Fifth Third set to open 100 more branches here
Fifth Third bank plans to add 100 branches in the Chicago area by 2010, giving it a total of 240 here. “Our strategy is to build a ubiquitous network in Chicago,” says Terry Zink, the bank’s Chicago-area CEO. Photo: Callie Lipkin
Just when the bank-building frenzy in Chicago seemed to be ebbing, Fifth Third Bancorp is preparing to open 100 new branches here in a renewed challenge to market leaders Chase, LaSalle and Harris.
The Cincinnati-based bank, fifth-largest in Chicago, aims to triple its share of Chicago-area deposits by the end of 2010, to between 8% and 10%, roughly the share Harris N.A. holds today. Fifth Third hopes the new branches will jump-start a Chicago operation that began with an acquisition four years ago but soon stalled.
“Our strategy is to build a ubiquitous network in Chicago,” says Terry Zink, Fifth Third’s Chicago-area CEO. “People will tell you a lot of times they choose their banks because of convenience.”
Convenience is hardly an issue for local banking customers these days. Frantic expansion by established local banks and new entrants has left the area overbanked by some measures, even prompting some municipalities to restrict new branch construction.
“What’s going to happen is that (banks) will beat each other’s brains out,” predicts banking consultant Bert Ely.
Mr. Zink’s strategy flies in the face of recent evidence that adding branches yields little for banks seeking a bigger slice of the fragmented Chicago market. Despite the opening of a record 310 branches last year and 241 the year before, the marketshares of the area’s leading banks have changed little in the past three years. The pace of construction slowed this year, with 88 branches opening through September.
NEEDS GROWTH HERE
Fifth Third badly needs more growth in Chicago, one of its largest markets, accounting for 13% of the bank’s deposits. After expanding rapidly through acquisition in the past decade, it has struggled with shrinking profit margins and slowing deposit growth.
Mr. Zink, 53, a veteran of San Francisco-based Wells Fargo & Co. who took over Fifth Third’s local operation in January, is vying to bust out of the second tier of Chicago banking by boosting its branch count here to 240, placing it No. 2 after market leader J. P. Morgan Chase & Co. Fifth Third hasn’t budged its marketshare here from the 3.3% foothold it acquired in the 2001 buyout of Michigan-based Old Kent Financial Corp.
A Chase spokesman says the bank isn’t worried about Fifth Third’s push. “We have the most convenient network of ATMs and branches in Chicago,” he says. “We think customers will continue to appreciate that.”
Fifth Third has selected 30 sites in the city and suburbs for new branches it plans to open next year at an estimated cost of $27 million. Another 70 would follow by 2010.
Mr. Zink is also hiring an army of commercial lenders and investment advisers to bring in new business. Fifth Third employs 225 commercial lenders here, up from 48 three years ago, and plans to add about 40 more by the middle of next year. By 2010, he says, employees will number around 3,500 in the Chicago area, up from today’s 2,100.
Mr. Zink was hired to turn around a Chicago operation that sputtered after failing to increase deposits with higher-than-market “teaser” interest rates on checking accounts. He’s rejected that approach now. Better-than-market pricing offers are being made only to larger customers who use multiple bank products, he says.
“The problem is, they’ve already made an impression,” says Gary Townsend, analyst with Friedman Billings Ramsey & Co. in Arlington, Va. “If you think in terms of a restaurant, they’ve had a menu that customers have found unappealing. They’ve got to rebrand themselves.”
Still, there are signs Mr. Zink is making progress. Fifth Third increased Chicago-area deposits 13% to $8.1 billion in the year ended June 30, according to data from the Federal Deposit Insurance Corp.
Bankwatch 