Form 425 for Fifth Third & Old Kent
TABLE OF CONTENTS

Overview
Why Old Kent ?
Fifth Third’s Proven Integration Experience
Revenue Opportunities
Long Performance History

     
  Filed by Fifth Third Bancorp
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Old Kent Financial Corporation
Exchange Act File Number 001-14591
Text version of 425 filed on December 5, 2000

 

Fifth Third Bank

The Growth Story Continues...

 

 

December 2000

 

Table of Contents

Forward-Looking Statement

This document contains forward-looking statements about Fifth Third Bancorp (“Fifth Third” or “FITB”), Old Kent Financial Corporation (“Old Kent” or “OK”) and the combined company which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made in connection to the financial condition, results of operations, plans, objectives, future performance and business of Fifth Third and/or the combined company. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) competitive pressures among depository institutions increase significantly; (2) changes in the interest rate environment reduce interest margins; (3) prepayment speeds, loan sale volumes, charge-offs and loan loss provisions; (4) general economic conditions, either national or in the states in which Fifth Third and Old Kent do business, are less favorable than expected; (5) legislative or regulatory changes adversely affect the business in which Fifth Third and Old Kent are engaged; and (6) changes in the securities markets. Further information on other factors which could affect the financial results of Fifth Third after the merger are included in Fifth Third’s and Old Kent’s filings with the SEC. These documents are available free of charge at the SEC’s website at http://www.sec.gov and/or from Fifth Third or Old Kent.

2

Table of Contents

Disclosure

Investors and security holders are advised to read the proxy statement/prospectus regarding the transactions referenced in this document when it becomes available, because it will contain important information. The proxy statement/prospectus will be filed with the Securities and Exchange Commission by Fifth Third and Old Kent. Security holders may receive a free copy of the proxy statement/prospectus (when available) and other related documents filed by Fifth Third and Old Kent at the Securities and Exchange Commission’s website at http://www.sec.gov and/or from Fifth Third or Old Kent.

Old Kent and its executive officers and directors may be deemed to be participants in the solicitation of proxies from stockholders of Old Kent with respect to the transactions contemplated by the merger agreement. Information regarding such officers and directors is included in Old Kent’s proxy statement for its 2000 Annual Meeting of shareholders filed with the Commission on February 25, 2000. This document is available free of charge at the Commission’s website at http://www.sec.gov and/or from Old Kent.

Fifth Third and its executive officers and directors may be deemed to be participants in the solicitation of proxies from stockholders of Fifth Third with respect to the transactions contemplated by the merger agreement. Information regarding such officers and directors is included in Fifth Third’s proxy statement for its 2000 Annual Meeting of shareholders filed with the Commission on February 9, 2000. This document is available free of charge at the Commission’s website at http://www.sec.gov and/or from Fifth Third.

3

Table of Contents

 

 

Overview

 

 

     
I. Fifth Third’s Track Record
II. Why Old Kent?
III. Integration
IV. Revenue Opportunities
V. What We Stand For

 

 

4

Table of Contents

Consistent & Superior Performance

Average EPS Growth

                         
20 Yr 10 Yr 5 Yr
FITB 16.6 % 16.5 % 17.6 %
S&P 500 7.4 % 6.8 % 11.7 %

 

Year - to - Year % Change in EPS

                                                                                                                   
22.3 21.7 14.1 11.4 14.6 15.4 16.9 18.7 17.3 15.8 10.0 14.0 18.0 19.3 15.5 15.0 14.1 17.2 20.5 17.0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996* 1997 1998* 1999*

Delivering Value to Shareholders

N.B. Data is as originally reported in Annual Reports. *Before impact of one-time charges.

5

Table of Contents

Pristine Balance Sheet = Flexibility & Consistency

•   Balance Sheet Strength

      – Equity to Assets: 10%
 
      – Tangible Equity to Assets: 9%
 
      – Favorable deposit and earning asset mix trends

•   Credit Quality

      – LLR coverage of UPAs is 2.3x Vs. 10-year average of 1.7x
 
      – UPA/Total Loans & Leases is 65 bp Vs. 10-year average of 1.02
 
      – YTD Charge-off Ratio is 27 bp Vs. 10-year average of 45 bp

•   Rating Agencies
           
S&P Moody's
–  Deposits AA - Aa2
–  Commercial Paper A-1+ Prime-1

       Moody’s upgrade in September from A1 to Aa3.

        One of only three bank holding companies with this rating.


NB: Fifth Third Historical

6

Table of Contents

Balanced Business Mix — Four Businesses

Revenues

                 
Business Dollars Percentage
Retail $ 323 53 %
Commercial $ 165 27 %
Transaction Processing $ 61 10 %
Investment Advisory $ 59 10 %

Net Income

                 
Business Dollars Percentage
Retail $ 110 51 %
Commercial $ 68 31 %
Transaction Processing $ 21 10 %
Investment Advisory $ 17 8 %

N.B.: Dollars in millions as of Q3 2000

7

Table of Contents

 

 

Why Old Kent ?

 

     
I. Business Mix Fit
II. Extension of Markets in Attractive States
III. Room for Continued Growth
IV. Additional Affiliate Management Depth
V. No Negative Impact on Performance Ratios

8

Table of Contents

Superior Franchise: Quality Business Mix

  — Continuity of business mix
 
  — Diversified sources
 
  — Core components:

  –   Corporate Banking
 
  –   Retail Banking
 
  –   Fee Generating Businesses

Net Income Comparison

Old Kent

         
Business Percentage
Retail Banking 44 %
Corporate Banking 23 %
Treasury/Other 17 %
Investment/Insurance 10 %
Mortgage Banking 6 %

Fifth Third

         
Business Percentage
Retail Banking 49 %
Commercial Banking 30 %
Advisory Services 9 %
Data Processing 9 %
Other 3 %

Pro Forma

         
Business Percentage
Retail Banking 44 %
Commercial Banking 29 %
Advisory Services 9 %
Data Processing 7 %
Other 6 %
Mortgage Banking 5 %

N.B. Segment data shown for the nine months ended September 30, 2000

9

Table of Contents

Best Fit with Focus in Larger MSA Markets

Dollars in millions.

Pro Forma Market Share
In FITB/OK 10 Largest MSAs

                   
Rank Institution* Deposits Branches Mkt. Share
1 Bank One $61.2 637 16.7 %
2 ABN AMRO 37.7 369 10.3
3 Fifth Third 29.6 628 8.1
4 National City 21.6 477 5.9
5 KeyCorp 17.5 196 4.8

* Pro Forma for pending acquisitions.
Source: SNL Branch Migration Database as of June 30, 1999.
NB -combined FITB / OK data pre-divestiture (if required).
      -combined SFB / MNC data pre-divestiture (if required).

10

Table of Contents

Significant Potential for Continued Growth

  — Only 1 out of 16 possible households is a Fifth Third customer
 
  — Best major-MSA concentration
 
  — Familiar Fifth Third competitors
 
  — Fragmented market

Indiana

     
Population 5.9 million
National Rank 14th
                             
Deposits Branches Market Share
1. Bank One Corp $ 12,333 219 17.5 %
2. National City Corp. 7,053 202 10.0
3. FITB / OK 5,386 162 7.7
4. Old National Bancorp 4,270 104 6.1
5. 1st Source Corp. 2,182 44 3.1

Illinois

     
Population 12.1 million
National Rank 5th
                             
Deposits Branches Market Share
1. Bank One Corp $ 30,166 244 13.8 %
2. ABN AMRO 23,260 122 10.6
3. Bank of Montreal 15,813 134 7.2
4. Northern Trust Corp. 8,285 17 3.8
5. FITB / OK 6,718 94 3.1

Ohio

     
Population 11.2 million
National Rank 7th
                             
Deposits Branches Market Share
1. Key Corp $ 18,953 225 12.1 %
2. Fifth Third 16,408 378 10.5
3. National City Corp. 15,624 349 10.0
4. Bank One Corp. 15,168 276 9.7
5. US Bancorp 9,034 307 5.8

Michigan

     
Population 9.8 million
National Rank 8th
                             
Deposits Branches Market Share
1. Bank One Corp $ 18,008 259 15.9 %
2. Comerica Inc. 16,053 251 14.2
3. FITB / OK 10,604 269 9.4
4. National City Corp. 10,040 275 8.9
5. ABN AMRO 9,268 151 8.2

Kentucky

     
Population 4.0 million
National Rank 25th
                             
Deposits Branches Market Share
1. National City $ 4,549 114 9.4 %
2. US Bancorp 4,036 134 8.4
3. Bank One 3,995 68 8.3
4. PNC Bank 3,322 56 6.9
5. Fifth Third 2,589 97 5.4

Source: SNL Branch Migration Database as of June 30, 1999.
NB -combined FITB / OK data pre-divestiture (if required).

11

Table of Contents

Management Accretive

  — Adds experienced local management to expand Fifth Third’s affiliate bank network
 
  — Additional product line depth in Investment Advisory, Commercial and Residential Mortgage
 
  — Old Kent Management has longstanding shareholder and customer focus
             
Name Age New Position
David J. Wagner 46 Chairman & CEO - Michigan Bank
Robert H. Warrington 53 President - Mortgage Banking Business
Kevin T. Kabat 43 President - Grand Rapids Affiliate

12

Table of Contents

No Dilution of Historical Performance Levels -
Not Dependent Upon Significant Assumptions

                         
Pro Forma
LTM - 9/00 Fifth Third Old Kent Combined (1)
ROACE 20.0 % 20.7 % 21.8 %
ROAA 1.94 1.47 1.93
Efficiency Ratio (2) 41.3 56.6 42.9
 
 
Tangible Common Ratio 8.91 % 6.50 % 8.09 %
Leverage Ratio 9.99 7.24 9.04

(1) LTM 9/30 pro forma combined for ROACE, ROAA and Efficiency Ratio assuming full 20% of Old Kent controllable non-interest expenses, and excludes non-recurring items.
(2) LTM 9/30 excludes amortization of intangibles.

13

Table of Contents

Fifth Third’s Proven
Integration Experience

     
I. Assumptions Preclude Urgency
II. Opportune Timing
III. Local Execution
IV. FITB Affiliates
V. Integration History

14

Table of Contents

No Need to Rush

  — Immediately accretive to EPS, before cost savings
         
Estimated
EPS Accretion
2001 No Synergies 9.4 %
2001 with Phased-in Synergies (a) 11.3
2002 with Phased-in Synergies (a) 12.5

  — Conservative, identifiable and readily achievable cost savings

    • Only 20% of Old Kent overhead
 
    • Realistic Savings Timetable: 25% in ‘01     75% in ‘02     and 100% in ‘03
 
    • Goal: - Protect and grow revenues
          - Positioned to roll-out typical Fifth Third enhancement programs

  — IRR well above cost of capital with conservative assumptions

(a) Assumes cost savings equal to 20% of Old Kent’s controllable non-interest expenses phased-in at 25% in 2001 and 75% in 2002

15

Table of Contents

Perspective on Deal Size

—   No dimunition of FITB culture, OK easily assimilated
 
—   Fifth Third’s most recent acquisition (CNB) is fully integrated and performing at FITB performance levels
 
—   As compared to many recent bank M&A transactions:

  •   Low deal value as % of market capitalization
 
  •   Lower year 1 phased-in cost savings assumptions
 
  •   Strong financial position affords Fifth Third the opportunity to preserve revenues and growth rates

—   IRR estimate exceeds previous Fifth Third transaction IRRs


16

Table of Contents

Executing Locally

•   All product-lines report to local affiliate CEO
 
•   Push P&L growth accountability further down in to the company
 
•   Measure relentlessly / Stress Accountability
 
•   Reward success

  –   Variable compensation
 
  –   Stock options

•   Upgrade under-performers continuously
 
•   Trust capitalism

17

Table of Contents

FITB Affiliate Banks (Pro forma)

—   Old Kent affiliates will represent a significant portion of the combined franchise
                                         
FITB Affiliates Assets Deposits Branches President Years @ 5/3
Cincinnati $11.7 $ 8.0 100 G. Schaefer, Jr. 28
Grand Rapids 12.1 7.9 173 K. Kabat --- OK Affiliate (c)
Chicago 8.0 6.7 100 B. Stamper (a) 14 OK Affiliate
Southern Indiana 5.1 2.4 58 J. Daniel (b) 1
Dayton 4.9 2.8 65 D. Sadlier 9
Detroit 3.7 3.0 74 TBD --- OK Affiliate
Columbus 4.1 2.5 59 P. Fehring 20
Toledo 4.1 2.6 44 B. Sullivan (b) 1
Central Indiana 3.9 2.6 82 M. Alley 14
Cleveland 3.7 2.4 75 R. King 24
Northern Michigan 1.5 1.1 21 TBD --- OK Affiliate
Louisville 2.0 1.0 40 J. Gaunt 31
Northern Kentucky 1.3 0.9 28 T. Rawe 24
Arizona 1.0 0.4 11 B. Robert (b) 2
Lexington 1.0 0.4 17 S. Barnes 6
Ohio Valley 1.0 0.6 23 S. Greenlee 10
Florida 0.5 0.3 10 C. Kvetko 12

(a) Current Fifth Third executive.
(b) Indicates executives who have joined FITB from acquired institutions.
(c) Includes pending acquisitions.

18

Table of Contents

Record of Successful Acquisition Integration

  —   Proven ability to improve target profitability
 
  —   Fifth Third has always delivered on acquisition promises
                                 
Year ROA at 2000 % of
Affiliate Acquired Purchase ROA Market Cap
Central Indiana (CNB Bancshares) 1999 1.38 % 1.75 % >
Southern Indiana ( “        “ ) 1999 1.42 1.50 > 9.9 %
Northern Indiana ( “        “ ) 1999 1.00 1.33 >
Western Ohio (CitFed*) 1998 0.87 1.64 4.7
Columbus, Ohio (State SB*) 1998 1.26 2.08 5.4
Louisville, Kentucky (Cumberland*) 1994 0.85 1.62 4.1
Northwestern Ohio 1989 0.97 2.18 20.1

* Thrift Institution

19

Table of Contents

Revenue Opportunities

     
I. Room to Grow
II. Similar Markets / Familiar Competitors
III. Fee Income Comparison
IV. Product Opportunities
V. Deposit Campaigns
VI. Proven Execution

20

Table of Contents

Uninterrupted Growth Story

—   Fifth Third and Old Kent combined will continue to generate high revenue growth rates
 
—   Sources of revenue growth:
 
    Attractive new markets for Fifth Third products:

  •   Duplicate FITB’s deposit campaign successes in new markets
 
  •   Sell MPS’ e-commerce solutions in new markets
 
  •   Continued improvement in Commercial and Investment Advisory revenue mix in all affiliates

    Enriching OK’s fee revenue for proven Fifth Third successes:

  •   Example: Achieving FITB fee results on OK’s deposit base is a $48 million per year revenue opportunity
 
  •   Improve Old Kent’s fee income to net revenue ratio*: FITB= 38%; OK= 26%
 
  •   Ratio of deposit fee revenue to core deposits: FITB = 1.54%; OK = 0.97%


* Ratios calculated excluding mortgage banking fees.

21

Table of Contents

Similar Markets and Familiar Competitors

Top 10 States for Business Expansion in 1999:

                             
New / Expanded Facilities New Manufacturing Plants
> 1. Michigan 2,174 1. California 432
2. California 2,137 > 2. Michigan 296
> 3. Ohio 1,141 > 3. Ohio 200
4. Texas 939 > 4. Illinois 168
5. New York 934
> 6. Illinois 872

Source: Site Selection Magazine’s “Top 10” States.

     
Ohio
Population
National Rank		 11.2 million
7th
                             
Deposits Branches Market Share
1. Key Corp $ 18,953 225 12.1 %
2. Fifth Third 16,408 378 10.5
3. National City Corp. 15,624 349 10.0
4. Bank One Corp. 15,168 276 9.7
5. US Bancorp 9,034 307 5.8
     
Michigan
Population 9.8 million
National Rank 8th
                             
Deposits Branches Market Share
1. Bank One Corp $ 18,008 259 15.9 %
2. Comerica Inc. 16,053 251 14.2
3. FITB / OK 10,604 269 9.4
4. National City Corp. 10,040 275 8.9
5. ABN AMRO 9,268 151 8.2
     
Illinois
Population
National Rank		 12.1 million
5th
                             
Deposits Branches Market Share
1. Bank One Corp $ 30,166 244 13.8 %
2. ABN AMRO 23,260 122 10.6
3. Bank of Montreal 15,813 134 7.2
4. Northern Trust Corp. 8,285 17 3.8
5. FITB / OK 6,718 94 3.1

22

Table of Contents

Proforma Fee Income Comparison

             
Business Percentage
Fifth Third
Fee Revenue Total Fee Revenue 37 %
Interest Revenue Mortgage Banking 4 %
Interest Revenue Investment Advisory 2 %
Interest Revenue Other 2 %
Interest Revenue Commercial Banking 20 %
Interest Revenue Retail Banking 35 %
Old Kent
Fee Revenue Total Fee Revenue 21 %
Interest Revenue Mortgage Banking 18 %
Interest Revenue Investment Advisory 2 %
Interest Revenue Other 2 %
Interest Revenue Commercial Banking 18 %
Interest Revenue Retail Banking 39 %
Pro Forma
Fee Revenue Total Fee Revenue 32 %
Interest Revenue Mortgage Banking 8 %
Interest Revenue Investment Advisory 2 %
Interest Revenue Other 2 %
Interest Revenue Commercial Banking 19 %
Interest Revenue Retail Banking 37 %

N.B. Total fee revenue excludes mortgage banking fees.

23

Table of Contents

More Products = Revenue Opportunity

             
Midwest Payment Systems >> > New markets for business growing revenues at 30% annually
> Significant MPS Chicago
customer base
Commercial
Foreign Exchange
Leasing
Cash Management		 >> > New product roll-outs to existing commercial deposit base. FITB commercial fees up 12% LTM
 
Retail
Overdraft Matrix		 >> > Adaptation resulted in a 47%
increase in consumer fees
Bankcards > 1 Million new customers without a 5/3 credit card!
 
Investment Advisors >> > Expanded sales force
> Doubles mutual fund assets on a
proforma basis
> Expanded investment capabilities

24

Table of Contents

Deposit Campaign Opportunities

>   Totally Free Checking

  •   Total Number of accounts has increased in excess of 650%
 
  •   Balances up in excess of 620%

>   Total transaction deposits up 16% YTD

25

Table of Contents

Substantial Potential — Proven Execution

—   No revenue enhancements assumed, but long standing track record of improving performance and revenue
 
—   Significant potential for revenue and productivity improvements
                 
Fifth Third Old Kent
– Net income per FTE $ 76.4 k $ 35.6 k
– Net revenue per FTE $ 226 k $ 141 k
– Earning assets per FTE $ 3.7 m $ 2.2 m
– Efficiency ratio 41.3 % 56.6 %

—   Demonstrated performance with CNB acquisition
         
– Net income per FTE at announcement (6/99) $ 35.0k
– Consol. Indiana NI per FTE — Q3 2000 $ 77.8k

26

Table of Contents

Long Performance History

     
I. Continuing Industry Leading Returns
II. Shareholder Focus
III. Market Confidence
IV. Trading Volume and Market Cap
V. FITB Relative Valuation

27

Table of Contents

FITB Continues to Deliver Industry-Leading Returns

             
ROE (1)
 
1 Bank Of New York 26.6 %
2 Mellon Financial 25.2
3 FITB / OK * 21.8
4 Northern Trust Corp. 21.8
5 Comerica 21.4
3 US Bancorp (pro forma) * 21.1
7 PNC Financial Serv. 20.8
8 Synovus Financial 20.0
9 FleetBoston Financial 17.8
10 Bank of America 17.1
             
ROA
 
1 Mellon Financial 2.11 %
2 Synovus Financial 1.94
3 FITB / OK * 1.93
4 US Bancorp (pro forma) * 1.89
5 Wells Fargo & Co. 1.86
6 Comerica 1.85
7 Bank Of New York 1.83
8 PNC Financial Serv. 1.78
9 National City Corp. 1.56
10 SunTrust Banks, Inc. 1.44
             
Efficiency
 
1 US Bancorp (pro forma) * 42.7 %
2 FITB / OK * 42.9
3 Comerica 46.6
4 Bank Of New York 49.5
5 Bank of America 51.4
6 Southtrust Corp. 51.4
7 BB&T Corp. 52.2
8 Wachovia Corp. 54.1
9 FleetBoston Financial 55.5
10 National City Corp. 56.9
         
LT Growth
 
1 FITB / OK 16.0%
2 State Street Corp. 15.0
3 Synovus Financial 15.0
4 US Bancorp 14.0
5 Wells Fargo & Co. 13.0
6 Bank Of New York 13.0
7 Mellon Financial 13.0
8 Northern Trust Corp. 13.0
9 FleetBoston Financial 12.0
10 BB&T Corp. 12.0

Data excludes Citigroup and companies that have announced control sales
(1) For U.S. banking institutions with leverage ratio > 6.75%

LT EPS Growth Rate Source: IBES
* 9/30 LTM combined financial data adjusted to reflect 100% of announced cost savings

28

Table of Contents

Linking Share Ownership to Behavior

—   Implementation of Fifth Third’s incentive programs
 
—   Key components

    – Performance based incentive compensation
 
    – Variable bonus level tied to high performance targets
 
  – All front-line managers have and will continue to participate in Fifth Third option grant program
 
    – Significant personal investment by Fifth Third team in FITB stock
 
    – Old Kent executives will have significant ownership as well

—   Share ownership mindset:
                     
FITB OK
• % of Employees Owning Shares 77% 33%
• # of Officers Receiving Options 2,250 1,750
• % ownership by Employees & Directors 9.7% 6.5%

29

Table of Contents

Market Confidence

—   Moody’s upgrade in September from A1 to Aa3. One of only three bank holding companies with this rating.
 
—   Stock performance:
                         
FITB S&P 500 Industry*
1-year 34.8 % 13.3 % -1.1 %
5-year 38.6 21.7 15.3
10-year 34.5 19.4
20-year 30.0 16.7

* S&P Bank Index total return (BIXK)
* N.B. All returns as of 9/30/00

30

Table of Contents

    Trading Volume and Market Capitalization

                       
Dollars in billions.
Avg Daily
Rank Institution Trading Volume Market Cap
Fifth Third 1 JP Morgan Chase 7,507 $ 74.1
currently 2 Bank Of America Corp 5,712 72.6
averaging 3 Bank One 4,262 42.3
2,455 million 4 Wells Fargo & Co. 4,042 83.6
shares per day 5 FleetBoston Financial 2,828 38.8
6 First Union Corp 2,760 26.0
7 U.S. Bancorp 2,637 34.0
>
8 Bank of New York 2,017 43.1
9 Mellon Financial 1,837 24.0
10 Fifth Third Bank 1,374 30.8
11 KeyCorp 1,319 10.6
12 National City 1,220 15.8
13 PNC Financial Services 961 20.7
14 Northern Trust 959 20.9
15 AmSouth Bancorp. 917 5.6

N.B. Market capitalization as of November 29, 2000. * Pro forma for pending acquisitions.

31

Table of Contents

    FITB Relative Valuation

                                                                                                         
Yahoo Cisco Coca Northern Pfizer Colgate Pepsico Bank of Fifth
Inc Sys Inc Cola Co GE Trust AIG Inc. Palmolive Merck Inc. New York Third IBM
Price / 2001E 88.4 52.8 35.5 35.3 34.8 34.8 33.3 31.1 27.8 27.0 24.8 22.0 20.3
Market Cap as of 12-1-00 (FITB Pro forma pending acquisitions) 21.4 341.5 154.2 505.3 18.7 225.6 274.4 34.2 209.0 61.1 39.6 29.6 167.7
P/2001E to 5-year IBES long term growth rate 1.84x 1.62x 2.54x 2.36x 2.68x 2.48x 1.59x 2.40x 2.32x 2.07x 1.91x 1.47x 1.57x

N.B. Yellow line represents P/2001E to 5-year IBES long-term growth rate. Numbers above bars represent price to 2001 earnings. Numbers in bars represent Market Cap as of 12-1-00 (FITB Pro forma pending acquisitions)

32

Table of Contents

Thank You

33