Company: FITBI
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0000035527-25-000212
Chunk: 74

Company: FIFTH THIRD BANCORP
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 7
Chunk 74
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 of 4.7% in 2025, increasing to an average of 8.0% in 2026 and decreasing to an average of 7.8% in 2027. In this scenario, the 10-year Treasury yield increases to 4.7% in the first quarter of 2026, then drops to 3.4% by the end of 2026. Credit spreads also expand in this scenario, reaching a peak of 3.9% in the second 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 4.3% in 2025, followed by 3.4% and 1.3% 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 September 30, 2025 and these qualitative adjustments increased from the qualitative factors used in the ACL as of June 30, 2025. These qualitative adjustments primarily reflect the Bancorp’s 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 

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

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.

The Bancorp’s quantitative credit loss models are sensitive to changes in economic forecast assumptions over the reasonable and supportable forecast period. Applying a 100% probability weighting to the Downside scenario rather than using the probability-weighted three scenario approach would result in an increase in the quantitative ACL of approximately $1.2 billion. This sensitivity calculation only reflects the impact of changing the probability weighting of the