Fifth Third Bancorp’s FITB deal to sell 17 branches, retail and private banking deposits worth $383 million and consumer loans in Pittsburgh to Pennsylvania-based F.N.B. Corporation FNB has received all necessary regulatory approvals. Recently, in the last pending consent, the Office of the Comptroller of the Currency also extended its affirmation.
First National Bank of Pennsylvania, the largest subsidiary of FNB Corp, intends to close the deal in the second quarter of 2016. Notably, Fifth Third will continue to offer commercial services, along with wealth management, institutional services and mortgage origination activities, in Pittsburgh.
The transaction is part of Fifth Third’s strategy to restructure and consolidate its branch network (announced in Jun 2015). On the whole, the bank plans to consolidate/ sell roughly 105 branches and around 31 other properties.
The restructuring is anticipated to result in $65 million of cost savings annually for Fifth Third. Notably, the company had incurred $97 million in non-cash impairment charges related to restructuring in second-quarter 2015. Further, the company expects to recognize around $6–10 million in other costs, mainly associated with real estate contract terminations. All proposed actions are likely to be completed by mid-2016.
Moreover, last September, Fifth Third announced its exit from the St. Louis retail market. The bank agreed to vend 12 branches, retail and private banking deposits worth $261 million and consumer loans worth $155 million in St. Louis to Springfield-based Great Southern Bancorp Inc. GSBC.
To combat revenue challenges amid global concerns, banks are striving hard to lower costs and boost bottom-line growth. With customers getting more accustomed to mobile and Internet banking, banks (both big and small) are taking note of such preference shifts and implementing corresponding changes in its business models.
We believe Fifth Third’s restructuring plan will boost profitability and help the company improve its overall efficiency.
Currently, Fifth Third carries a Zacks Rank #3 (Hold). A better-ranked major bank is The PNC Financial Services Group, Inc. PNC, holding a Zacks Rank #2 (Buy).
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