Company: FITBI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000035527-25-000137
Chunk: 60

Company: FIFTH THIRD BANCORP
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 7
Chunk 60
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 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.

March 31, 2025 ACL

The ACL as of March 31, 2025 increased $38 million from December 31, 2024, driven by higher period-end loan and lease balances and deterioration in the economic forecasts used to calculate the ACL, partially offset by favorable impacts of improvements in the risk profile of the loan and lease portfolio. As of March 31, 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. During the first quarter of 2025, the FOMC paused further changes in monetary policy after cutting rates at the end of 2024. It is expected that the FRB will maintain current federal funds rate levels in the near-term until there is more clarity regarding U.S. economic policies and their impacts. 

At March 31, 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 March 31, 2025 ACL assumed that inflation rates peaked higher and more rapidly when compared to the scenario used for the December 31, 2024 estimate. These changes reflect recent trends and additional inflationary pressures that have arisen from changes in U.S. fiscal, tariff and immigration policies. This scenario assumed a peak rate of inflation of 3.8% at the start of the scenario, decreasing to 3.1% by the end of 2025 and averaging 2.8% and 2.2% in 2026 and 2027, respectively. In response to fiscal tightening and high interest 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 1.9% for 2025, followed by 1.7% in 2026 and 2.3% in 2027. The Baseline scenario also assumed an average unemployment rate of 4.1% for 2025, followed by 4.3% for both 2026 and 202