Fifth Third's Southeast Expansion, Fee Income Drives Optimism

B of A Securities analyst Ebrahim H. Poonawala revised estimates for Fifth Third Bancorp (NASDAQ:FITB) following its investor meeting with the company.

The analyst says that the meeting with CEO Tim Spence, CFO Bryan Preston, and Head of IR Matt Curoe emphasized management's strong commitment to enhancing shareholder returns after a period of stock underperformance.

In particular, the analyst notes that the bank has made disciplined investments in the Southeastern U.S., opening approximately 140 branches since 2018 with plans to add 200 more by year-end 2028.

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As these newer branches mature, they’re expected to drive household acquisition and support meaningful loan and deposit growth, with a potential $15 billion—$20 billion deposit upside, says the analyst.

Poonawala writes that the Street will likely look for tangible progress, especially given the modest 1.6% deposit growth over the past two years, which was affected by funding optimization efforts.

He noted that Fifth Third earns sticky, differentiated fees from its wealth management (~8% of revenue) and payments (~7%) segments.

Also, its advisory-focused wealth platform manages ~$70 billion AUM, attracting advisors with traditional trust bank capabilities. Commercial payments generate ~$2 billion annually (23% of revenue), growing 7%- 9%, adds the analyst.

Finally, Poonawala writes that Fifth Third appears to be on track to meet its increased near-term loan growth guidance.

The analyst says this, combined with a positive interest rate environment, tight expense control, and improving credit (criticized loans are at a five-quarter low, and non-performing assets are expected to drop 40% soon), hints at potential EPS upside.

While solar panel lending exposure (3.5% of loans, 7.6% credit reserves) seems to be an idiosyncratic risk due to proposed tax subsidy changes, the analyst sees it as a growth headwind rather than a worsening credit risk event.

Overall, Poonawala revised the EPS estimates to $3.88 (from $3.87) for FY26 and $4.28 (from $4.12) for FY27 while reiterating a Buy rating and a price forecast of $44.

Price Action: FITB shares are down 1.18% at $37.74 at the last check on Monday.

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