Fifth Third Bancorp: Diversification Aids Resilience Amid Tariff-Driven Uncertainty

Fifth Third Bancorp executives highlighted their proactive management and the bank’s ability to navigate uncertain environments during a conference call Thursday (April 17) discussing first-quarter earnings.

They said these qualities are especially relevant at times like the present, when potential tariffs could lead to any number of different scenarios through the remainder of the year.

“[We] cannot predict what the final tariff policies will look like, much less what the second-order effects on economic activity, fiscal policy and monetary policy will be,” Fifth Third Chairman, CEO and President Tim Spence said during the call. “What we can do is to ensure that our business mix is more naturally resilient, run our balance sheet defensively and maintain optionality so that we can react quickly as conditions change.”

The Ohio-based indirect parent company of Fifth Third Bank is pursuing several strategies to maintain resilience amid this uncertainty, Spence said. These include diverse national loan origination platforms that provide flexibility in generating loan growth; investments in Southeast branches and commercial payments that provide granular operational deposit funding; and credit concentration limits that ensure a diversified portfolio across asset classes, industries and regions.

The bank also highlighted its proactive approach to managing credit risk; its diversified fee income sources; and day-to-day management that “maximizes optionality.”

Spence said during the call that he traveled to meet with around 50 business owners in the five regions served by the bank and in sectors like materials, manufacturing, transportation, logistics, energy, automotive and healthcare to get their views on recent tariff announcements.

While all the business owners said they were surprised by the magnitude of the announced tariffs, they were split about how the tariffs might play out, Spence said. Half of the business owners viewed the tariffs as a negotiating tactic, while the other half expressed concern that higher tariffs would remain in place on major supply chain countries like China and Vietnam.

Nearly all the business leaders said they would need to push prices to offset tariff costs because they have limited ability to absorb these costs in margins, he said.

“What was maybe a little bit interesting to me is that the folks that have domestic supply chains were also saying they have to move prices in the U.S. because they’re expecting that if the tariffs hold, they’re going to experience volume losses in foreign markets, and … they require a certain amount of gross margin dollars just to be able to cover overheads and run their businesses,” Spence said.

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