Fitch Ratings has maintained its Issuer Default Rating (IDR)
of "A-" on
Fifth Third Bancorp
) last week, but with a positive outlook.
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According to the rating agency, the positive outlook on the
rating is a reflection of Fifth Third's comparatively stronger
earnings profile though, to some extent, this is marred by the
company's elevated credit risk.
Over the near term, the elevated level of problem assets that is
reflected in Fifth Third's weaker asset quality ratios is a
concern and a hindrance to an upgrade in its rating.
Encouragingly, however, the positive outlook implies that if
Fifth Third can achieve improvements in its asset quality ratios
along with continuation of better-than-average earnings as well
as strong capital and liquidity profile, the rating could be
upgraded a notch higher.
Moreover, the rating agency recognized that in spite of having
elevated levels of nonperforming assets, which are ahead of the
peer levels, losses are manageable at Fifth Third and lie close
to the peer averages over the past year.
As a matter of fact, the rating is a testament of the company's
financial strength and its ability to pay back its borrowings.
Therefore, enjoying higher ratings enable the company to issue
debt at a lesser cost and hence are a positive for the company.
In addition, IDRs on 13 other large regional banks were
reaffirmed by Fitch following a thorough review of the peer
group. The list includes the likes of
Huntington Bancshares Incorporated
M&T Bank Corporation
Fifth Third currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
also maintain a long-term Neutral recommendation on the