Curtailing the bond purchases will drive long-term interest rates higher.  But what most banks need to see expanding net interest margins and significantly higher net interest income is a parallel rise in interest rates, which will require the Fed to raise the target for the federal funds rate. The FOMC has repeatedly said this "highly accomodative" policy would likely remain appropriate until the unemployment rate falls below 6.5%, assuming inflation is held in check.

Bernanke has said it might be appropriate for the federal funds rate to remain right where it is even after the unemployment rate falls below 6.5%.  Any deviation on Wednesday from his past remarks will be of great interest to investors and bankers.

Usdin sees further upside for Fifth Third's stock to $27, if the central bank raises the federal funds rate late in 2014.

The following chart shows the outperformance this year of Fifth Third's stock against the KBW Bank Index (I:BKX):


FITB Chart
Data by YCharts


Interested in more on Fifth Third Bancorp? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.



>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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