Fifth Third Bancorp’s 2026 Earnings Call: Accelerated 2026 EPS Accretion, NIM Outlook Shift, and Direct Express Run Rate Uncertainty Clash with Prior Guidance

Date of Call: Jan 20, 2026

Financials Results

• Revenue: Adjusted fourth quarter revenues rose 5% year-over-year.
• EPS: $1.04 per diluted share (or $1.08 excluding certain items).

Guidance:

• Full year NII expected to range between $8.6B and $8.8B.
• NIM expected to increase approximately 15 basis points upon closing the Comerica transaction.
• Full year average total loans expected to be in the mid $170B range.
• Adjusted noninterest income expected to be between $4B and $4.4B.
• Noninterest expense expected to be between $7B and $7.3B (excluding CDI amortization and acquisition-related charges).
• Adjusted revenue and adjusted PPNR expected to be up 40% to 45% over 2025.
• 2026 net charge-offs expected to range between 30 and 40 basis points.
• CET1 capital post-close expected to remain near the 10.5% target.

Business Commentary:

Financial Performance and Strategic Growth:

• FITB reported earnings per share of $1.04, or $1.08 excluding certain items, achieving an adjusted return on equity of 14.5% and an adjusted return on assets of 1.41%.
• Adjusted fourth quarter revenues rose 5% year-over-year, driven by 6% growth in net interest income, 8% growth in commercial payments fees, and 13% growth in wealth and asset management fees.
• The growth in financial performance was attributed to disciplined execution, operational efficiency, and strategic investments in digital transformation and new market expansion.

Loan and Deposit Growth:

• Fourth quarter average loans increased 5% year-over-year, with 7% growth in consumer loans and 7% growth in middle market and business banking C&I loans.
• Average core deposits grew 1% year-over-year, driven by 5% growth in consumer DDA and 3% growth in commercial DDA.
• The increase in loans was supported by strong consumer and middle market lending, while deposit growth was driven by Southeast branch expansion and digital engagement initiatives.

Comerica Merger and Integration:

• FITB announced the closing of its merger with Comerica, expecting to realize over $850 million in expense synergies and more than $0.5 billion in revenue synergies over the next 5 years.
• The merger aims to enhance FITB's presence in Texas and leverage Comerica's strengths in middle market platform and vertical expertise.
• The integration is expected to drive significant cost savings and revenue growth, positioning FITB for continued peer-leading returns and efficiency improvements.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized 'peer-leading returns and efficiency' and 'record full year NII.' They noted the merger with Comerica has 'overwhelmingly positive result' and confidence in realizing 'more than $0.5 billion in revenue synergies over the next 5 years.' The tone was optimistic about momentum entering 2026 and the integration.

Q&A:

• Question from Ebrahim Poonawala (Bank of America): When we stack rank being able to do more with Comerica clients, the Texas expansion and then leaning into their tech and life science practice, just give us a sense of where the biggest opportunity, what's more near term versus longer term?
  Response: Near-term opportunities include tactical actions to deepen client relationships and deposit marketing in Comerica branches. Medium-term is Texas retail branch build-out; long-term is ramping the innovation banking business combining tech and life sciences.

• Question from Gerard Cassidy (RBC): Can you give us an update on the integration? How is it progressing? And when will the customer conversion occur now that the legal closing has occurred?
  Response: Integration is ahead of schedule; conversion is moving up to Labor Day from a mid-October timeframe. The merger was approved quickly, and preparations from the First Republic process have positioned the company well for a smooth transition.

• Question from Gerard Cassidy (RBC): Can you give us a view on the C&I loan growth? You also pointed out, I think you said one out of 3 of the payments customers, the commercial customers don't have commercial lines of credit with them. When does the utilization turn more favorable? And what do you see for the C&I loan growth?
  Response: Production is strong, but utilization dip was due to balance sheet clean-up by corporate clients ahead of potential capital investments or M&A. The outlook depends on client willingness to proceed with investments amid economic uncertainty.

• Question from Robert Siefers (Piper Sandler): Could you talk about what the company's rate sensitivity is going to look like after you complete those actions you discussed around the close? And will those immediate post-close actions get you to 100% of where you'd like the balance sheet to be?
  Response: The balance sheet will become more asset-sensitive but manageable; full transformation to target mix (60-40 commercial-to-consumer loans and deposits) will be a multiyear journey requiring continued investment in marketing and Texas branch build-out.

• Question from John Pancari (Evercore ISI): Have you made any changes to your initial assumptions tied to the Comerica transaction outside of timing, but any changes to the assumptions that you provided at the announcement, the cost save expectations, the restructuring charges or the related mark or P&L impacts?
  Response: No material changes to assumptions; synergy delivery is on track. Expense saves in 2026 may be slightly higher at ~$400M with some reinvestment, up from the original ~$320M expectation.

• Question from Michael Mayo (Wells Fargo): So you have earlier closing, earlier targeted conversion, earlier metrics. So is there any change in your targeted EPS accretion for this year? I think you just said kind of maybe just a little bit accretive and then you get the big accretion in 2027. Any changes to those numbers, it would seem like that would be implied to go higher?
  Response: EPS accretion timing accelerates; the 9% accretion expected in 2027 is now targeted to be achieved in the fourth quarter of 2026.

• Question from L. Erika Penala (UBS Financial): Just wondering what -- how we should think about average deposits that's underpinning your net interest income outlook for the year and how we should think about given Tim's comments about targeted rate offers, how we should think about deposit costs underpinning the 2026 outlook?
  Response: 2026 will see targeted deposit growth in DDA and consumer IBT, balancing sheet optimization, and funding cost reduction from Comerica's balance sheet, leading to overall lower funding costs and some NIM pickup.

• Question from Kenneth Usdin (Autonomous Research): Can you just -- if you have it, can you give us what the CDI add from the deal is on the Comerica side, so we can kind of just square the total overall?
  Response: CDI amortization is about $20M per month in 2026, with a $20M-$30M reduction expected in year two.

• Question from Manan Gosalia (Morgan Stanley): I wanted to ask about the 19% plus ROTCE target. I mean it looks like you're already at 19.6% as of 4Q. Are there any areas that you think you're over earning here?
  Response: The target accounts for normal seasonality (Q4 is seasonally high, Q1 is low) and a small ACL release in a normal loan growth environment.

• Question from Christopher McGratty (KBW): I'm wondering if the timing, the sooner closed conversion changes at all about your timing about when you would consider another bank acquisition.
  Response: Focus remains entirely on integrating Comerica successfully; inorganic growth is not on the immediate agenda.

Contradiction Point 1

C&I Loan Growth and Utilization Outlook

Contradiction on the trend and drivers of commercial loan utilization between quarters.

Given that one-third of commercial customers lack commercial lines of credit, what is your outlook for C&I loan growth? - Gerard Cassidy (RBC)

20260120-2025 Q4: C&I production has been strong, and utilization rebounded... A key uncertainty is 'chronic postponement syndrome,' where clients delay large capital investments due to uncertainty about the stability of the economic environment. - Timothy Spence(CEO)

Are customers facing tariffs and slowing commercial activity, or is there a pickup in investment-driven loan growth? - Ebrahim Poonawala (BofA Securities)

2025Q3: Commercial client sentiment is mixed... Optimism has increased due to potential rate cuts and client requests to shift from renting to owning, boosting middle market pipelines. Strong demand exists in logistics, government infrastructure, and AI-related sectors. - Timothy Spence(CEO)

Contradiction Point 2

Direct Express Program Transition and Run Rate

Contradiction on the status and expected timing of the Direct Express program reaching full operational run rate.

What are the 2026 projections for Direct Express, and will they achieve full run rate by Q4? - Manan Gosalia (Morgan Stanley)

20260120-2025 Q4: The Direct Express run rate is included in the 2026 guidance, with the only omission being Comerica's standalone activity for the month of January. The upside growth for Direct Express will come from playing 'offense' by helping government agencies transition to electronic payments... This expansion will be focused on after the existing program is successfully converted to the new tech platform in 2026. - Bryan Preston(CFO)

What are the plans for transitioning Direct Express to Fifth Third's rails? - Robert Siefers (Piper Sandler)

2025Q3: The Direct Express transition schedule remains on track. The merger closes the need for a BIN number change, allowing Fifth Third to retain and continue issuing Comerica's BINs, simplifying the card transition for 3.4 million program participants. - Timothy Spence(CEO)

Contradiction Point 3

EPS Accretion Timeline

Targeted EPS accretion moved from 2027 to Q4 2026, accelerating by about two years.

Are you aiming to achieve your 2027 targets by Q4 2026, and is there any change in your targeted EPS accretion for this year? - Michael Mayo (Wells Fargo)

20260120-2025 Q4: The bank expects to deliver the 9% EPS accretion originally targeted for 2027 in the fourth quarter of 2026. - Timothy Spence(CEO)

What is the expected EPS accretion from the Comerica merger? - Not explicitly answered in the transcript. (The prepared remarks by Spence include forward-looking statements.)

2025Q1: Our expectations are for EPS accretion of about 9% in 2027. - Timothy Spence(CEO)

Contradiction Point 4

Net Interest Margin (NIM) Outlook

NIM guidance shifted from an expectation of pressure to a specific pickup, reflecting changed assumptions.

How should we think about average deposits underpinning your net interest income outlook for the year and deposit costs for the 2026 outlook? - L. Erika Penala (UBS Financial)

20260120-2025 Q4: The 2-3 basis point NIM pickup in the outlook includes benefits from funding synergies and balance sheet mix changes. - Bryan Preston(CFO)

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2025Q1: We model multiple scenarios... Net Interest Income (NII) is expected to achieve record levels even without rate cuts or further loan growth. - Timothy Spence(CEO)