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Less is more strategically for Fifth Third

Emphasis will shift from adding physical branches to investing in digital banking.

October 21, 2016
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Fifth Third Bank CEO Greg Carmichael sees West Michigan as a vital market for the bank, but not one that will require a lot more brick-and-mortar investment.

Carmichael said the bank is “more committed in this market than we’ve ever been,” and the West Michigan market, the bank’s third largest presence, is essential to the ongoing success of the Cincinnati-based company.

“In the area of talent, product and services, this market is one that we’re very committed to, and as West Michigan goes, as Cincinnati goes, as Chicago goes, so does Fifth Third Bank,” Carmichael said. “We need this market performing extremely well. So, our intention is to continue to grow this franchise here.”

But how the bank intends to do so likely will differ from the growth strategies traditionally associated with further integration market presence. Rather than adding branches in the region, the number of Fifth Third branches is more likely to decrease in coming years as a reaction to the way consumers are banking.

“Branches are important to an extent, but the world is shifting away from transactions that happen in a branch,” Carmichael said. “The reality of it is 80 percent of consumer transactions don’t happen in a banking center anymore.”

For example, Carmichael noted 40 percent of all check deposits happen through an image of a check taken via a mobile app. And while physical branches remain a vital part of Fifth Third’s strategy to serve more complex financial transactions, they’re less important for the average customer.

Carmichael added this is a strategy that likely will be undertaken by many banks nationwide. Comerica Bank recently announced it is closing 16 Michigan branches, including four in West Michigan, in part due to consumers’ increased reliance on digital banking.

Carmichael said Fifth Third will continue to invest in its digital banking properties, such as the Fifth Third mobile app, online banking applications and smart ATMs, while boosting its commercial banking, wealth management and small business services.

By closing branches in oversaturated markets, Fifth Third will be able to open more branches in regions that are underserved.

“It used to be the more branches, the better,” Carmichael said. “Now, the most efficient branch structure is the best.”

The bank’s recent sale of Fifth Third Center, comprising buildings at 111 Lyon St. NW and 200 Monroe Ave. NW, to Grand Rapids-based CWD Real Estate is symbolic of that shift. Fifth Third remains a long-term anchor tenant of the buildings, which will retain the Fifth Third Center name.

Carmichael said selling the buildings to a developer with a significant investment in the community allows the bank to restructure and renovate its offices to better fit with the evolving office space structure.

That includes more open-air workspace more conducive to the needs of employees, rather than the closed office structure of days past. Fifth Third West Michigan regional president Tom Welch said the renovations will make Fifth Third “the employer of choice for future generations.”

“If you think about 50 years ago, we built these buildings to drive economic development downtown, to drive people downtown and it worked.” Welch said. “And now, it’s served its purpose ...”

As Fifth Third refocuses its presence across its markets, Carmichael said it’s important the bank retains its sense of serving and supporting the communities in which it resides. He intends to do that by placing an emphasis on putting the right people in the right jobs and by continuing the community investments already implemented by Fifth Third — initiatives like the Fifth Third River Bank Run and sponsorships of the Meijer Garden Summer Concert Series and West Michigan Whitecaps.

Carmichael said over the next five years, Fifth Third has committed to spending $27.5 billion in the communities it serves through investments, lending and servicing programs. To date, Fifth Third employees have volunteered more than 10,000 service hours in West Michigan, he added.

Additionally, Welch said the bank plans to shine a stronger spotlight on its financial literacy programs to better educate customers on the ins and outs of banking in the 21st century.

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