This was a tough year for banks, and 2014 could be worse. The good news for shareholders of Fifth Third Bancorp (NASDAQ:FITB) is that the Ohio-based lender may have an ace up its sleeve.

The industry's recent woes are multifaceted. Regulators continue to clamp down on sources of noninterest income. Compliance costs are boosting expenses. And to top things off, the Federal Reserve announced last week that short-term interest rates will stay low for a "considerable time," perhaps even after the unemployment rate dips below 6.5%.

The anemic revenue environment has sent banks scrambling for ways to boost the bottom line. U.S. Bancorp (NYSE:USB) is pursuing the payments arena, BB&T is building out its insurance subsidiaries, and Huntington Bancshares (NASDAQ:HBAN) is doing just about anything it can think of to drive growth.

But one thing they all have in common is an increasingly heavy reliance on lower loan loss provisions to fuel earnings. For the first nine months of the year, BB&T's fell by 34% compared to the year-ago period, Huntington Bancshares' by 39%, and U.S. Bancorp's by 26%.


In many instances, in fact, banks would have experienced a contraction in earnings but for the reduction in credit costs. Take this out, and both BB&T and KeyCorp (NYSE:KEY) would have found themselves in this boat. Including provisions, BB&T earned $257 million more before taxes; excluding provisions, it earned $16 million less. Meanwhile, KeyCorp's $12 million increase would have translated into a $49 million decrease.

It's here, in turn, where Fifth Third Bancorp may have an edge going into 2014.

Through the third quarter of this year, its provisions declined by a comparatively reasonable 22%. And while banks aren't supposed to use this measure to manipulate earnings, there's use no denying that it's highly subjective, and thus inherently vulnerable to such misuse. Indeed, even assuming the absence of illicit intentions, it gives Fifth Third Bancorp more wiggle room from an earnings perspective to respond to improved credit conditions next year relative to its peers.

Is this enough of an edge for Fifth Third Bancorp to outperform its peers in 2014? If the industry's underlying economics don't start improving in the not-too-distant future, it may very well do the trick.

John Maxfield has no position in any stocks mentioned. The Motley Fool owns shares of Fifth Third Bancorp, Huntington Bancshares, and KeyCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.