Fifth Third Bancorp

We expect that Fifth Third will eventually need to include AOCI in its regulatory capital ratios. However, regulators appear poised to exempt Category IV banks from other capital requirements that had been proposed as part of the finalization of Basel III. 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 have increased and equate to 7.9% of total commercial loans, which we view somewhat cautiously. Commercial real estate (CRE) mortgages are 9.4% of total loans and construction is 5.0% of total loans--both toward the lower end of the peer range. Exposure to office properties is minimal at 1.0% of total loans.

...S&P Global Ratings thinks that Fifth Third Bancorp (Fifth Third)'s balance sheet is well positioned as the U.S. Federal Reserve (Fed) begins to ease monetary policy. Fifth Third experienced relatively good deposit stability, despite outflows across the banking industry in 2022 and 2023 partly caused by the Fed's quantitative tightening. The bank's deposits were down only 1.5% between the end of 2021 and June 30, 2024, and brokered deposits represent a nominal 2.3% of the total. About 57% of Fifth Third's deposits are insured and most commercial accounts are operational, including those tied to treasury management products. Moreover, we expect non-interest-bearing account balances to stabilize as the proportion of depositors seeking higher-yielding alternatives continues to decline. Management forecasts deposit betas (the portion of the change in market rates passed to depositors) associated with market priced accounts and time deposits (64% of total deposits) will be about 80%-100% in a...

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