Company: FITBI
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0000035527-25-000212
Chunk: 73

Company: FIFTH THIRD BANCORP
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 7
Chunk 73
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 below trend until at least 2027 and the unemployment rate will increase modestly. The Baseline scenario assumed an average annual real GDP growth rate of 1.8% for 2025, followed by 1.5% in 2026 and 1.8% in 2027. The Baseline scenario also assumed an average unemployment rate of 4.2% for 2025, followed by 4.6% in 2026 and 4.7% in 2027. The Treasury rate environment is expected to be relatively stable with the 10-year yield remaining within a narrow projected range of 4.2% to 4.3% through 2027. Credit spreads are projected to expand from an average of 1.8% in 2025 and reach their peak level of 2.4% in late 2026. Lastly, the Baseline scenario assumed additional cuts to the target federal funds rate, with an average federal funds rate of 4.2% in 2025 that decreases to an average of 3.4% and 3.0% in 2026 and 2027, respectively.

The Upside scenario assumed that, on an average annual basis, the change in real GDP is 2.0% in 2025, 3.2% in 2026 and 2.2% in 2027. The Upside scenario also assumed an average unemployment rate of 4.1% in 2025, 3.7% in 2026 and 4.0% in 2027. In this scenario, 10-year Treasury yields are fairly stable, reaching a peak of 4.4% in the third quarter of 2026, while credit spreads are consistent with the Baseline scenario, peaking at 2.3% in the first quarter of 2027. In the Upside scenario, the forecast for federal funds rate cuts was generally consistent with the Baseline scenario. 

The Downside scenario included significant worsening of economic conditions, causing the U.S. economy to fall into a recession in the fourth quarter of 2025. The Downside scenario assumed that real GDP declines from the third quarter of 2025 through the second quarter of 2026, with a cumulative decline of 2.6%, recovering to an average annualized GDP growth rate of 1.0% for the full year of 2027. The Downside scenario assumed an average unemployment rate