Fitch Affirms Fifth Third Bancorp's IDR at 'AA-'; Outlook Negative.

NEW YORK -- Fitch has affirmed all ratings for Fifth Third Bancorp (FITB) and its principal subsidiaries, following the announcement that FITB is undertaking a significant balance sheet restructuring. The Rating Outlook remains Negative. A complete list of ratings is provided at the end of this release.

The announced balance sheet restructuring involves FITB selling $11.5 billion of securities, mainly low-coupon, fixed-rate mortgage-backed securities, with the proceeds used to pay down $8.7 billion of short-term borrowings and to reinvest $2.8 billion in mortgage-backed securities and three-month U.S. Treasury Bills. The transaction also calls for the termination of $1.1 billion of repurchase and reverse repurchase agreements. These transactions combined are expected to generate a pre-tax losses of approximately $500 million. Finally, management plans to purchase a series of interest rate swaps, caps, and floors in an attempt to reduce interest rate sensitivity. Management expects the restructuring of the balance sheet to benefit annualized net interest income by $110 million to $120 million (pre-tax) and add 35 to 40 basis points to the net interest margin. However, it is anticipated that the planned hedging activity will reduce net interest income and the net interest margin by $40 million and five basis points, respectively, for 2007.

Losses generated by the transaction are expected to largely offset what FITB would have otherwise earned in 4Q06. That said, Fitch expects FITB to realize future benefits in terms of earnings, interest rate risk, and tangible capital. Fitch has maintained the Negative Rating Outlook and will re-evaluate FITB as some of the prospective benefits of the transaction materialize and after a more detailed review of company's future balance sheet management strategies, particularly with regard to capital and liquidity. Fitch expects FITB to maintain a strong capital position given its high credit ratings. As such, a material diminution of FITB's capital base or quality thereof would likely put further pressure on FITB's ratings.

Separately, the company has essentially completed its overhaul of senior management. Since year-end 2005, FITB has named several new key managers, including a chief financial officer, treasurer, chief operating officer, and corporate strategist.

Fitch affirms the following ratings with a Negative Rating Outlook:

Fifth Third Bancorp

--Issuer Default Rating (IDR) 'AA-';

--Subordinated debt 'A+';

--Short-term debt 'F1+';

--Individual 'A/B';

--Support '5'.

Fifth Third Bank (Ohio)

--Issuer Default Rating (IDR) 'AA-';

--Senior debt 'AA-';

--Subordinated debt 'A+';

--Short-term debt 'F1+';

--Long-term deposits 'AA';

--Short-term deposits 'F1+';

--Individual 'A/B';

--Support '4'.

Fifth Third Bank (Michigan)

--Issuer Default Rating (IDR) 'AA-';

--Subordinated Debt 'A+';

--Short-term debt 'F1+';

--Long-term deposits 'AA';

--Short-term deposits 'F1+';

--Individual 'A/B';

--Support '4'.

Fifth Third Capital Trust I

--Preferred stock 'A+'.

Old Kent Capital Trust I

--Preferred stock 'A+'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.