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1 Reason Fifth Third Bancorp Could Outperform in 2014

John Maxfield
December 1, 2013

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%.