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Rating Action:

Moody's affirms Fifth Third's ratings (holding company senior at Baa1); outlook remains stable

23 Jun 2017

New York, June 23, 2017 -- Moody's Investors Service has affirmed all of the ratings of Fifth Third Bancorp (Fifth Third) and those of its subsidiaries. The parent company is rated Baa1 for senior debt and its bank subsidiary, Fifth Third Bank, Ohio, has deposit ratings of Aa3/Prime-1 and a standalone baseline credit assessment (BCA) of a3. The bank also has an A3 senior debt rating and a Baa1 subordinated debt rating, and its counterparty risk assessments are A2(cr)/P-1(cr). Fifth Third's rating outlook remains stable.

The following ratings have been affirmed:

Issuer: Fifth Third Bancorp

Issuer Rating, Affirmed Baa1, outlook stable

Senior Unsecured, Affirmed Baa1, outlook stable

Senior Unsecured Shelf, Affirmed (P)Baa1

Subordinate, Affirmed Baa1

Subordinate Shelf, Affirmed (P)Baa1

Preferred Shelf, Affirmed (P)Baa2

Preferred Stock Non-cumulative, Affirmed Baa3 (hyb)

Issuer Outlook, Stable

Issuer: Fifth Third Bank, Ohio

Long Term Deposit Rating, Affirmed Aa3, outlook stable

Short Term Deposit Rating, Affirmed P-1

Deposit Note/CD Program, Affirmed (P)Aa3

Issuer Rating, Affirmed A3, outlook stable

Baseline Credit Assessment, Affirmed a3

Adjusted Baseline Credit Assessment, Affirmed a3

Senior Unsecured, Affirmed A3, outlook stable

Senior Unsecured Bank Note Program, Affirmed (P)A3

Subordinate, Affirmed Baa1

Subordinate Bank Note Program, Affirmed (P)Baa1

Short Term Bank Note Program, Affirmed (P)P-2/P-2

Long Term Counterparty Risk Assessment, Affirmed A2(cr)

Short Term Counterparty Risk Assessment, Affirmed P-1(cr)

Issuer Outlook, Stable

RATINGS RATIONALE

The rating affirmation is supported by Fifth Third's established direct banking franchise in the Midwest, which provides the foundation for generating diversified earnings and respectable profitability as well as for its strong core deposit base. The affirmation also reflects Fifth Third's improving asset quality, its solid capitalization, and its strong and stable funding and liquidity.

Moody's said that Fifth Third's credit quality has strengthened, benefiting from significant efforts by the bank to shift its asset mix away from segments where the risk-to-reward can be unfavorable. Those segments include commercial real estate, prime indirect auto, and brokered mortgages. Moody's problem loan ratio for Fifth Third, which includes accruing 90 day past due and restructured loans, declined to 2% as of first quarter 2017 from 3.3% in 2014. Furthermore 59% of the problem loans are restructured loans resulting from the 2007-2009 financial crisis that have been performing for a number of years. Fifth Third's moderate exposure to commercial real estate also supports the bank's asset quality, added Moody's.

With regard to capital, Moody's noted that Fifth Third's capital ratios have steadily increased owing to strong earnings and relatively flat growth as the bank has repositioned its business. Moody's adjusted TCE/risk-weighted asset ratio for Fifth Third rose to 10.7% as of 31 March 2017 from 9.7% as of year-end 2015. The bank's tangible capital can withstand significant asset quality and earnings stress under Moody's severely adverse case scenario. With that said, Moody's considers capital to be less a rating strength than Fifth Third's asset risk and liquidity profiles.

Fifth Third's revenue growth has been challenged by the protracted low interest rate environment and its exit from non-core businesses and lending relationships. The bank has nevertheless improved its core profitability, aided by lower credit and operating costs and strong fee generation. Recent interest rate increases are giving the bank some earnings pick up through the net interest margin, said Moody's.

With regard to funding and liquidity, Moody's noted that Fifth Third's regional market presence supports its strong core deposit base, which more than fully funds the bank's loan portfolio. Fifth Third's investment portfolio is conservative, comprised mainly of high quality, liquid securities.

Overall, Moody's considers Fifth Third's standalone BCA to be appropriately positioned at the a3 US median bank BCA. The stable outlook on the rating anticipates little change in its credit profile over the next two years.

What Could Change the Rating - Up

Fifth Third's standalone BCA could move up if it raised its capital ratios.

What Could Change the Rating - Down

Meaningful deterioration in capitalization or asset quality could result in negative rating pressure.

The principal methodology used in these ratings was Banks published in January 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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