Fifth Third Bancorp's pending acquisition of MB Financial Inc. will make it one of the largest banks in Illinois, potentially giving the Cincinnati-based bank the heft and footprint to challenge Chicago's dominant banking presence: JPMorgan Chase & Co.
At closing, Fifth Third will leap to the No. 2 bank in Illinois by deposit share with $18.96 billion of deposits, behind only JPMorgan and ahead of Bank of Montreal and Bank of America Corp. In Chicago, Fifth Third will become the No. 4 bank after the deal, behind JPMorgan, Bank of America and Citigroup Inc.
During a May 21 deal call, Fifth Third executives highlighted MB Financial's expertise in the smaller end of middle-market lending — an area management had previously identified as a gap in Fifth Third's offerings.
"It brings together two complementary platforms to create a real, strong, viable alternative to JPMorgan Chase in every segment of the banking model in Chicago," said Gene Katz, managing director of investment banking for D.A. Davidson & Co.

JPMorgan has been the dominant player in both Chicago and Illinois since its acquisition of Chicago-based Bank One in 2004. The bank holds 25% of all deposits in Chicago and 16% of all deposits in Illinois, more than double the deposits Fifth Third will have even after its MB Financial acquisition closes.
The gap appears smaller on the asset side of the balance sheet. Fifth Third will have 20% of the middle-market business in Chicago after the deal, putting it in second place behind the 29% share for an unnamed bank in the No. 1 spot, according to an investor presentation.
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MB Financial will also bring commercial real estate expertise to Fifth Third. Per MB Financial's first-quarter earnings report, the company had $1.8 billion of commercial real estate loans, concentrated among developers and investors in the Chicago area and some established clients from other geographies. In 2017, MB Financial originated more than $1.0 billion of commercial real estate loans in the Chicago metro area, nearly triple Fifth Third's origination volume, according to data from S&P Global Market Intelligence.
While the Chicago market presents opportunities as the nation's third-largest metro by population, competition for loans remains tight. There are 135 banks and thrifts headquartered in the Chicago metro area, 102 of which have less than $1 billion of assets.
"Chicago has always been overbanked, and the best lender wins," said Darren Latimer, CEO of Stonegate Capital Holdings LLC, a Chicago-based nonbank focused on commercial lending.
Whether Fifth Third can grow its Chicago commercial business will depend on the deal integration process, Latimer said, adding that the asset-based lending division of MB Financial tends to be riskier than traditional banking. "In asset-based lending, you're going to expect to lose money sometimes, and that's part of the model, and that can be tough for banks."
Wall Street appeared to share some of Latimer's skepticism, as Fifth Third's stock sold off by more than 7% on the deal news. On May 22, the stock regained some of those losses, up nearly 4% in early afternoon trading. Richard Durkes, vice president of investment banking for Raymond James, said the selloff might have been overdone and Fifth Third can regain momentum by explaining the transaction and proving that it understands what is needed for a successful integration. It will likely be years before the market can judge whether the two banks' cultures are a good match, but it is clear that Fifth Third has secured a large commercial lender in one of the largest commercial markets.
"Chicago is a landscape that is significantly fragmented with a substantial number of independent, owner-operated businesses," Katz said. "That's why banks like [MB Financial] that have significant expertise can bring significant value."

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