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 regulatory capital ratios to rise somewhat towards management targets by year-end 2022. We could raise the ratings if we believe the company's franchise strength, financial performance, and risk profile--including asset quality metrics--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 an economic downturn. Although not our base case, we could also lower the ratings if capital

...We believe Fifth Third has built an adequate buffer to absorb rising net losses as asset quality normalizes from historically low levels. We expect asset quality will normalize in 2023, perhaps rapidly if the economy deteriorates. Positively, we believe the bank's risk posture is relatively conservative, and it has a reserve for loan losses that is generally higher than most peers. In addition, management suspended share repurchases in late 2021 to build its common equity Tier 1 (CET1) ratio to about 9.25%, which is roughly in-line with peers. We expect Fifth Third's financial performance to remain relatively stable barring a more significant economic slowdown. We expect the bank's earnings will continue to benefit from rising interest rates and steady loan growth over the next 12 months, with the increase in net interest income helping to offset the likelihood of softer noninterest income and rising credit provisions. Fifth Third's noninterest income represented a solid 33% of total revenue...

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