If there's much solace in Fifth Third's (NASDAQ:FITB) earnings report, it's mostly that it wasn't any worse than what the company had preannounced. Business continues to be quite challenging for this large super-regional bank, and it still seems as though management is reacting to conditions instead of preparing for them.

Fifth Third wasn't especially prepared for a flattish yield curve, and that's still coming back to haunt it. Net interest income was actually down in the quarter, as ongoing compression in net interest margin tag-teamed with sluggish deposit growth and moderate pricing power on loans. When it all hit the bottom line, it meant more than a 16% drop in net income over last year.

On a positive note, loan growth is still pretty strong, and the company increased its average loans outstanding by a low-teens rate without the inclusion of First National Bankshares, a Florida-based bank that the company acquired earlier in the year. Commercial lending has been particularly strong, but credit quality has held firm.

Deposits, though, are much more troublesome. Average core deposits increased by only 5% when excluding the acquisition and by only 3% on an annualized sequential basis. While Fifth Third is seeing the number of customers increasing, it seems as though it's having trouble hanging on to larger-sized deposits. As I've said before, deposits are generally the cheapest money a bank can ever get, so it's a definite problem when a company can't grow its deposit base. Management is responding to this problem by offering better rates and various package deals for customers, but certainly this is a significant problem area.

I once liked this stock as a potential turnaround, but I'm beginning to think that the turnaround is going to take longer than I originally expected. This is a tough market for banks in general, and the fact that Fifth Third is seeing such anemic deposit growth is a real reason to pause before buying.

That said, the dividend yield is above 4%, and while the return on assets has dropped quite a bit, it's not terrible yet at 1.5%. Investors who still believe that this bank can recapture some of its faded glory may yet be right, though I'm not sure I'd choose this bank over the likes of BB&T (NYSE:BBT) or M&T (NYSE:MTB), or overseas banks like Lloyds (NYSE:LYG) or HSBC (NYSE:HBC), for an investment today.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).