Fifth Third to Incur $170-$200M Charge in Q3 on Loan Fraud Exposure

Fifth Third Bancorp FITB disclosed that it expects to record a non-cash impairment charge of $170–$200 million in the third quarter of 2025, tied to alleged fraudulent activity involving subprime auto lender Tricolor Holdings, the commercial borrower associated with an asset-backed finance loan. The loan carried an outstanding balance of approximately $200 million. The company has engaged with law enforcement authorities and third-party advisors to determine the extent of the loss.

The impairment is expected to significantly affect Fifth Third’s provision for credit losses, which is now forecasted to be in the range of $220–$250 million for the third quarter.

The development comes as other large banks, including JPMorgan Chase & Co. JPM and Barclays Plc BCS, also face exposure through warehouse lending lines to Tricolor Holdings. Tricolor, which targets borrowers with limited or no credit history, funds its lending primarily by packaging loans into asset-backed securities (ABS). Since 2022, the company has issued nearly $2 billion of ABS, including a $217 million deal in June 2025 led by JPM and BCS. 

Our Take on FITB’s Strategic Position

While the impairment linked to fraudulent activity will likely weigh on FITB’s near-term earnings, steady loan growth and improving non-interest income are expected to support top-line growth. The bank’s balance sheet discipline and focus on core operations position it for long-term growth.

However, Fifth Third continues to face elevated non-interest expenses due to investments in technology, compensation, and customer experience initiatives. Further, the bank’s loan portfolio remains heavily concentrated, with commercial loans accounting for 60.3% of total loans and leases as of June 30, 2025. This lack of diversification exposes the company to heightened risk, particularly in a volatile macroeconomic environment.

FITB’s Zacks Rank & Price Performance

The company’s shares have gained 18.9% in the past six months compared with the industry’s 19.5% growth.

FITB presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research