Fifth Third Earnings: Solid 2024 Sets Up Strong 2025

Key Morningstar Metrics for Fifth Third Bancorp

• Fair Value Estimate: $40.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Fifth Third Bancorp’s Earnings

Fifth Third Bancorp FITB reported solid fourth-quarter earnings. As we incorporate these results and the company’s 2025 guidance, which broadly came in above our expectations, we anticipate raising our fair value estimate of $40 per share by a single-digit percentage.

Net interest income increased 1% sequentially as higher loan balances and decreased deposit costs more than offset modest loan yield compression. We view these results favorably, as the net interest margin expanded 7 basis points to 2.97% from the prior quarter, when the loan book grew amid falling interest rates. Fifth Third forecasts 2025 NII growth of 5.5% at the midpoint, implying around $5.97 billion, slightly above our pre-earnings estimate.

Deposit trends were generally positive during the quarter, as average core deposits rose 1% sequentially, primarily reflecting increases in interest checking balances. Deposit mix improved as average demand deposits remained around 24% of total core deposits, while expensive certificates of deposit over $250,000 declined 28% from the previous quarter, which enabled interest-bearing liability costs to decline 38 basis points sequentially to 3%.

About the only blemish in the quarter was the firm’s mixed credit trends. Nonperforming assets as a percentage of total assets ticked up 9 basis points sequentially to 0.71%, which was a bit elevated relative to the 10-year average (excluding the covid-19 period) and chiefly driven by increases in nonperforming commercial and industrial loans. Net charge-offs declined around 4% sequentially, leading to a 2-basis-point decline in the NCO ratio to 0.46%. Provisioning expenses increased by around 15% sequentially. This may prove to be overly conservative, though, as Fifth Third forecasts the NCO ratio to be 40-49 basis points in 2025, which would represent improved credit quality at the midpoint. Thus, the mixed credit trends are worth monitoring in the year ahead.