Fifth Third Bancorp Hit by Lawsuit Over $230M Tricolor ABS, Shares Fall 4.8%
Investors holding over $230 million of Tricolor notes sued Fifth Third Bancorp, JPMorgan and Barclays for alleged audit warnings ignored and underwriting failures in asset-backed securities now trading below 10 cents on the dollar. Fifth Third recorded a $178 million non-cash impairment and saw its shares drop 4.8% on the news.
1. Lawsuit Filed by Noteholders
Noteholders including Janus Henderson, One William Street and Ellington Capital filed a federal complaint in Manhattan claiming losses on over $230 million of Tricolor ABS sold between April 2022 and June 2025, now trading under 10 cents on the dollar.
2. Allegations of Underwriting Failures
The suit alleges that audit reports in 2022 and 2024 flagged misrouted payments, misstated delinquencies and phantom repossessions, yet the banks continued to underwrite and securitize Tricolor loans without disclosing these risks.
3. Tricolor Bankruptcy Charges
After Tricolor’s September 2025 bankruptcy, Fifth Third booked a $178 million non-cash impairment charge in Q3 2025 related to its asset-backed finance exposure, while JPMorgan and Barclays recorded $170 million and £110 million charges respectively.
4. Earnings and Legal Uncertainty
Any settlement or adverse ruling could increase provisions and pressure earnings in upcoming quarters, following a 4.8% drop in Fifth Third’s share price on the lawsuit news.