DBRS downgrades Fifth Third

DBRS said it downgraded the long-term ratings of Fifth Third Bancorp to A from AA (low) and its short-term rating to R-1 (low) from R-1 (middle).

At the same time, DBRS downgraded the long-term ratings of Fifth Third's subsidiary banks to A (high) from AA and their short-term ratings to R-1 (middle) from R-1 (high).

This concludes the review with negative implications that began in January, and the trend is negative.

The agency said the downgrade was driven by Fifth Third's more-than-year-long struggle with steepening credit costs from deteriorating asset quality. The $5.3 billion of loan loss provisions taken in the past five quarters were 1.6 times the company's income before taxes and provisions of roughly $3.3 billion.

The ratings of Fifth Third are underpinned by a core-funded, predominantly Midwest retail and small/middle market super-regional banking franchise with a strong sales culture and a recurrent revenue generating ability, DBRS said, adding that the ratings also reflect the strength of the company's strong deposit shares in many markets.

The negative trend reflects DBRS's perception that significant amounts of potential losses remain embedded in the company's loan portfolios.

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