DBRS Confirms Fifth Third Bancorp at AA (low); Trend Changed to Negative

DBRS has today confirmed the ratings of Fifth Third Bancorp (Fifth Third or the Company) and its operating bank subsidiaries, including Fifth Third’s Issuer and Senior Debt rating of AA (low). The ratings action follows a detailed review of the Company’s operating results and financial fundamentals. At the same time, DBRS has changed the trend on all ratings to Negative from Stable.

The change of trend to Negative from Stable reflects DBRS's concern over the brisk and significant deterioration in Fifth Third's $2.9 billion residential development, $15.0 billion in other commercial real estate and $22.4 billion in mortgage and home equity portfolios, particularly in Michigan and Florida. Fifth Third’s asset quality lagged the medians of similarly rated peers at year end 2007 and appears to be further weakening. If the deterioration moderates in the near term, the Company's earnings should be able to absorb the losses and will recover as asset quality improves. DBRS also noted that some investments held in the Company’s bank-owned life insurance policies also continue to deteriorate in value based on the underlying investments and may place a further constraint on earnings.

DBRS's confirmation of Fifth Third's Senior Debt rating at AA (low) represents the rating agency's view that the Company's earnings power and core franchise are healthy, continue to perform well and have demonstrated resilience in the past year, despite the difficult operating environment. Net interest income has expanded and net interest margin has proven relatively stable while fee income has outperformed and costs have been well managed. Pre-tax pre-provision income, adjusted for one-time charges, has grown during this period of stress, indicating the Company’s continuing ability to maintain positive momentum in its principal businesses. Another positive is that loan growth, core deposit growth and fee income growth have exceeded its geographic peers and Fifth Third’s processing business continues to lead the industry in many areas. Operating performance, however, does trail historical levels.

DBRS notes that although the Company’s capital ratios have declined over the past year, like many banks, they remain adequate, are within the acceptable range for similarly rated peers and will likely rise in the coming quarters. Additionally, Fifth Third is 80% core funded and has maintained adequate liquidity with minimal rollover risk and improving liquidity coverage at the bank holding company level.

Further significant deterioration and losses in the Company’s asset quality of the scale to materially impact earnings and invade capital could result in negative rating actions. Conversely, the stabilization and decline of credit losses and charges could result in the restoration of the trend to Stable.

Note: All figures are in U.S. dollars unless otherwise noted.