Fifth Third Bancorp

As of Sept. 30, 2023, Fifth Third's Tier 1 ratio adjusted for unrealized losses was 7.0%, lower than that of similarly rated large regional bank peers. (Certain peers have more sizable allocations to held-to-maturity portfolios versus AFS.) We therefore expect the bank will work to accrete capital by limiting share repurchases through at least 2024. Fifth Third's solid earnings power should also help, as should the accretion of AOCI, which management forecasts will decline 35% by year-end 2025 (assuming the implied forward curve). 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. Nonetheless, criticized assets are a bit elevated versus peers, at 7.0% of

...We think that Fifth Third's balance sheet is well positioned as the Federal Reserve continues to tighten monetary policy. Fifth Third Bancorp. has had relatively good deposit stability, as the Federal Reserve's quantitative tightening continues to cause deposit outflows across the banking industry. The bank's deposits (excluding brokered deposits) were down 3.8% between the end of 2021 and June 30, 2023, and increased 2.0% during third-quarter 2023, from the prior quarter. About 60% of Fifth Third's deposits are insured and most commercial accounts are operational, including those tied to Treasury management products. Nonetheless, we expect depositors will continue to seek out higher yielding alternatives, causing noninterest bearing account balances to decline. We also expect deposit betas (the portion of the change in market rates passed to depositors) will accelerate towards the mid-to-high-40% range cumulatively. We expect Fifth Third will continue building capital as it works toward...

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