Company: FITBI
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0000035527-25-000212
Chunk: 72

Company: FIFTH THIRD BANCORP
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 7
Chunk 72
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 31, 2024, the Bancorp used three forward-looking economic scenarios during the reasonable and supportable forecast period in its expected credit loss models to address the inherent imprecision in macroeconomic forecasting. Each of the three scenarios was developed by a third party that is subject to the Bancorp’s Third-Party Risk Management program including oversight by the Bancorp’s independent model risk management group. The scenarios included a most likely outcome (Baseline) and two less probable scenarios with one being more favorable than the Baseline and the other being less favorable. The more favorable alternative scenario (Upside) depicted a stronger near-term growth outlook while the less favorable outlook (Downside) depicted a moderate recession.

The Baseline scenario was developed such that the expectation is that the economy will perform better than the projection 50% of the time and worse than the projection 50% of the time. The Upside scenario was developed such that there is a 10% probability that the economy will perform better than the projection and a 90% probability that it will perform worse. The Downside scenario was developed such that there is a 90% probability that the economy will perform better than the projection and a 10% probability that it will perform worse.

September 30, 2025 ACL

The ACL as of September 30, 2025 decreased $70 million from December 31, 2024 primarily driven by impacts of changes in loan portfolio mix. As of September 30, 2025, the Bancorp’s macroeconomic scenarios included estimates of the expected impacts of changes in economic conditions caused by forecasted interest rates and higher tariffs.

At September 30, 2025, the Bancorp assigned an 80% probability weighting to the Baseline scenario and 10% to each of the Upside and Downside scenarios. The Baseline scenario used in the September 30, 2025 ACL assumed that inflation rates peaked at around the same level and time as in the scenario used for the June 30, 2025 estimate. This reflects recent data and continued uncertainty that has arisen from changes in U.S. fiscal, tariff and immigration policies. This scenario assumed a peak rate of inflation of 3.6% in the third quarter of 2026, gradually returning to target in early 2027 and averaging 3.4% and 2.7% in 2026 and 2027, respectively. In response to fiscal tightening and high interest rates, this scenario also assumed that real GDP growth would be