Company: FITBI
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000035527-25-000079
Chunk: 537

Company: FIFTH THIRD BANCORP
Filing Date: 2025-02-24
Form: 10-K
Item: Item 7
Chunk 537
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 rates, this scenario also assumed that real GDP growth would be below trend in the near term but that the unemployment rate will remain steady. The Baseline scenario assumed an average annual real GDP growth rate of 2.2% for 2025, followed by 1.6% in 2026 and 1.8% in 2027. The Baseline scenario also assumed an average unemployment rate of 4.1% for 2025, 2026 and 2027. While the Treasury rate environment is relatively stable with the 10-year yield remaining in a range between 4.24% and 4.33%, credit spreads are projected to expand from 1.5% at the start of the scenario to a peak of 2.60% in early 2027. Lastly, the Baseline scenario assumed additional cuts to the target federal funds rate beyond 2024, with an average federal funds rate of 4.1% 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 3.2% in 2025, 2.4% in 2026 and 2.0% in 2027. The Upside scenario also assumed an average unemployment rate of 3.3% in both 2025 and 2026 and 3.5% in 2027. 10-year Treasury yields are fairly stable reaching a peak of 4.43% at the end of 2025, while credit spreads are consistent with the baseline scenario peaking at 2.57% in 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 first quarter of 2025. The Downside scenario assumed that real GDP declines from the fourth quarter of 2024 through the third quarter of 2025, with a cumulative decline of 2.6%, modestly recovering to an average annualized GDP growth rate of 0.4% for the full year of 2026 and 2.7% for the full year of 2027. The Downside scenario assumed an average unemployment rate of 7.3% in 2025, increasing