute the Comerica integration on plan and on schedule. In Commercial, legacy Fifth Third C&I loan balances grew 6% year-over-year.

Production remained healthy, with the strongest activity in manufacturing and construction, supported by reshoring and infrastructure investment. New client acquisition more than doubled, led by our Southeast markets, and 35% of new clients were fee-led with no extension of credit. Importantly, our commercial loan growth continues to come from relationship-based lending and not from nonrelationship sources. In Commercial Payments, NewLine continued to scale with revenue up 30% and deposits up $2.7 billion year-over-year. During the quarter, Plaid launched a new payment product built on NewLine, joining other marquee clients like Stripe and Circle. And we advanced preparations for the second-quarter launch of a new Direct Express platform.

In Consumer, the legacy Fifth Third Bancorp franchise delivered 3% household growth and 4% DDA balance growth. Southeast households grew 8%, led by Georgia and the Carolinas, and we opened 10 additional branches in the region during the quarter. Consumer and small business loans grew 7%, led by auto, home equity, and our Provide fintech platform. Now turning to Comerica. Thanks to timely regulatory approvals, we closed earlier than originally expected on February 1 and have continued to make progress at an accelerated pace. Our top priority is our people, and we are working hard to become one team.

Since legal day one, leaders have been on the ground in Comerica’s major markets nearly every week, and we visited every branch in the Comerica network. We have also hosted product showcases to highlight the breadth of our combined capabilities. Organizational design and leadership decisions are complete, and I am very excited about the caliber of our combined team. On technology, we remain on track to convert all systems over Labor Day weekend, with our first full mock conversion later this month. As a result, we remain confident that we will deliver $360 million of net cost savings this year and reach an $850 million annual run rate by the fourth quarter.

We are also already building a strong pipeline of revenue synergies. In Commercial, we are seeing early wins by bringing capital markets, payments, and lending to existing relationships. In the first 60 days, our capital markets team completed fuels and metals commodity hedges and executed an accelerated share repurchase for Comerica clients. We also booked our first Comerica-to-Fifth Third loan win in asset-based lending, while Fifth Third referrals helped to build the largest ever pipeline in Comerica’s national dealer services business. Commercial Payments has presented our managed services solutions to over 100 Comerica clients with 65 of them interested in moving forward. In Consumer, we launched our first Comerica-branded deposit campaign in Texas in February.

Response rates and average opening balances were broadly consistent with results that we generate in our legacy Fifth Third Bancorp markets, and nearly half of new savings customers also opened a checking account. We have hired more than half of the mortgage loan officers and auto dealer representatives that we plan to add this year in Comerica’s footprint, and pipelines in each of those businesses are in the build. We will open our first Fifth Third Bancorp branded branches in Dallas and Fresno this month, and we now have letters of intent in place or in progress for 81 of our targeted 150 de novo branches in Texas.

As I wrote in our annual letter to shareholders, the global economy is a complex adaptive system, and such systems react to change in unexpected ways. We are closely evaluating the direct impacts of the war in Iran on energy and other commodities, as well as the implications for prices, interest rates, and customer activity. In an environment where we may not see the macro tailwinds that many expected at the start of the year, the Comerica merger expands Fifth Third Bancorp’s organic opportunity set, but we do not need a perfect backdrop to deliver on our commitments. Before I turn it over to Bryan, I want to say thank you to our colleagues.

Earlier this month, we surpassed $300 billion in total assets for the first time—an important milestone that reflects the work we do together to serve customers, support communities, and show up for one another. I know many of you are putting in extra effort to support the integration, whether that is helping customers, learning new products, meeting new teammates, or navigating change. Your commitment to getting 1% better every day and your dedication to our clients and to each other is what gives me confidence in what we are building and the opportunities ahead. With that, Bryan will provide more detail on the quarter and the outlook.

Bryan D. Preston: Thanks, Tim, and good morning. Our first quarter results reflect the strength of what we have built and the discipline with which we are executing. Results exceeded our March expectations, driven by stronger NII, disciplined expense management, and integration execution on plan. Adjusted ROA was 1.12%, and adjusted ROTCE, excluding AOCI, was 13.7%. The Comerica acquisition closed without tangible book value dilution, and TBV per share grew 1% sequentially and 15% year-over-year. The earnings power of the combined company is intact and the integration is on track. Given the magnitude of the acquisition, standard year-over-year and sequential comparisons obscure more than they reveal this quarter.

What matters is how we exit: a larger, more granular loan portfolio, a lower-cost deposit base, and larger diversified fee income businesses. Each of those is a deliberate outcome, and each positions us to generate stronger and more durable returns as the integration delivers. Now diving further into the income statement, starting with NII and the balance sheet. Net interest income was $1.94 billion for the quarter, above our March expectations. Net interest margin expanded 17 basis points to 3.30%, driven by the impacts of the Comerica acquisition. That includes 7 basis points from securities portfolio marks and repositioning, 6 basis points from cash flow hedge termination, and 2 basis points from purchase accounting accretion on the loan portfolio.

A full quarter of these impacts will benefit NIM by a few additional basis points in the second quarter. End-of-period loans were $178 billion, up 2% sequentially from pro forma combined year-end balances. Average total loans were $158 billion, reflecting the February 1 close. The growth was broad-based: strong middle market production, a rebound in line utilization, and continued momentum in home equity, auto, and our Provide fintech platform. In Commercial, line utilization ended the quarter at 40.7%, up approximately 120 basis points from the pro forma combined year-end level, and notably, it held steady throughout the volatility in March. Clients are cautious but active. On a legacy Fifth Third Bancorp basis, commercial loans grew 6% year-over-year.

Combined with the Comerica addition, shared national credits now represent only 26% of total loans—a deliberate and ongoing reduction in concentration risk. On the Consumer side, first-quarter auto originations were the highest in two years, with average indirect secured balances up 10% year-over-year. Home equity balances grew substantially, supported by both the acquisition and strong underlying production. We achieved the number one HELOC origination market share in our legacy Fifth Third Bancorp branch footprint, with an average portfolio FICO of 773 and average loan-to-value of 64%. The production strength is real, and the credit discipline behind it is equally real. Turning to deposits. Average core deposits were $207 billion, and end-of-period core deposits were $231 billion.

Noninterest-bearing balances comprised 28% of core deposits at quarter end, up from 25% at the same point last year. That improvement reflects the combined benefit of Comerica’s commercial DDA franchise and our continued organic consumer DDA growth. The household growth trend I described is showing up directly in our funding costs. On a legacy Fifth Third Bancorp basis, consumer household growth of 3% over last year supported 4% consumer DDA growth. Total deposit costs, including the benefit of noninterest-bearing balances, were 1.58% in the first quarter—a funding cost profile that compares favorably across the peer group.

Interest-bearing deposit costs were 2.15%, down 27 basis points year-over-year, reflecting both that organic deposit mix improvement and the benefit of the Comerica balance sheet. Despite the larger balance sheet, our approach to balance sheet management is unchanged. We prioritize granular, insured deposit funding over large wholesale sources. We maintain strong liquidity buffers, and we proactively manage the overall cost of funds. That discipline showed up again this quarter. Average wholesale funding declined 3% year-over-year, even with Comerica balances included. That favorable mix shift lowered the cost of interest-bearing liabilities by 36 basis points. We also maintained full Category I LCR compliance at 109% and a loan-to-core deposit ratio of 76%. Now turning to fees.

Adjusted noninterest income, excluding securities losses and the other items listed on page four of our release, was $921 million, slightly above the midpoint of our March expectations. The most significant milestone here is that both Wealth and Commercial Payments are now generating fee income at the run rate necessary to deliver $1 billion each in annualized noninterest income. That outcome reflects years of consistent, disciplined investment in both businesses and the recurring nature of the revenue. Looking further at Wealth, fees were $233 million, and total AUM ended the quarter at $119 billion. Legacy Fifth Third Bancorp AUM trends remain strong, up $10 billion or 15% over last year.

Fifth Third Securities delivered strong retail brokerage results, with revenue up 15% year-over-year. These are businesses that we have been consistently investing in, and the returns are compounding. Commercial Payment fees totaled $218 million for the quarter. Direct Express contributed $14 million in fees for the quarter, and approximately $3.7 billion in average deposits for the month of March. NewLine continues to drive strong fee growth of 30% year-over-year, and related deposits reached $5.5 billion, up $2.7 billion from last year. Capital Markets fees were $134 million, up 11% sequentially. Increased hedging activities in commodities and FX, and strong bond underwriting fees combined with two months of Comerica activity, were the primary drivers of this growth. Turning to expenses.

Page five of our release details certain items that had a larger impact on noninterest expense this quarter, primarily $635 million in merger-related expenses. Adjusted noninterest expense was $1.77 billion, consistent with our guidance. The adjusted efficiency ratio was 61.9%, which reflects the addition of Comerica and normal first-quarter seasonality associated with the timing of compensation awards and payroll taxes. On the synergy front, we remain confident in our ability to achieve the $850 million of annualized run-rate cost savings in the fourth quarter of this year. Integration activities are progressing as planned, against our established milestones, and savings are being realized.

The expense benefit will build steadily over the first three quarters of this year, with a more significant increase in the fourth quarter once the system conversion and branch consolidations are completed in early September. Shifting to credit. The net charge-off ratio was 37 basis points for the quarter, in line with our expectations and the lowest level in two years. The NPA ratio was 57 basis points, compared to 65 basis points last quarter. Commercial net charge-offs were 26 basis points, also a two-year low, with stable trends across industries and geographies. Consumer net charge-offs were 58 basis points, down 5 basis points from last year.

The consumer portfolio remains healthy, with nonaccrual and over-90 delinquency rates relatively stable across all loan categories. We have been deliberate about where we choose to grow. Our exposure to nondepository financial institutions represents only 7% of our total loan portfolio, well below the industry average. Our three largest categories are subscription lines, capital call facilities, and corporate credit facilities to traditional institutions such as payment processors, insurance companies, and brokerage firms, and secured lending to residential mortgage-related entities. These are long-standing portfolios. We have deep underwriting expertise in each of them, strong collateral visibility, and structural protections where needed, including borrowing base requirements and advance rates that provide significant loss absorption before we would recognize a dollar of loss.

On private credit, we have chosen not to participate meaningfully in lending to private credit vehicles and business development companies, which combined represent less than 1% of total loans. That was a deliberate decision, not a missed opportunity. The structural complexity embedded in these exposures introduces risks that are harder to assess through a cycle. We would rather grow in categories where we have more transparency to the collateral and have direct relationships with the underlying borrowers. On software and data center lending, we have maintained that same disciplined posture. We believe in the long-term demand for AI infrastructure, but we have also seen how quickly these build cycles can overshoot.

We have remained selective, and our exposure is intentionally limited. Software-related exposure is less than 1% of total loans, with the portfolio performing in line with expectations and with no material migration in the quarter. ACL as a percentage of portfolio loans and leases decreased to 1.79%, primarily reflecting the Comerica acquisition. The ACL as a percentage of nonperforming assets increased to 316%. Provision expense included $83 million for merger-related day-one ACL build. Our baseline and downside cases assume unemployment reaching 4.5% and 8.5% respectively in 2027.

We made no changes to our macroeconomic scenario weightings during the quarter, though a qualitative adjustment was applied to reflect the direct impact of elevated energy and commodity costs as well as the broader implications for economic growth, inflation, and unemployment in the current geopolitical environment. Moving to capital. CET1 ended at 10%, reflecting the impact of the Comerica transaction and strong RWA growth. Under the proposed capital rule, our estimated fully phased-in pro forma CET1 ratio is 9.6%. The RWA benefit to capital ratios associated with the new rule is nearly a 100-basis-point improvement, primarily due to credit risk RWA reduction.

The proposed rule recognizes the granular, well-secured, and relationship-based nature of our loan portfolio—the same portfolio characteristics we have been deliberately building toward over the past several years. The proposed rule should expand the ability of the banking industry to support the economy through increased lending capacity. Additionally, our tangible common equity ratio, including the impact of AOCI and the Comerica acquisition, increased to 7.3%. Over the last 12 months, the impact of unrealized losses included in regulatory capital under the proposed rule has decreased by 16%, a 25-basis-point improvement to the pro forma capital ratios despite an 11-basis-point increase in the ten-year Treasury rate.

That is the direct result of our strategy to concentrate our AFS portfolio in securities that return principal on a known schedule, which represents approximately 55% of the fixed-rate holdings within our AFS portfolio. We expect continued improvement in the unrealized losses as the securities pull to par. Moving to our current outlook. Our outlook reflects the forward curve at March, which assumes no rate cuts or hikes in 2026. Given the updated rate outlook and our more asset-sensitive balance sheet, we are updating our full-year NII outlook to a range between $8.7 billion and $8.8 billion.

We will continue to take actions to move the balance sheet to a more neutral rate risk position over time, which could include investment portfolio and/or other hedging actions. Our outlook for full-year average total loans remains in the mid-$170 billion range. Full-year noninterest income is expected to be between $4.0 billion and $4.2 billion, reflecting continued revenue growth in Commercial Payments, Capital Markets, and Wealth and Asset Management. Full-year noninterest expense is expected to be $7.2 billion to $7.3 billion, including the impact of $210 million of CDI amortization, and $360 million of net expense synergies in 2026. This outlook excludes acquisition-related charges. In total, our guide implies full-year adjusted PPNR, including CDI amortization, up approximately 40% over 2025.

We remain on track to exit 2026 at or near the profitability and efficiency levels consistent with our 2027 targets. For credit, we expect full-year net charge-offs between 30 and 40 basis points. Turning to capital. With the release of the proposed capital rule, we are updating our CET1 operating target to a range of 10% to 10.5%. We expect to resume regular, quarterly share repurchases in 2026, with the amount and timing dependent on balance sheet growth and the timing of the remaining merger-related charges. Our capital return priorities are unchanged: pay a strong dividend, support organic growth, and then share repurchases.

For the second quarter, we expect average loans of $178 billion to $179 billion, driven by growth in C&I, home equity, and auto. NII is projected to be $2.20 billion to $2.25 billion with NIM expanding another 3 to 5 basis points. Noninterest income is expected to be $1.00 billion to $1.06 billion, and noninterest expense is expected to be $1.87 billion to $1.89 billion. Finally, net charge-offs are expected to be 30 to 35 basis points. The first quarter established the foundation: NII above expectations, tangible book value per share growth intact, credit at a two-year low, integration on track, and early revenue synergies beginning to show.

Those results matter, not just for what they are, but for what they signal. The core business is performing. The integration is delivering. And as we move through the year, the financial profile of Fifth Third Bancorp will continue to improve in ways that are visible, measurable, and consistent with everything we committed to when we announced this combination. We have the balance sheet, the business mix, and the team to get there. With that, let me turn it over to Matt to open up the call for Q&A.

Matt Curoe: Thanks, Bryan. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. We will now open the call for questions. Operator, please open the call for Q&A.

Operator: Thank you. We will now begin the question and answer session. We will go to our first question from Michael Lawrence Mayo at Wells Fargo.

Analyst: As you highlighted, this is the biggest acquisition in your firm’s history, and it sounds like it is on track from your prior guidance with the Labor Day integration and $850 million run-rate savings by the end of the fourth quarter. I think we kind of knew that already, but what is incremental in the last three months, or since your last presentation, that you think is maybe going better than expected? Is any of that higher NII guide due to the expansion in Texas and the promotions? Also, where are you seeing some of the snags? There are always issues with these things.

What do you need to make sure you work out so it does not let down the progress? Thank you.

Timothy N. Spence: Hey, Mike. Good morning. I will take an initial crack at that one, and then I will let Bryan clean it up. As you know, with large transactions, the absence of surprises is a positive. Getting one quarter closer to operating on a single common platform is an important milestone unto itself. In terms of the core integration, things have gone really well. We completed the lock-the-walls planning exercise that we run. All the customer day-one deliverables have been locked. There are 46 new-to–Fifth Third Bancorp applications, which, as we mentioned previously from a technology perspective, support the tech and life science business and the dealer services business, plus a couple of things in Payments.

The data strategy and the data conversion work is completed. All the risk-based process reviews we needed to get done, which are essentially the click-down from the work done in diligence, have been completed, and we know where the product gaps are that need to be filled. The org charts are done, and we have selected the key leaders. It is very early days—this is not a declaration of success—but employee attrition is running a little bit below historical levels, so we are not seeing any elevation in attrition. The positive surprise is what is happening in Texas and more broadly across the Southeast as it relates to promotional activity.

We got a lot of questions after we announced the deal about whether the playbook that has worked so well for Fifth Third Bancorp in the Southeast would work in Texas and the Southwest more broadly. The initial mailing I referenced in my prepared remarks was a test to reground our targeting and expected balance models on empirical data in Texas. We mailed 700 thousand households. Response rates were good. More than half of customers opened checking even while the legacy tech limitations that Comerica had are still in place, which is very good.

Having regrounded the models, we dropped a subsequent mailing on the 10th or 11th of this month to 6 million people, and the very early results are super positive. With the regrounded analytic models, we are getting roughly 3x the response rate that we see at this stage in a campaign in our legacy markets, and we actually expect that campaign alone to generate about $1 billion in deposits across Texas, Arizona, and California. That is all incorporated in the guide, to be clear; it is not above and beyond.

It speaks to the fact that the tactics we use in the Southeast are going to work in the Southwest, and the fact that Comerica had not run any external consumer marketing in roughly 13 years means it is a relatively unsaturated market for us. If anything, our optimism about our ability to gain share there has improved. In terms of what is not working, we have a little bit of an internal civil war between people who like their chili with beans, no beans, or on spaghetti—that we will have to solve before we can truly say we are one company.

On the more serious point you raised about transition risk: the tech conversion is the single largest point of risk in a transaction. The code-red event would be a mistake on the conversion that impacts access or service. We are very mindful of that. Assuming we execute the conversion well, as we did with MB, the conversion is actually a positive. There will be a bake-in period as people learn new interfaces, but Fifth Third Bancorp’s digital channels have much broader capabilities than Comerica’s current channels. The managed services in Commercial Payments are a good example; we have shown those to 100 Comerica clients and have two-thirds of them as qualified leads.

Post-conversion, we also unlock digital marketing channels in the Southwest that Comerica could not access because they could not open consumer deposit accounts digitally. Once on the Fifth Third Bancorp tech stack, the roughly 50% of our direct marketing done via digital becomes viable in the Southwest, and all the household growth tactics we use in the Southeast become viable as well.

Operator: We will move to our next question from Robert Scott Siefers at Piper Sandler.

Analyst: Maybe, Bryan, hoping to start with you. You suggested the reported margin should expand another few basis points in the second quarter due to the full-quarter impact of Comerica. Could you speak to dynamics such as overall rate positioning, competitive dynamics on loan pricing, and what you are seeing on deposits?

Bryan D. Preston: Absolutely. As I mentioned in my prepared remarks, we are asset sensitive today. We are focused on moving to a more neutral position over time. Current rate volatility gave us opportunities in the investment portfolio and to put a few hedge positions on at attractive levels. We expect some additional improvement from fixed-rate asset repricing over the remainder of the year. The magnitude is smaller than it has been because a third of our balance sheet effectively repriced with the Comerica acquisition.

On the legacy Fifth Third Bancorp portfolio, we still see a basis point to a basis point and a half of NIM pick-up per quarter through year-end, with a trajectory that gets us approaching exiting the year closer to 3.40% NIM. The environment is competitive but not irrational. Loan spreads have come in a little, but they are not compressing excessively. On deposits, the Midwest continues to be the most competitive consumer deposit market we see—more competitive than the Southeast. We are still assessing the Southwest, but it does not look like an outlier versus other markets.

Analyst: Thank you. A higher-level question: you have talked about the fourth quarter representing the time when we will really see the full run-rate accretion, returns, and efficiency from the Comerica transaction. As we look to a post-Comerica time next year when those benefits are realized, how will you balance additional improvement in profitability/efficiency versus investing to ensure durability at those levels?

Timothy N. Spence: We believe we can sustain the level of profitability we expect to achieve in the fourth quarter and continue to improve it. There is no finish line. You want strong ROE under any circumstances, and then you make decisions at the margin. If we are at 19% ROTCE and a 53% efficiency ratio, the question is whether to use operating performance to push profitability higher and expand the P/TBV multiple, or focus on growing TBV per share, or do both. We think we can do both. Our footprint now covers more than half of the U.S. population, with 17 of the 20 fastest-growing large MSAs. We have a credible path to top-five market share in all of them.

We have one of the freshest branch networks, a Payments business that benefits when nonbanks take share, and a large influx of Comerica bankers who are no longer capital or liquidity constrained. We are proud of our tech innovation track record. We will continue to invest in the core business with the expectation that if we ever run out of ideas, we can still push ROTCE from 19% to 20%+ while growing book value per share.

Operator: Next, we will go to Gerard Cassidy at RBC Capital Markets.

Analyst: Morning, Tim. Morning, Bryan. When I look at your utilization trends, it jumped from 34.9% in the fourth quarter to 40.7%. Can you give us color in two areas—what you are seeing in legacy Fifth Third Bancorp and legacy Comerica?

Bryan D. Preston: From a utilization perspective, it is fairly consistent across both platforms. In middle market, we are seeing a bit more activity. We also saw a nice rebound in the corporate bank. Some of this ties to capital markets activity—fewer paydowns this quarter—and we also saw the expected rebound associated with tax-related cash flows, with customers a bit more active as they worked through the environment. Later in the quarter, there were some impacts associated with the situation in the Middle East.

Timothy N. Spence: One thing to add: unlike some peers, our loan growth did not come predominantly from private equity or private capital. Less than 10% of our loan growth came from that channel, whereas it looked much higher at others. Comerica’s portfolios are a lot like Fifth Third Bancorp’s—banking real-economy businesses: primarily privately held companies that make, move, warehouse, or sell goods, or provide core services like healthcare. Both of us have been on the low end of NDFIs as a share of total commercial loans. Also, we have less than $100 million of funded exposure to data centers. We have been more skeptical there. Historically, tech infrastructure build cycles tend to overshoot, and obligors can be less clear than we prefer.

Analyst: Thank you. A follow-up on credit quality: the 30–89 day delinquency numbers for C&I and CRE ticked up, even though levels are low. Anything we should keep an eye on?

Timothy N. Spence: The majority of that increase was two credits, and the payments were made on April 1. If we were reporting as of April 2, you would not have seen the jump.

Operator: Our next question comes from Ebrahim Huseini Poonawala at Bank of America.

Analyst: On deposits, funding feels like a bigger constraint going forward than capital. Talk about the Southeast strategy in what seems like an intense environment. How are you converting clients acquired through promotions into core checking relationships? Is that happening? And tied to that, as you think about opening branches in Texas, three to five years from now what is your confidence that branches will still be as relevant as a client acquisition tool as they are today?

Timothy N. Spence: Converting acquired relationships into primary, long-tenured relationships is the seed corn for everything we do. We disclose household growth rates in the Southeast because those are primary checking households, and inactive accounts are washed out. The 3% overall and 8% Southeast household growth are real—active accounts this period divided by active accounts a year ago, minus one. Population growth in the Southeast is 1.5% to 2% per year; our growth rates have been 7% to 8%, so we are generating 3x to 4x market growth on a net basis. Savings promotions and loan products do not count in that number.

On Texas and the Southwest, we have 81 or 82 properties locked up and will have branches opening next year, not in three to five years. Branches materially boost direct marketing response rates—there is a nonlinear decay by drive time. As long as that exists, branches play an important role. I do not expect human behavior to change that quickly.

Analyst: You have delineated between NDFI growth versus non-NDFI. Why avoid private credit exposures that many of your peers like?

Timothy N. Spence: We are not calling for private credit to go away. Our general view is that the industry will be much smaller than feared. Some growth strategies relied on retail money, which has again proven to be a bad idea, and on promising 8% to 9% returns that we viewed as unrealistic given leverage and revenue mix. Our bigger reasons to avoid it are: we could not reliably assess total leverage in the structures, and it is not a place where banks can build durable competitive barriers—returns tend to gravitate to cost of capital.

We want to generate returns in excess of cost of capital via primary relationship lending, wallet-share management, and lead-left positions, not chase volume that eventually settles at 11% to 14% returns.

Operator: We will move next to Manan Gosalia at Morgan Stanley.

Analyst: In the prepared remarks, you noted the proposed capital rules recognize granular, well-collateralized loans. I think you were pointing to opting into ERBA. First, please clarify that. And second, if ERBA allows banks to hold less capital against higher-quality loans, does it create a disincentive or negative selection for banks that do not opt in?

Bryan D. Preston: We are still evaluating whether to opt in to ERBA. It is not the main driver of our benefit; ERBA is probably an incremental ~10 basis points relative to the numbers I quoted, and it comes with data, model, and systems complexity. There is always some regulatory arbitrage in capital frameworks. We do not think ERBA opt-in or non-opt-in will have a big impact on overall industry competitiveness.

Timothy N. Spence: It also depends on how you underwrite and calculate returns. At the macro level, we look at regulatory capital and returns on it. At the individual credit level, we use economic credit capital based on our risk ratings—PD and LGD. If you used the same capital charge for every loan, you could run into issues, but our methodology differentiates at the loan level regardless of ERBA opt-in.

Analyst: With capital proposals out, focus is turning to liquidity rules. What would you like to see there, and would it change how you manage liquidity?

Bryan D. Preston: The most valuable change would be recognizing secured lending capacity in liquidity rules—e.g., FHLB capacity against securities, discount window, or repo facilities—so firms get credit for off-balance-sheet liquidity we know is there. We would also like more rational deposit outflow assumptions. Current assumptions embedded in many stress tests are absurdly high for core operational deposits attached to treasury management services.

Operator: We will go next to Christopher Edward McGratty at KBW.

Analyst: You said the Midwest is more competitive than the Southeast, which seems contrary to where many banks are allocating capital. Can you unpack that?

Timothy N. Spence: Two dynamics. Historically, the Midwest has had more regional banks headquartered there, less trillionaire market share, and less consolidated markets tend to be more competitive. Second, credit unions play a more prominent role in many Midwestern markets and optimize for different objectives, including absolute liquidity levels. The combination produces higher deposit competition. As we move into the Southeast, we benefit from having smaller existing share—lower cannibalization cost—and the marginal dollar is still a bit cheaper to raise than in the Midwest, allowing us to be more aggressive with a positive franchise impact.

Analyst: On full cost synergies mapping to efficiency, can you help with exit run-rate on efficiency?

Bryan D. Preston: We have discussed being around a 53% efficiency ratio in 2027. Our fourth-quarter efficiency ratio is always our lowest of the year, so I would expect us to be roughly 1 to 2 points below 53% in the fourth quarter.

Operator: We will go next to Peter Winter at D.A. Davidson.

Analyst: When you first announced the Comerica acquisition, you were targeting $0.27 EPS accretion and $4.89 of EPS in 2027, but you did not include any revenue synergies. Now that you have early wins on revenue synergies, do you see upside?

Bryan D. Preston: Yes. We did not contemplate revenue synergies in the deal, so anything we are seeing is upside. We feel good about the progress and will strive to outperform. 2027 is still a ways out and the environment can change, but we are more positive today about the opportunity even though we were very positive at announcement.

Analyst: On balance sheet positioning, where are you in repositioning Comerica’s balance sheet? You mentioned you are asset sensitive now—do you want to get back to neutral quickly, or slow-walk it given higher-for-longer?

Bryan D. Preston: We are cautious on what could happen out the curve. We are balancing capital risk with down-rate risk. We see more bias toward higher-for-longer right now, so we will probably move a little slower. As the outlook changes, we can accelerate. There is roughly $30 billion to $40 billion of notional exposure we could move out the curve as our rate outlook changes. That gives us flexibility. Even if cuts resume, we would expect some steepening that gives us opportunity to deploy and maintain or even grow NII in a falling-rate environment.

Operator: Next, we will go to Erika Najarian at UBS.

Analyst: Given there are no cuts in the curve, could Fifth Third Bancorp maintain deposit costs even if there are no cuts? You are competitively strong in many markets—what is the deposit cost outlook if the Fed does not cut?

Bryan D. Preston: We believe we can maintain deposit costs even if the Fed does not cut. The wildcard is balance sheet growth needs. If loan growth accelerates, that would put more pressure on deposit costs. In a rational, normalized growth environment, we have many options to maintain deposit costs where they are.

Operator: Next, we will move to John Pancari at Evercore.

Analyst: Good morning. This is Gerard Sweeney on for John. One on the fee side: solid result in the quarter and a healthy guide despite volatility in headlines. If this subsides, do you see this driving upside from the $1 billion quarterly run rate? And thinking about Wealth and Capital Markets as you mentioned, how much conservatism might be baked into guidance now versus potential upside?