Why Fifth Third's Earnings Could Be Better Than Expected in 2021
The coronavirus pandemic forced most banks to set aside much more in reserve than usual to prepare for potential loan losses. After all, the pandemic resulted in broad swaths of the economy shutting down for long stretches and the overall economy running at a much slower pace than normal. But intervention from the Federal Reserve and the U.S. government has delayed those loan losses and might even prevent them from happening. If more stimulus is passed and vaccination efforts prove successful, Fifth Third Bancorp (NASDAQ: FITB) is likely to benefit in an outsized way because of all of the reserves it has built up. This, in turn, could lead to much better earnings in 2021. Here's why.
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Fifth Third has taken a conservative approach to its loan loss reserving. At the end of the fourth quarter, the $205-billion-asset bank had reserved $2.6 billion, or enough money to absorb losses on roughly 2.41% of its loan book and unfunded lending commitments.
Source Fool.com
