FIFTH THIRD STILL ON THE SKIDS

Fifth Third Bancorp of Cincinnati, the 800-hundred-pound gorilla of banking in Grand Rapids is still on the downward slide, in the wake of gobbling up Old Kent Bank four years ago.  After announcing fat bonuses for top executives, Fifth Third revealed that profits for the bank collapsed 5.8% during the past quarter.  The decline has been officially attributed to expenses Fifth Third incurred from its recent purchase of a Florida bank.  However, Fifth Third CEO George Schaefer indicated that this is part of longer term troubles the bank has yet to correct when he admitted to shareholders this week, "Revenue growth continues to be below our expectations.  It's safe to say this won't be turned around overnight."

We know from Fifth Third's botched acquisition of Old Kent that it continues to hemorrhage small business and retail customers with its obnoxious fees on everything and lackluster customer service.  We also know that Fifth Third has has trouble penetrating the Detroit area, the crown jewel of the Michigan market, which its acquisition of Old Kent was supposed to help capture but has failed to so far.  Is this symptomatic of broader problems within the big bank?

Maybe, because Schaefer insists the solution to Fifth Third troubles is to open more branches and hire better people.  Of course, there could be deeper dysfunction in the bank.  Fifth Third was recently investigated and punished by the Federal Reserve for the way it booked the assets it acquired from Old Kent and later was forced to divest itself of its trust division.  All that put a real crimp in Fifth Third's running-on-water strategy of devouring other banks quicker than its structural and management problems could surface.  (Click here and here for related stories.)

Meanwhile, Fifth Third continues to reveal its dread over a potential $30-40 billion in penalties for violations of state environmental laws by its development company 940 Monroe L.L.C., the developer of the Boardwalk project in downtown Grand Rapids, which Fifth Third inherited from Old Kent.  On March 28, 2005, Fifth Third intervened in a motion before the Michigan of Court Appeals to argue on behalf of the developer and its contractors that they should not be held liable for their violations.

One must wonder if other Fifth Third acquisitions are not similarly plagued.