At the same time, DBRS Morningstar confirmed the ratings of its primary banking subsidiary,
KEY RATING CONSIDERATIONS
The Negative trend reflects the wide and growing scale of the economic disruption resulting from the Coronavirus Disease (COVID-19) pandemic, which is expected to pressure Fifth Third's earnings and asset quality. Nevertheless, unprecedented support measures have been put in place through monetary and fiscal stimulus, as well as relaxed criteria from regulators, which in our view, could help mitigate some of the negative impact of the crisis. However, should the crisis be prolonged, or if the recovery is muted, additional ratings pressure is likely.
The ratings confirmation reflects Fifth Third's strong balance sheet fundamentals, current risk profile and diversified earnings stream. The ratings also consider Fifth Third's commercially-focused loan portfolio, which is less diversified into consumer loan categories than some peers. Fifth Third also has exposure to small businesses and other industries, including oil & gas, that may be adversely impacted during the downturn.
RATING DRIVERS
Given the Negative trend, an upgrade of the ratings is not currently anticipated. However, DBRS Morningstar would revise the trend back to Stable if the economic fallout from the coronavirus pandemic is not prolonged and the Company's performance is aligned with similarly-rated peers. Over the longer term, if Fifth Third achieves better-than-peer core profitability metrics over a sustained period, while maintaining a sound balance sheet and risk profile, the ratings would be upgraded.
Conversely, a downgrade of ratings would arise from a sustained decline in profitability levels or significant deterioration in asset quality.
RATING RATIONALE
Fifth Third provides products and services to commercial and consumer customers, across its ten-state footprint from
Over the last few years, Fifth Third has been reducing its risk profile by exiting individual commercial credits that do not fit its risk and return targets, reducing exposure to commercial real estate and slowing its origination of indirect auto loans. These actions should better position Fifth Third during this credit cycle. However, Fifth Third has identified
The Company's funding and liquidity profile remains strong, underpinned by a large core deposit base that amply funds the loan portfolio. Additionally, liquidity at the holding company remains robust, with sufficient liquidity to service debt and pay dividends for over two years. At
Fifth Third, a diversified financial services corporation headquartered in
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
The Grid Summary Grades for Fifth Third are as follows: Franchise Strength - Strong; Earnings Power - Strong/Good; Risk Profile - Strong/Good; Funding & Liquidity - Strong; Capitalisation - Strong/Good.
Notes:
All figures are in
The principal methodology is the Global Methodology for
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
The primary sources of information used for this rating include Company Documents and
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
Tel. +1 212 806-3277
Ratings
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
20-May-20 Long-Term Issuer Rating Trend Change A Neg US
20-May-20 Short-Term Issuer Rating Confirmed R-1 (low) Stb US
20-May-20 Long-Term Senior Debt Trend Change A Neg US
20-May-20 Short-Term Instruments Confirmed R-1 (low) Stb US
20-May-20 Subordinated Debt Trend Change A (low) Neg US
20-May-20 Preferred Stock Trend Change BBB Neg US
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
20-May-20 Long-Term Issuer Rating Trend Change A (high) Neg US
20-May-20 Short-Term Issuer Rating Trend Change R-1 (middle) Neg US
20-May-20 Long-Term Senior Debt Trend Change A (high) Neg US
20-May-20 Short-Term Instruments Trend Change R-1 (middle) Neg US
20-May-20 Subordinated Debt Trend Change A Neg US
20-May-20 Long-Term Deposits Trend Change A (high) Neg US
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