Wednesday, March 17, 1999
Fifth Third in no rush for mergers
Schaefer: Returns important
BY JEFF McKINNEY
The Cincinnati Enquirer
Fifth Third Bancorp's George Schaefer Jr. does not feel compelled or pressured to buy a major regional bank, though takeover activity industrywide appears to be regaining steam.
Mr. Schaefer, Fifth Third's president and chief executive, told shareholders Tuesday at the company's annual meeting that he expects to see a lot more consolidation this year.
But he said Fifth Third, coming off 25 years of record profits and the industry's lowest expense ratio, is in the catbird's seat: It has the option not to do anything, the flexibility to continue doing small acquisitions or buy any bank or thrift with $1 billion or more in assets in the Midwest — should the opportunity arise.
Mr. Schaefer shared his views after being asked about the pending $16 billion merger between Fleet Financial Group and BankBoston Corp., a deal that would form the nation's seventh-largest bank with $180 billion in assets.
That deal, announced Monday, ended a brief drought in multibillion-dollar bank deals and could signal a stampede of similar deals the rest of the year. Some analysts contend that such deals could lead to only 10 to 15 dominant region al banks nationwide in five years.
But Mr. Schaefer said Fifth Third will not rush to buy a regional bank just to get bigger in assets or because other regional banks — including Milwaukee-based Firstar Corp., Chicago-based Banc One Corp. and Charlotte-based NationsBanc Corp. — are playing that game.
He said that when one examines the risks and rewards the big bank mergers have reaped in recent years, and the returns such deals have yielded shareholders, not many of the mergers have performed that well.
In comparison, Mr. Schaefer said Fifth Third — mostly using a conservative acquisition strategy of buying banks and thrifts mainly in the Tristate — has provided shareholders average annual returns of 31 percent during the past 10 to 20 years.
“The press thinks it's sexy to do those deals,” Mr. Schae fer said after the shareholders meeting. “Our shareholders just like good returns.”
Mr. Schaefer said Fifth Third also is not ruling out expanding beyond its core Tristate business territory of Ohio, Kentucky and Indiana. The bank also operates in Florida and Arizona.
He said other states where Fifth Third could do deals include West Virginia, Wisconsin, Michigan, Illinois, Tennessee and Pennsylvania.
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