Insurance and Economic Development and Real Estate & Retail

Bank boss eyes No. 1: New Fifth Third chief plans expansion, faces tough Chase

July 10, 2006

The view from John Pelizzari's 14th-floor office in downtown's Capital Center is a good one. The recently hired president and CEO of Cincinnati-based Fifth Third Bancorp's central Indiana operations can see the rooftops of many of downtown's landmarks.

And he likes it that way. He's used to the view from the top. From 2001 to 2005, Pelizzari, 50, captained the ship for Fifth Third's northern Michigan affiliate, which enjoyed a whopping 28-percent market share, more than 10 percentage points higher than its closest competitor.

In Indianapolis, he replaced Maurice Spagnoletti, who joined South Financial Group in South Carolina in early May.

And Pelizzari (rhymes with Larry) has wasted no time outlining his plans.

"In northern Michigan, we had the No. 1 market share by a long shot, and I'm not comfortable being at No. 4," he said. "I'm just not used to that position. So I'll do whatever I can to move us up through the ranks."

He has his work cut out for him.

Fifth Third has grown its local market share more than any bank since 1994, increasing from less than 2 percent to more than 8 percent, but it's still a long way from catching market leader Chase, which holds 23 percent of deposits, according to the Federal Deposit Insurance Corp. National City and Union Federal also hold greater market shares than Fifth Third.

He's taking the reins in Indianapolis at a time the Cincinnati company is trying to rekindle investor enthusiasm. Sputtering performance nationally has pushed Fifth Third shares to around $36, down from $60 in 2004.

"The bank is in a difficult period right now," said Richard Bove, managing director of New York-based Punk Ziegel & Co., who follows the company. "It's very leveraged against interest rates in the wrong direction. ... If interest rates go up, their earnings go down."

Because of the problems, Bove said, the company eventually might put itself up for sale.

Pelizzari doesn't think so.

"We're positioning ourselves for growth, and I just don't see it," he said.

Experienced climber

Climbing to the top of the pile is a familiar experience for Pelizzari. He was formerly president of Old Kent Financial Corp., the second-largest bank in Michigan's Grand Traverse County. Fifth Third purchased Old Kent in 2001.

He stayed on in the same role with Fifth Third and within a year had grown the bank to the biggest in town. By the time he left in May to take his new position, the bank dominated Grand Traverse County, holding an 11-percentage-point edge in deposits over the No. 2 competitor.

But while those competitors were probably glad to see Pelizzari pack his bags for Indianapolis, the philanthropic community in Traverse City wasn't.

As a board member of the Northwestern Michigan College Foundation, Pelizzari spearheaded an effort to raise $65 million to essentially rebuild the entire campus.

"He's been terrific," said Kathleen Guy, the foundation's executive director. "We're very sorry that he's left town."

In Michigan, however, Pelizzari was a big fish in a small pond-a far cry from Indianapolis' sharkinvested financial waters. Here, the number of banks has been growing annually. In Grand Traverse County, banks hold roughly $1.4 billion in deposits, while Indianapolis banks have $25 billion.

And the banks with bigger vaults than Fifth Third's don't plan to hand over chunks of market share to Pelizzari as a housewarming gift.

"While competition is good for the consumer and good for the community, Chase is more than ready to defend its first-place position in Indiana," said Nancy Norris, Chase spokeswoman. "We believe that we have the best people and financial products and services in Indiana."

Plan of attack

How does Pelizzari expect to challenge the likes of Chase?

For starters, by building more branches.

"We're probably looking at ... in the neighborhood of 10 to 15 in the next few years in Indianapolis and elsewhere," Pelizzari said. "We don't have an exact time frame, but we're constantly looking for real estate and locations."

National City leads the market in branch locations with 73, according to FDIC data released in mid-2005. Chase and Union Federal had 69 and 44 locations, respectively.

Fifth Third had 50 branches, meaning that adding a dozen would put it on par with the biggest players. It's already opened two this year and plans an additional two in the next two months.

Drawing on his roots as a commercial lender, Pelizzari also wants to beef up customer service by getting his loan officers out in the field more often to meet with clients.

"My best kind of day is when I walk down to a commercial loan floor and nobody's there," Pelizzari said, although he joked, "Hopefully, they're not just out playing golf."

Community development is also near the top of Pelizzari's list--and not simply for altruistic reasons. Community investments he oversaw at a bank in Washington, D.C., in the late 1980s regularly outperformed some of the bank's investments in "fancy office space."

The bank already has a good reputation for investing in the community, said Christie Gillespie, executive director of the Indiana Association for Community Economic Development, a trade group that represents community development organizations.

Fifth Third invested roughly $40 million in projects like affordable housing in 2005. The bank's autonomous structure, which allows affiliates like Pelizzari's to make decisions without approval from corporate bigwigs, helps it get money out quicker, said Gillespie, who has worked with Fifth Third on three significant projects.

But there's always a need for more, said Mark Stokes, executive director of the Westside Community Development Corp.

"I would welcome any further involvement or any interests they would have in our community development efforts," he said.
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