00:00The third CEO Tim Spence offered a pragmatic take on AI pointing to real productivity gains and tangible use cases.
00:07He also laid out the three key things he believes banks need to get right to truly realize AI's benefits.
00:14I'm pleased to say that Tim joins us now. Tim, first of all, wonderful to have you in the studio
00:17here. Great to see you.
00:18And I know this has also been top of mind because you've been at RBC's conference where AI has been
00:23spoken a lot.
00:23I saw, for example, Citizens Bank talking about AI agents taking 50 percent of calls.
00:28What has been the sense both in talking to other executives and at your institution itself?
00:34Just how much is AI being implemented?
00:36Yeah, I mean, I think the simple sense here, if you think about any new platform technology,
00:40there are three things to have to be in place in order to see broad based adoption.
00:45One is that there has to be a capability overhang.
00:48The technology has to be fit for purpose to the business case has to work out.
00:52So you have to be able to generate a reasonable return on the investment to put it in.
00:55And then three, it's the hard work on change management and getting people to adopt it.
01:00And I think where we are at the moment is the capability overhang is very clearly there.
01:06The business case has become pretty strong.
01:08So you're seeing a real race to find ways to get AI embedded into core workflows across the sector.
01:14So, I mean, how much money does it save you?
01:17How much work can it do in terms of, you know, headcount that it could replace?
01:22I mean, honestly, pretty remarkable.
01:24So our journey started a couple of years ago.
01:26I'm a big believer that I think as financial institutions, we should experiment more than maybe we have historically.
01:34So we rolled out AI productivity tools starting with Copilot, Microsoft's Copilot, two years ago in April.
01:42Today, 60% of our employees use an AI tool that we provide at least daily.
01:47If you look at engineering, there's a requirement that they use AI when we push code.
01:52So 100% of the squads use it.
01:5431% of the code that we released last year as a company was written by AI.
02:00And 80% of the unit tests, so the regression testing, the UAT, the things you've got to do before
02:05you put new code into production, all automated with AI.
02:09And the byproduct of that is, like, when I got to the bank 10 years ago, we did two to
02:13three mobile app releases a year.
02:15We did over 400 in 2025.
02:19So it's not just expenses you're able to get out.
02:21It's the sprint velocities.
02:23It's your ability to bring new capabilities to market to customers that are game changers.
02:26Do you set targets to up those numbers this year and next year?
02:29Or is it just kind of, like, organically, naturally it's happening?
02:32I only know those numbers because we manage them for the sake of ensuring that they go up over time.
02:37So our chief information officer told me before I made the trip out here that as of year to date,
02:44so as of the last two months, it's 40% of the code.
02:46By the way, when you have more code, because this is a big debate that's happening in the labor markets,
02:52because more code is being written,
02:53do you almost need more people to oversee that or less because it's more efficient, or does headcount stay the
02:59same in that part of the business?
03:00Oh, I think over time you're going to see, what I wrote in the annual letter, I really believe, is
03:05you will see meaningful, sustained, long-term gains in productivity.
03:08What you hope for is that what it supports is above market growth, right?
03:13So the goal for us has always been to drive growth.
03:15But if you look at a longer time frame, you just think about machine automation as a super cycle.
03:21Like Fifth Third's peak headcount before we closed the Comerica acquisition was in 2006.
03:26It was 22,900 employees, and we ended the year last year prior to closing Comerica at about 18,500,
03:33and the bank doubled in size during that time period.
03:36So we were two times the size with 20% fewer headcount to run the company, you know, and that's
03:44just in working with, you know, conventional, like, classification AI as opposed to the transformers that we have now.
03:51So your growth has been tremendous, and you think you can use AI to significantly improve margins.
03:59That's an up arrow story for the bank.
04:01I wonder about using AI for your consumers, for your customers.
04:05One of the things about the Citrini research piece that freaked everybody out a couple weeks ago is that he
04:10thinks it's going to remove friction from the system.
04:12And that can have positive effects as well, right?
04:15When I'm in my banking app and I'm looking at budgeting and I'm comparing prices, I mean, I can save
04:20money that way.
04:21That's the thing, honestly, that I'm most excited about.
04:23I started my career in software.
04:25I was a little bit of a latecomer to the financial services sector.
04:29So I have a little bit of a product orientation just in terms of the way that I see the
04:33world.
04:33And the dream for us, as we have launched new digital capabilities over the past 10 years, was to get
04:39out of the business of providing tools that people use to manage their, you know, financial tasks and into the
04:45business of providing tools that did the jobs for them, right?
04:49And that really is what we're going to be able to do with AI, is we're not just going to
04:53be processing payments or custodying deposits or making liquidity available.
04:57We're going to be able to actually execute tasks on behalf of consumers and businesses.
05:03It's really exciting.
05:03It is this real moment, though, where CEOs like yourself are having to grapple with this technology and understand what
05:09its use is.
05:09And then you add to that the other existential things happening in the world right now, which we don't need
05:13to rehash, but it has just resulted in broad market volatility.
05:16The regional bank index is now negative for the year after reaching a high level.
05:20How does that change deal making for regional banks?
05:24You closed Comerica.
05:25We spoke with you when you did that.
05:27Does it make deals more likely, less likely?
05:30Does it change the outlook?
05:31Yeah, I mean, I think it probably makes activity less likely in the immediate term because you have to be
05:37able to value what you buy, right?
05:40And more likely over time.
05:42You know, when I started in the business, there were 14,000 banks.
05:47I think there are 4,000 in the U.S. today.
05:50There's been a lot of consolidation in the sector already.
05:53But there will continue to be pressure to drive unit economics, you know, positively, to be able to produce the
06:01sort of diversification in your balance sheet that helps you to perform well in a more volatile environment.
06:06And in particular, to be able to support the sort of investments in technology that, you know, are going to
06:12be so important.
06:13I was just thinking about that.
06:14You know, it's a massive amount of banks in the U.S.
06:18Like far other markets are far less fragmented than we are.
06:23What do you think it looks like in five to 10 years, Tim?
06:26Yeah, I have a cloudy crystal ball.
06:28So you shouldn't take my prediction on that one.
06:30I know, though.
06:32But does Fifth Third, do you aim to be an acquirer as we see that number slim down?
06:37We don't think of M&A as a strategy on a standalone basis.
06:40It's a means to achieve a strategic objective, right, or a strategic goal.
06:45So we care about being material in the markets where we compete, right?
06:49We're the second largest bank now in the Midwest by market share.
06:53We're the sixth largest bank, having been the 11th five, I think, five years ago in the southeast.
06:58And we're the ninth or tenth largest in Texas following the acquisition of Comerica.
07:04The goal is to be number one, two, three, four, five in every one of those markets.
07:09I think we have the ability to get there organically, in particular because of the accelerant that Comerica provides across
07:15the Southwest in the U.S.
07:18But if we can achieve the same outcome, you know, more efficiently and, you know, get our capital back faster
07:26for shareholders through M&A,
07:27that's always a thing we look for.
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