Fifth Third Bancorp (FITB) June 10, 2026 Conference Transcript

Okay, welcome to day two of the 17th Annual Morgan Stanley Financials Conference. Kicking off today, we have fifth third. We're delighted to have with us today, Brian Preston, CFO, and Christoph Schneider, Chief Credit Officer. Thanks for joining us.

Thanks for having us.

All right, perfect. Brian, let's get into it. Let's start off with the outlook. I know you put out a slide deck ahead of the conference, and you reiterated the guide there. Do you want to share any expectations for the second quarter? Give us any more color there?

Yeah, absolutely. We're feeling really good about the trends that we're seeing out of the company right now. The economic environment, despite all the volatility that we've seen with the situation in Iran, activity remains robust. We're seeing good activity from a loan production perspective. We're seeing customers actually doing some things from an investment perspective, and it's translating into financial outcomes. NII and fees are coming in right where we expected, and expenses are actually coming in at the low end of our guide. So we're expecting the quarter to be, from a PPNR perspective, to be slightly better than what we had originally guided to. From a credit perspective, credit performance is very strong as well, right in the ballpark of what we had guided from a charge-off perspective. Actually, we think we're probably leaning a little bit towards the bottom end of the range right now from a charge-off perspective. So a lot of good activity that we're seeing and a lot of good trends. The integration remains on track. The expense saves remain on track. We feel very good about our ability to deliver the fourth quarter metrics that we've been talking about for some time.

There's a lot to dig into there, but you reiterated the guide. Expense is coming in slightly better, and charge-offs coming in slightly better as well. All right. And then are there any implications of that to the full-year outlook that you provided at earnings?

Yeah, it's certainly positive for the full year. A couple other factors, the rate environment obviously has an impact. We're very, you know, we have shifted to asset sensitivity with the Comerica acquisition. So a higher for longer rate environment is one that is productive for our balance sheet. The idea that we're now talking about potentially a hike or two is something that would be productive for our balance sheet today. The volatility in the markets over the last six weeks has also created some opportunity for us on the balance sheet management side, whether looking at some incremental swaps to lock in some levels. We've done a little bit of that activity in the quarter. And we did realize a little bit of securities loss this quarter as we've taken advantage of some market opportunity. The structure of our investment portfolio is such that we actually have a decent amount of cash flow that we're coming in within the next year. And we took some of the disruption moments to accelerate the receipt of those cash flows to redeploy them. And so it'll be less than $10 million of security losses, but we were able to lock in yields north of 100 basis points higher than we were expecting on a couple billion dollars of balances, so that's certainly something that's productive for us. The earn back on those losses and on those locked-in levels is three to four months, so we felt like that was a pretty productive trade.

Got it. And that $10 million would be in the second quarter as well?

That $10 million will be no more than $10 million, but it'll be in the second quarter as well.

Got it. So while we're speaking about, I guess, the asset sensitivity, and you mentioned you put on some swaps as well, but how are you thinking about managing this interest rate positioning from here, just given you used to be neutral? Do you want to move back to neutral? help us think through how you want to manage the balance sheet from here?

Yeah, our long-term bias is to be neutral. We just don't think that investors are paying us to take big market positions, but we also want to be very disciplined on how we get there. One of our big lessons as we think about investing is that entry points matter, and your risk of having a bad entry point when you have very concentrated positions where you've entered at a very concentrated point of time is what puts you in a position to take more risk. And with our rate outlook, we did have a view heading into the year that it was likely a higher-for-longer environment. We just felt like the economic activity, the impact of the tax bill, the impact of the infrastructure spending associated with the data center build-outs, what we're seeing in the labor market, all indicated that inflation was likely to be a little bit stickier. Could the Fed have done a cut or two at the beginning of the year or expected a cut or two at the beginning of the year? Absolutely. But we just felt like the trends were higher for longer. Everything that's happened in the last six to eight weeks, obviously, has reinforced that view now. So we're going to continue down our measured approach. And if we need to, we can do some things to accelerate some of that shift. But it's going to be something that's going to progress over time.

And I think you've guided to approximately a 340 NIM by the end of this year. Any thoughts on how this impacts that?

No, we still feel very good about that. You know, like I said, a lot of the things we did from an investment portfolio perspective were a little bit of just pulling forward earlier into the year, some of the things, the other repricing that was going to occur. But we do feel good that from a trajectory perspective that exiting near $340 is still a very, very, we have high confidence we're going to be able to deliver that.

All right.

Perfect.

So we should pivot over to loan growth. You know, 1Q growth was really strong. Legacy C&I was up, I think, 6% year-on-year. Consumer and small business was up 7%. Can you tell us what the trends have been there on the loan growth side since? Yeah, absolutely.

Sure, yeah, I can touch on that. So, look, the loan growth has really been broad-based. It's been a combination of a lot of things happening that were set up coming into the beginning of the year, with last year being really a year of another set of volatile factors that clients were dealing with. And I think they've gotten to the point now where the sentiment is generally that volatility is the new normal, and they're just going to have to get on with investing. And so it's a mix of working capital. It's a mix of CapEx. It's a mix of some M&A that's more strategic in nature. And so we're seeing that broad based across the company. And then I think everybody's aware we've been investing in RMs across the southeast. We are seeing gains in just, you know, continued momentum from the addition of new bankers. And then with Comerica being added on with that, there's some exuberance amongst the client base early on with the prospect of using some of the new products we're bringing to bear with those clients. So overall, I think the environment's pretty constructive, especially looking rearward. Charge-offs have been pretty well-behaved. Delinquencies are still behaved. Consumers are still spending. And the one question we keep getting is, when might that end? And our portfolio is predominantly tilted toward homeowners who are sitting on low interest rates, and they're feeling relatively confident from the stock market being up in their 401ks and other investment accounts being stronger. So they're spending through and looking through to the other end of this potential uptick here in gas prices and some of the volatility that we're seeing with the geopolitical environment.

Yeah, it's been good to see that we've continued to see stability and utilization as well. Our portfolio is in the commercial side, and CNI in particular, is a pretty heavy revolver. We're a working capital lender. It's a big part of what we do as we serve our customers. And it's nice that this year, despite all the volatility in the market, we've seen good stability. Utilization is a little bit above where we entered the quarter, and what we're seeing is just normal fluctuations in utilization. That was a big headwind for us in the industry last year as we were seeing a significant pullback in utilization in response to the tariff policy.

Got it. And, you know, Christoph, one of the things you guys spoke about on the 1Q earnings call was that loan spreads were coming in a little bit. Is that, you know, it's been a consistent theme across the space. Is that something you guys are still seeing in the second quarter, and how are you thinking about competition for loans overall?

Yeah, I think spread compression is, mild spread compression is still an environmental factor right now. It's just there's a lot of competition, and there's some new demand for loans now. And the one thing that we haven't seen is anybody being super undisciplined in the risk-taking. So structures are not being destroyed in the environment we're in right now as a competitive force. It's mostly on the pricing side that we're seeing primarily.

And part of that narrative is mix as well, because in an environment where you're seeing a little bit more high-quality credit being originated, those tend to originate at a slightly tighter spread. So it's not that you're seeing this dramatic reduction in pricing across all credit spectrums. What you're seeing is just a little bit of a mix shift as well.

And is that a comment for CNI? For CNI. Okay, for CNI. Got it. Brian, maybe on the deposit side, I guess, same question, right? We're hearing deposit competition picking up across different regions. You've highlighted that the Midwest has been more competitive than the Southeast, which was a surprise to me when you said that at earnings. Can you give us an update on that and, I guess, how conditions are shaping up in Texas?

Yeah, we feel very good about what we're seeing from a deposit perspective. It's clearly competitive, but it's rational. The Midwest has always been competitive from a consumer deposit perspective. The southeast has typically been, say, 10 to 15 basis points behind it from a market offer perspective. That theme is continuing to hold out and continue. There's always a little bit of volatility there just depending on if a particular bank has a need for funding. So you'll see some movement depending on what a bank might need. And the southwest, it continues to be a pretty productive environment. You know, we talked about deposit growth from the Comerica marketing campaigns that we did for their markets in the Southwest. You know, we had talked about delivering a billion dollars of deposits. We're actually expecting to now deliver $2 billion of deposits from the Comerica marketing campaigns in the second quarter. So we expect to have that in the door by June 30th. So we're seeing really strong response from the direct mail campaigns that we've done, and it helps reinforce us that the tactics that we've been relying on, The things that have been proven winners for us across the Southeast, across the Midwest markets, those same tactics are working in the Comerica markets. And what's exciting about that for us is we're doing that without all the tools that we have from a Fifth Third perspective. We're still doing that on the Comerica brand. We're still doing that with the Comerica processes without the same digital experience that you have from Fifth Third. And we're doing it without the ability to originate digital accounts. And so all the things that, you know, we felt like we knew that our processes would work there, that's proving out, and we're seeing great results from an early-stage perspective.

So we'll talk about the conversion in just a sec, but I guess as you get the digital conversion, there's more to come there as everything moves to the fifth-third systems.

Yeah, there's more to come because we can actually sell the whole bank. and we can also, we're seeing good experience from a household growth and a primary checking perspective, even with some of the older processes they have, so we're excited about the opportunity when we're able to actually originate digitally a checking account. A fifth third, you can originate a digital checking account in less than two minutes. It's a much longer process from a Comerica side, so we're excited about what that brings. And we're excited about what the branch investment is going to bring. We're going to open, you think about all the branch investments that we've made the last couple years, and those branch investments have been working, right? We've got a very well-defined playbook. They're growing very well. We're getting good economics out of them. We opened 55 branches in 2025. You know, I think that puts us in a pretty elite club, maybe one other member, and they've got $4 trillion of assets. We are going to open 60 branches this year, and we're going to open 100 branches in 2027. So we're excited about the ability to continue to execute on that playbook and what it means for us from a deposit growth opportunity. We think the branch play is a $20 billion deposit growth play for us as those branches season. $10 billion from the seasoning of the southeast branches and $10 billion from the southwest branches we're going to be building.

Got it. And, you know, this is a playbook you've already deployed in the southeast. So it's, you know, what friends repeat in a different region.

That's right. And what's good is that those early indicators are supporting that we can continue to rely on that same playbook. And we're continuing to learn. And that's been one of the fun parts of our experience as well, is we've learned how to make every vintage of those branches better. And so all of those learnings from the last eight years, you know, the 2025 branches we've opened have been one of the strongest vintages that we've had. So now 55 branches is being one of the strongest vintages. We're confident that the 60 branches in 2026 and the 100 branches in 2027 are going to be just as strong, if not stronger.

Got it. All right. Perfect. So before we dig in on the integration side, I just want to take a step back and talk about the macro environment. And, you know, Christoph, you alluded to this a little bit in the loan growth question. But I guess what are you seeing across the client base in terms of overall activity levels? You know, any risks that you're seeing on the credit side, anything you're focused on here?

Not rearward-looking, certainly forward-looking perspective, right? So we do a variety of stress tests across the portfolio where we stress macro factors, and we can do isolated shock analyses to see, you know, how these things would play out across our portfolio as a transmission mechanism for risks. And, you know, so one of the things we're obviously watching right now is oil and commodities with the volatile situation over in the Middle East. While that is a long way away from here, you know, the prices for a lot of those commodities are global in nature. And so they will affect some level of domestic industry either through transportation costs or commodity prices as a critical input to products. So we have thought about that. We think it will play out and be, you know, passed through largely through the industries we cover. But ultimately, that's going to play into something Brian mentioned earlier on inflation stickiness. We think that that is something that's going to be here to stay for a while just because there's no way for the economy to absorb the, you know, without getting passed through, without it showing up in, you know, real day-to-day things like food prices and things like that. So we're not overly concerned about it right now, given the fact that consumers remain resilient. The performance of that portfolio is still very strong. And we think, you know, borrowers in general have gotten used to this level of volatility. They've been through a sequence of these things, really starting before COVID with the first Trump regime and tariffs, and have a lot of practice at managing through these situations, both from a liquidity and a leverage standpoint. So we feel pretty confident in the client base being able to navigate their way through the environment despite there being a lot of uncertainty out on the horizon with it.

Have you been surprised by the resilience of the consumer so far? And then you have confidence in the ability for them to navigate through this environment, but I guess you might have a little bit more inflation. You could have a hike in rates as well. Do you think – is there anything that you worry about in that kind of an environment?

Obviously, the lower end of the – you know, the lower side of the K, when we talk about the K-shaped economy is concerning. That's not a large exposure for us. I mean, it's less than a percent of our portfolio. So that's not a huge concern. Obviously, if conditions were to remain such that it would cause a tipping point in the economy where maybe there's a retraction in the stock market where people are feeling a little less affluent, that would cause them to drastically cut back on things. That would be a bit more concerning for us, and we do track that as part of our behavior-based metrics we have in the consumer portfolio, along with credit scores and trended utilization metrics and things like that. But that shows up in the DDA information that we have in our internal models that we watch and monitor.

Yeah, we've had a view for a while that demographics were going to be a support for the labor market. And then you throw on top of that some of the immigration policies and the impact that it's had on the immigration into the labor force. And every year now we're talking about a new record of people turning 65 years old. And we've already hit a peak of 18-year-olds. And so we think that the labor force will likely remain tight for some time, which that should help some of the lower-income consumers as they're able to spend or able to continue to maintain employment so that they can spend. And the people that are driving all the spending in the country, asset owners like the equity markets, what's happened from a home price perspective, it's hard to see anything but a dramatic pullback in the equity markets. that would be the only thing that would likely slow them down from a spending perspective. So the market continues to feel somewhat stable on that. Now, medium term, if AI disrupts a bunch of white-collar workers, that is obviously something that is a risk that's out there that we're thinking about. But broadly speaking right now, it does still feel somewhat productive in that the consumers that are the most impacted aren't the consumers that are borrowers of the banking industry. Sure.

I guess from the AI impact on white-collar workers, I guess that's a risk we're all thinking about, but is there a way to embed it into underwriting standards? Is that something you're thinking about right now?

Yeah, we're absolutely trying to, and I'll actually let Christoph go into a little bit more detail on this one. We're actually trying to figure out how do you actually bring AI risk into underwriting today, and it's something that will continue, we'll have to continue to evolve our thinking as we see those trends.

As far as the, it's because of the nature of it, it's so hard to predict when it will So it's this like unquantifiable risk right now. It'd be really hard to add it as an element to underwriting and be precise on it. You'll either misprice or you'll avoid a risk that you probably should have taken. So we're not to the point where, you know, it would cause us to materially change how we're approaching doing things, but it's definitely something we're thinking about. We're trying to run them through all the various scenarios that we think about that would be really tail risks that we would try to manage more with a recession kind of playbook or something like that that would be more hands-on active risk management than it would be on the passive side of things.

All right, that's great color. Let's move over to the Comerica integration. I think you did your first full mock conversion this quarter. Can you talk about how that went, what some of your learnings have been, and I think you're doing the full systems conversion on Labor Day weekend?

Labor Day weekend.

So how is that going?

Yeah, and we have two more mocks to go. So mock one went really well. I'm a person that loves to use sports analogies, and for me it's a lot like when I used to play football, any sport where you have set pieces. You know, the coach basically drew up to play on the board, and then you're out on the field to run it the first time, you know you're going to have problems. You know you're going to have players running into each other. You know you're going to have issues like figuring out the real timing. So that was exactly what we expected to occur in Mach 1, and we got all of the learnings that we expected to get out of it. We found the gaps where we thought we would find them from a data perspective. Like one of the big ones, Comerica didn't have a master customer file. So we've had to go through a process of building a master customer file for them, and so then testing whether we had it comprehensive enough. The other component is a lot of learnings around sequencing. You think about ultimately what is hydration of this data all through your systems and making sure that you're sequencing them in a particular way to make sure that systems are running accurately but also running timely. Our commercial loan system processing in Sino, like there was a learning that we had on Encino where we needed to refine some things in its sequencing. So all of those things worked very, very well in terms of identifying the spots where we need to refine the playbook. The things that we thought were going to be issues that we said, hey, these are things that we're going to need to learn, we learned what we needed to learn. Mach 2, what is interesting is that will be the first time, you know, as part of this process we are having to build some new capabilities. There are some things that Comerica offered its customers, whether in the consumer bank and the commercial bank, where there's some product enhancements. Mach 2 will be about testing all of those product enhancements and ensuring that the fixes that we've put in post-Mach 1 for all the data things and sequencing work effectively. And then Mach 3 is that real dry run to make sure that we can deliver it within the timeline that we'd expect. So Mach 2 and 3 obviously are two big events for us, but we feel very good about what we're seeing from a progress perspective.

And then, Christoph, you've been helping lead the credit risk management effort at Fifth Third, obviously. And what are your thoughts on the credit culture at Comerica relative to Fifth Thirds?

Yeah, I mean, look, culture is foundational to everything we do, right? It's not something we can compromise on, and it's how we take risk. And what we saw in diligence was, and what we expected to see, was a very credit-centric, a client-focused culture. And that has panned out since legal day one. You know, I think about culture as how you train, what you do, and how you talk, right? So Comerica had a robust credit training program. I think they did a great job training their bankers and their credit professionals in the fundamentals. What they do, they were very client-focused and relationship-based, very similar to us. I think one of the things that was very apparent after we all started meeting each other and spending time together is that we're a lot more alike than we are dissimilar. um but where we are different uh you know maybe in process management and things like that are our rwa focus and things uh you know more around uh you know optimizing the business um you know we're being very deliberate about being transparent and consistent in the messaging um so we can translate and uh and at times you know where there might be a disconnect we're we're offering escalation uh you know to to get to the right decisions very quickly And we think that that will then refocus and reinforce the one-team, one-standard approach that we've had across the company that will really homogenize the two cultures into one that I think will be better together.

Yeah, we're more convicted today about the cultural alignment, the credit alignment, and the opportunity in front of us. You know, the things that we expected to be strong at Comerica, their middle market franchise, their ability to deliver expertise to their clients is proving out to be true. The expertise that they bring in some of their specialty verticals is very strong. We're excited about the opportunity in their dealer finance business. Environmental services working very well as well. The tech and life sciences business is one we've talked about a fair amount. We're excited about the quality of the team and the relationships that they're bringing as well. And there's real opportunity in their commercial real estate business. They had a very similar mentality to us from a commercial real estate perspective, and they have some very strong relationships that we think we're going to be able to leverage. And we're excited about what it means for our platform.

And as you think about the two teams coming together on the commercial side, and you spoke about the middle market bankers at Comerica, when you think about Fifth Third's balance sheet and products and the ability to offer that, how is that coming along as you think about the integration?

Yeah, and again, another thing that just as we've been very, very happy with what we're seeing from a collaboration perspective on that front as well. The incremental product sets that we bring, just things as simple as an ABL capability. With Comerica's customer set, it's a product that works very, very well, and we just bring a different level of capability on that front. What we can do from a capital markets perspective, what we can bring from a treasury management perspective. There's a lot of excitement within the sales force as well as in the customer base on the things that we can do to serve them with that broader suite of products. Now, it will take getting through system conversion to unlock all of that. Basically, the remainder of the second quarter and first couple months of the third quarter, there's going to be a lot of hand-holding to get the customers through system conversion, especially the treasury management customers. And that is job number one to make sure that we deliver that. But once we get through Labor Day weekend, that's when we're really going to be able to unlock the power of the combined franchise.

Got it. And one of the things that people typically look at when there's an acquisition is if there's parts of the portfolio that the acquiring bank does want to run off. Are there any portions of the Comerica portfolio that you're looking to run off? Anything material that we should be thinking about there?

No. In fact, one of the businesses that we acquired through this deal was the National Dealer Services business. We were in that business before. It was pretty small. and we exited it to recycle the capital into things that we had more interest in doing that had more scale. But we're back in that business. In fact, we've had clients asked to come back prior to integration day because they're excited to hear that we're back in the business. So no, we're not looking to run any of the businesses off. In fact, there are a few of them we think we could really lever into being growth catalysts for the next leg of our journey as a company, including the tech and life sciences business Brian mentioned. There's a lot of buzz about the innovation economy, and there's a lot of new things happening in there. We think our product suite and capabilities overlap really nicely with that client base, and we believe we can bring more value to the table there.

Yeah, and that's a very deposit-centric business as well. Traditionally, that's a three to four times deposits-to-loan business. And when we think about deposit growth opportunities, and you'll hear we talk so much about deposits because to us, deposits are the lifeblood of the bank, right? This is how we generate differentiated outcomes is being graded deposits. We think the tech and life science business represents another $10 billion growth opportunity for us over the next couple of years as we bring back and grow the relationships in the TLS business, some that Comerica lost, but some that have ended up in other places because of the disruption that happened to all the banks that service that industry in 2023.

So I think that feeds in nicely into the synergies that you expect from the acquisitions. So can you just remind us about the revenue and the expense synergies that you're thinking about here and the timeline for that?

Yeah, expense synergies we've talked about were $850 million of run rate expense synergies. We will hit that run rate in the fourth quarter of this year. So highly confident in our ability to deliver that. Trajectory is good. And we actually believe that we're going to be able to outperform that number. but we actually are looking to basically use any outperformance to accelerate growth investments. Whether it's continued marketing, whether it's potentially looking at branch build accelerations, whether it's looking at digital marketing in new ways, we want to invest to grow the company. Ultimately, when we think about what is going to create the most value for shareholders over time, we're basically at the top of our peer group near the top of the industry from a return on capital perspective. once we get to the fourth quarter. We want to be in a position to compound book value growth faster because we think that is what's ultimately going to deliver the best outcome for our shareholders. So I feel really good from an expense perspective and the revenue synergies. It's the opportunity and the incremental products that we've talked about, whether it's the balance sheet products like ABL, whether it's balance sheet capacity because we actually have the liquidity and the capital to deploy into our customers at a heavier level. Comerica was having to ration balance sheet capacity. Imagine as an investor if you weren't able to follow your best winning investments. That was the position that Comerica was in. So we now have an opportunity to follow those customers as they're successful. So we do think there's opportunity to grow the balance sheet as a result of that. The capabilities in the fee businesses, both on capital markets, wealth and asset management, as well as in payments, All of those areas, our product capabilities, our ability to invest in sales force and distribution are just at a different level that are going to drive great outcomes for us over time. In the consumer business, it's the investment in the branches. It's the investment in the deposit growth that's working today. So we're excited on that front. And then throw on top of that the product partners and actually being able to bring a whole consumer franchise to that customer base, bringing mortgage originators, bringing investment professionals at a different level than what CodeMaracle is able to support. That is what's feeding, when we talk about $500 million of cumulative revenue opportunities over the next three to five years, like that is the kind of opportunity that we're looking at. And none of that is embedded in the profitability guidance that we've given for 2027.

So things are going well with more room for upside?

Yes.

All right, Perfect. So let's talk about capital return. We spoke about capital deployment. You're targeting a CET1 ratio of about 10 to 10.5%, and I think you mentioned that there'll likely be some buybacks in the second half of the year. Any updated thoughts there or how you're thinking about capital return as we get further into 2026?

No, I mean, our capital priorities remain the same, which is we're going to pay and maintain a stable and strong dividend. We're going to fund organic growth next. We do think from a returns perspective that why do we bias towards organic growth? Organic growth gives us an opportunity to outperform our cost of capital. And then share repurchases next. Share repurchases are our last because ultimately what it represents is a delivery or cost of capital back to our shareholders. And we use that as a mechanism to manage excess capital because excess capital and undeployed capital is a cost to our shareholders, so we do want to manage that over time. But our bias right now is for organic growth. We think there's enough opportunity out there, and we think that the platform that we have today, the markets that we cover today, we're in the best markets in the country. We're in the best markets from a population growth perspective, the best markets from an investment perspective and where do we think the investment in the country is going to go over the next decade we want to lean into that because we think there is real opportunity to create some differentiated outcomes on that so as you as you get some of this growth is that 10 to 10 and a half percent ct won the right governor or you know they're like tc to ta ratios or rating agency actions or anything else to think about capital capital is always a relative game. I don't think regionals are going to be able to get too far away from the largest banks, so I do think that will be one governor. I do think that rating agencies will have a point of view. That's not been something that has been a binding constraint for Fifth Third. I think 10 to 10.5% right now is a good spot to be on a fully phased-in perspective that is what It will be around 9%, and that puts us on a trajectory to be in what was probably a 9.5% to 10% range from a long-term perspective. That was where we had historically talked about running the bank was between 9.5% and 10%, or was around 9, 9.5%, add, say, 50 to 75 basis points to that for AOCI volatility with the changing capital rules. So we're kind of thinking that 9.5%, 10% is probably the long-term range where you might run the bank. But I also think that TCE is a real binding constraint for the industry today. And I don't think many people are going to want to run with a TCE below 7%. So I think that's going to be another factor that people look at when they're managing capital.

Got it. All right, perfect. So, Brian, I want to end with a discussion around AI. We always look forward to Tim's shareholder letter, and AI was a clear focus area there. uh tim mentioned that the ways that you're applying ai to software engineering 30 percent of new code is ai generated you know more than half your employees are using ai tools can you elaborate on how you see ai use cases evolving over time at fifth third and where the where the greatest opportunities are there we're we're very excited about the opportunity that's in front of us from an ai perspective we think it has a real ability to change how we deliver products and experiences to our customers and how for us an ability to deliver it on a more efficient and more productive way we think there it really is a game changer out of the gate right

you know there's been obviously a lot of discussion around the cyber risk associated with ai it really gives you an opportunity to identify weaknesses and vulnerabilities that you have in your you know basically your cyber ecosystem today and like that is something that out of the gate the industry is now starting to see benefits from we were we were invited into project glasswing over the last several weeks we think it was a reflection of just the role we play in the payments ecosystem in the country today whether it's the direct express business some of the processing that we do for u.s customs as well as just the the magnitude of payroll processing that we do for the country those things you know there have been real learnings that have come from that And we're excited about what the future represents and our ability to address vulnerabilities today. You know, the idea that across, you know, basically across the global economy, that these capabilities are allowing people to identify vulnerabilities that have been in existence for 20 years. Like, there is real opportunity to enhance the security for our customers today, and we're seeing those benefits today. And then what we're thinking, what it's going to be able to allow us to deliver from a productivity perspective. The company, and Tim, is obviously very excited about what it means for us. Matt and I spend a lot of time with Tim as he's trying to build his own agent to basically be agentic Tim to help with all of the public comments that he makes. He sees it, and having a CEO that is focused on actually going through and testing and experimenting on his own gives a mentality to our company around just the excitement of what this represents. And, you know, if you're going to work at Fifth Third, you've got to lean into AI because it is the future.

We look forward to hearing that. Okay, maybe I'll wrap up with a question that's been coming up a lot recently around agentic AI, cash sweeping, you know, the impact on deposit costs over time. Can you give us your quick views there?

Yeah, I mean, there is no doubt that agentic commerce and agentic financial services is going to be part of the future. Like, we think there is real value in creating agents to do the jobs for our customers. We think that the AI is going to impact the financial system and the economy in ways that no one is expecting today. and that you've got to be always forward-thinking to make sure you take advantage of those opportunities. We also think that this conversation around deposit sorting is potentially a little bit in front of the actual realities of the economics of the situation. I mean, the median deposit account in the consumer business is less than $5,000. And so the idea that a customer picking up 100 to 200 basis points, which equates to, you know, $50 to $100 a year, that they're actually going to do a lot of work to create complexity in their financial lives. We don't think that that is quite the narrative that's out in the market right now, and it's also forgetting that we sell on a lot more than just rate with our customers. We're providing a lot of services and capabilities and security and trust for our customers, and I think that's one of the things that's missing from that argument. It doesn't mean that we're not paying attention and we're not trying to understand where the market's going or trying to lead what our customers need. We just don't think that that is the biggest risk today. Honestly, we're more concerned around how do you think about marketing to an agent? We know how to digitally market to through paid search with Google. We know how to do mail campaigns. But how do you actually think about marketing when a customer searches by asking an AI agent? So those are the things that we're trying to test today to figure out how to be better.

All right, lots more to discuss. I'm sure we'll have an interesting discussion on that on the next earnings call. But I really appreciate the time. Brian, Christophe, thanks very much. Thanks, Manal.