Encouraged by a u.s.-based multinational client that no longer wants to divvy up its banking services to do business in Canada, Fifth Third Bancorp of Cincinnati has opened a commercial banking office in Canada.

“[It] specifically said to Fifth Third in the summer of 2005, ‘Either you are open in Canada or you are being kicked out of our bank group’,” says Jerry Hynes, vice president and principal officer of Fifth Third’s Toronto branch. Hynes, who was chief credit officer at Bank One Canada for 12 years, adds that he cannot reveal the name of the company that inspired the opening of the Canadian branch.

Fifth Third, which offers commercial lending products in Canada, along with treasury management and international banking services for corporate clients, chose to make the move into Canada by outsourcing its back-office operations to Royal Bank of Canada, while maintaining regulatory reporting and internal control functions in the U.S., Hynes says. Most foreign banks operating in Canada use a Canadian bank as their clearing bank, but Hynes says Fifth Third is the first to take it one step further by outsourcing its entire back office to the Canadian giant.

The strategy to trim infrastructure costs added to the time it took to receive permission to open the Canadian office. “What is usually about a six-month regulatory approval process became a nine-month process,” he says.

In total, only four executives, pulled from other banks in Canada, actually work at the Toronto office, but the RBC and Cincinnati-based support groups add about 40 more people dedicated to Fifth Third’s Canadian business.

Hynes says the move makes sense, even if Fifth Third’s hand hadn’t been forced. Fifth Third’s footprint — it is the tenth-largest bank in the U.S. and has about 1,100 branches in 10 states — nestles along the Great Lakes And companies in the industries in which Fifth Third specializes — manufacturing, transportation and distribution — prefer to deal with a bank that can serve their needs on both sides of the Canada/U.S. border, he says.

Serving both sides

That goes for U.S. companies operating in Canada and vice versa, he says. In fact, so far, half of the bank’s clients are Canadian companies doing business in the U.S. These firms expect seamless cross-border banking, and a Canadian presence is the only way in which to achieve that, Hynes says: “The banks that get to sit at the grownups’ table are Canadian.”

Fifth Third plans to reach out to Canadian companies that routinely do business in the U.S. Midwest, presenting itself in its marketing material as an efficient cross-border bank with superior technology to manage U.S. cash. “We’re not here to replace TD Bank,” he says of the message Fifth Third is presenting to the marketplace. “TD Bank can absolutely handle you in Windsor, [Ont.], but once you get across the Ambassador Bridge, there are no more green signs.”

Fifth Third’s growth projections are relatively modest, in line with the size of the operation. Hynes says even if it handles a minuscule piece of the trade pie — one-tenth of 1% to 1% — it would still make a sizable income, what with almost US$1.8 billion in trade crossing the border each day. He estimates that, over time, Fifth Third could earn around US$7 million a year.

He doesn’t expect this to happen overnight: “This is a marathon, not a sprint.” But, he adds, it is well within reason that Fifth Third can persuade a relatively small number of Canadian companies that it can best serve their cross-border commercial banking needs. IE