Moody's Downgraded Ratings of Fifth Third Bancorp (FITB)
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Moody's downgraded the ratings of Fifth Third Bancorp (Nasdaq: FITB) and the bank financial strength rating (BFSR) of its operating banks by two notches (senior debt at the holding company to Baa1 from A2; BFSR to C from B-). Fifth Third Bancorp's short-term rating was also downgraded, to Prime-2 from Prime-1.
The long-term debt and deposit ratings of Fifth Third Bank, Ohio and Fifth Third Bank, Michigan, were lowered by one notch (long-term deposits to A2 from A1). The Prime-1 short-term ratings of both bank subsidiaries were affirmed. Following these rating actions, the outlook on Fifth Third and its subsidiaries is negative.
The firm said, "The downgrade incorporates Moody's view that Fifth Third, despite having taken very sizable loan loss provisions in 2008, faces continued elevated credit costs as real estate markets and the overall U.S. economy remain weak. The additional credit costs will come from a range of consumer and commercial asset classes, in Moody's view. Fifth Third operates in challenging Midwest markets, including Ohio and Michigan, and it also expanded its exposure to the troubled Florida market in recent years. As a result, credit challenges will negatively impact Fifth Third's near-term profitability and pressure its capital position."
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