Fifth Third CEO argues AI agents pose limited threat to regional bank deposits

Tim Spence, chief executive of Fifth Third, has downplayed the potential risk that artificial intelligence agents pose to the bank’s deposit base, asserting that established financial institutions retain significant leverage in the market. Speaking during the Cincinnati-based lender’s third-quarter earnings call on Monday, Spence argued that traditional banks are better positioned to compete with emerging technology than online-only lenders, who rely heavily on pricing as their primary value proposition. He noted that for most established banks, the combination of physical distribution networks, such as branches, and the added value provided through specific products and services creates a sufficient buffer against the disruption caused by agentic AI cash sorting. This perspective comes as the launch of Meta’s AI assistant, Muse, has intensified industry discussions regarding the threat such tools could present to deposit businesses. The concern is further heightened by reports that major competitors, including Citi, Bank of America, and JPMorgan Chase, have moved to block customers from using external AI agents to access their bank accounts, citing liability and security risks.

Bryan Preston, the bank’s chief financial officer, echoed these sentiments, describing concerns over AI-driven cash optimization as likely overblown. He suggested that adoption timelines for such technologies may be accelerated, but the issue remains manageable for a $301 billion-asset institution. Preston highlighted that Fifth Third’s median household checking account balance stands at $3,000, meaning there is limited excess cash available to be moved in search of higher yields. Furthermore, he noted that deposits from commercial clients are largely operational in nature, with the attached services forming a core part of customer relationships in both retail and commercial segments. The bank does not currently permit AI agents to initiate transactions in customer accounts. Preston emphasized that questions regarding accountability must be resolved before such agents are allowed to carry out transactions on behalf of customers, ensuring that the integrity of financial operations is maintained.

Spence outlined a strategic response to the emergence of new platforms, stating that the competition will ultimately depend on whether incumbents can innovate faster than insurgents can gain distribution. He announced that Fifth Third intends to integrate valuable services currently available on platforms like Muse into its own applications. These services include subscription management, identifying savings opportunities, and budgeting tools. The executive stressed that this approach offers customers the benefit of bank-grade information security. He also highlighted the advantage of keeping financial data separate from social data, which is often monetized by third parties for advertising purposes. This strategy allows the bank to maintain a secure perimeter while providing the convenience of AI-driven tools, thereby strengthening customer relationships and differentiating the bank from competitors who may not make similar investments.

The bank faces a competitive environment where the fight for deposits has intensified this year as institutions seek to fund loan growth. Spence identified being strongly differentiated in core deposit growth as a top priority. According to the earnings release, Fifth Third’s average core deposits grew by 3% sequentially to reach $236 billion. However, the cost of these deposits has risen, with third-quarter deposit costs increasing by 10 basis points to 1.64%. Interest-bearing deposit costs saw a similar rise of 11 basis points to 2.24%. Consequently, the bank’s third-quarter net interest margin decreased by two basis points to 3.34%. Despite these cost pressures, Spence expressed confidence in the bank’s strategy, pointing to continued branch expansion in the Southeast and Southwest regions as well as the recently launched innovation banking platform as key drivers for future gains. He maintained that acquiring low-cost deposits requires structural investments that accumulate over time, reinforcing the bank’s long-term competitive position in the market.