Fifth Third Bancorp

Our rating outlook on Fifth Third remains stable based on our assumptions that the company's asset quality, in terms of nonaccruals and net charge-offs, will not deteriorate significantly over the next two years, and earnings will remain solid. We expect capital ratios to decline because of common share repurchases but remain adequate. We could raise the ratings if we believe that the company's franchise strength, financial performance, and risk profile--including asset quality metrics--have become commensurate with those of higher-rated peers. We could lower the ratings if we believe that nonperforming assets and net charge-offs will significantly increase, possibly because of the company's commercial concentrations or because of a stall in the economic recovery, which we do not expect. We could

...Our ratings on Fifth Third Bancorp reflect its scale and franchise as a major U.S. regional bank with strong market positions in the Midwest and a presence in the Southeast. The ratings also consider the company's good diversification by loan type, geography, and borrower. We view the company's inherent earnings power as solid, aided by a strong contribution from fee-based revenue and relatively well-controlled expenses. We expect Fifth Third's net loan losses to remain low, although its higher-than-peers level of criticized commercial loans relative to total commercial loans (about 10% as of June 30, 2021) may indicate slightly elevated asset quality risks from industries impacted by the pandemic, particularly if the economic recovery stalls. About 9% of the company's total loans and leases are in commercial industry segments that have been more vulnerable to the COVID-19 pandemic, such as hotels and casinos (about 2.3% of loans). As a buffer for potential loan losses, the company's reserves-to-loans...

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