Fifth Third Bank's message on credit jitters: There's nothing to see here

By Steve Gelsi

Regional bank's stock bounces as earnings beat expectations and provisions for credit losses were less than feared

Fifth Third's stock was recovering its footing

Fifth Third Bancorp's stock regained its footing and rose Friday, after the regional bank said it expects its net charge-off ratio to decline in the fourth quarter - a sign that it's seeing less trouble ahead for its loan portfolio.

The results may suggest that a loan loss disclosed by the bank last month was more of a one-time event, rather than a sign of wider distress in the world of corporate credit.

Fifth Third's stock (FITB) was rising 1.3% Friday afternoon, reversing a steep loss in the previous session.

The bank confirmed it was a lender to bankrupt subprime auto-finance company Tricolor but said it sees no other problems among its nondeposit financial institution (NDFI) loans, which make up 9% of its total loan portfolio.

After a "comprehensive" review of its NDFI portfolio, Fifth Third is "very confident in the quality of the remaining clients within that category," Chief Executive Tim Spence told analysts.

On Thursday, the stock fell 6% as loan problems disclosed by Zions Bancorp (ZION) triggered a selloff in regional-bank stocks, as well as across the broader stock market. Zions shares were rebounding 5.5% Friday.

Read: Banks' credit 'cockroaches' are spooking the stock market. Here's what investors need to know.

Fifth Third said it expects its fourth-quarter charge-off ratio - which reflects the percentage of its loans that it doesn't expect to be paid back - to fall by about 40 basis points, from the third-quarter figure of 1.09%. To be sure, that third-quarter total was well above the year-ago net charge-off ratio of 0.48%.

Among other key figures in the quarter, Fifth Third's provision for loan losses rose 23% to $197 million in the quarter, but the bank had already flagged an increase last month in an update that touched off selling in its stock.

Wall Street analysts had expected $245 million in loan-loss provisions, which is money that banks set aside to cover anticipated problems with loans, according to FactSet data.

Fifth Third also managed to grow its bottom line in the quarter by 14% to $608 million, or 91 cents a share. The bank topped the FactSet analyst consensus estimate for earnings of 86 cents a share.

Citi analyst Keith Horowitz said the bank's "core credit metrics seem solid," with an overall improvement in nonperforming loans in the quarter.

Fifth Third last month disclosed a loss of up to $200 million due to suspected fraud on two loans. While the bank didn't initially name the borrower, it was a lender to Tricolor, which had announced at least one warehouse loan with Fifth Third in recent years.

Fifth Third exited a position in a loan to bankrupt auto-parts seller First Brands years ago because of questions over its collateral, CEO Spence noted.

Earlier this week, JPMorgan Chase & Co. (JPM) said Tricolor contributed $170 million to losses booked during the third quarter. JPMorgan CEO Jamie Dimon subsequently raised concerns about credit-market conditions by noting that "when you see one cockroach, there are probably more."

Separately, Fifth Third made headlines in recent weeks with its deal to buy Comerica Inc. (CMA) for $11 billion in a major deal in the banking sector.

See: Fifth Third paying nearly $11 billion for Comerica as wave of bank mergers builds.

Also read: These banks might be next to pair up, says analyst who called the $11 billion Comerica sale.

As of Thursday's close, Fifth Third's stock had fallen 4.5% in 2025, while the S&P 500 SPX was up by 12.7%.

-Steve Gelsi

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10-17-25 1502ET