Company: FITBI
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0000035527-25-000171
Chunk: 72

Company: FIFTH THIRD BANCORP
Filing Date: 2025-08-05
Form: 10-Q
Item: Item 7
Chunk 72
---
 cumulative decline of 2.6%, recovering to an average annualized GDP growth rate of 1.7% for the full year of 2027. The Downside scenario assumed an average unemployment rate of 5.4% in 2025, increasing to an average of 8.2% in 2026 and decreasing to an average of 7.5% in 2027. In this scenario, the 10-year Treasury yield increases to 4.8% in the fourth quarter of 2025, then drops to 3.5% by the end of 2026. Credit spreads also expand in this scenario, reaching a peak of 4.0% in the first quarter of 2026. In the Downside scenario, the forecast for the federal funds rate included steeper rate cuts than the Baseline scenario, with average target rates of 4.6% in 2025, followed by 2.8% and 1.0% in 2026 and 2027, respectively.

The Bancorp’s qualitative adjustments, as an overlay to the quantitative models, resulted in a net increase to the ACL as of June 30, 2025, however, these qualitative adjustments decreased from the qualitative factors used in the ACL as of March 31, 2025, primarily driven by a qualitative decrease in the ACL for the commercial portfolio segment. These qualitative adjustments primarily reflect the Bancorp’s 

46

Table of ContentsManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

expectations that additional credit losses may be present in its portfolio loans and leases beyond what is predictable through the use of quantitative models. The qualitative adjustment for the commercial portfolio segment was primarily driven by additional allowances for certain nonowner-occupied commercial loans secured by real estate, particularly loans secured by office buildings, based on current challenges in the commercial real estate market that are not fully reflected in the Bancorp’s quantitative models. These challenges include, but are not limited to, an imbalance between supply and demand in the market for commercial real estate properties and pressures on borrowers and property valuations resulting from elevated interest rates. Specific to office properties, the Bancorp has also observed industry data indicating that the office sector of the commercial real estate market continues to lag behind others in terms of property values, driven in part by lessened demand as a result of the increased prevalence of remote work across many professions. These adjustments for certain nonowner-occupied commercial loans secured by real estate were partially offset in the second