Fifth Third Bancorp (FITB) said it expects third-quarter losses tied to defaulting loans to rise 24% from the second quarter, to approximately $775 million.

Kevin Kabat, the Cincinnati bank's chairman and chief executive, told investors at the Barclays Capital Global Financial Services Conference that he expects losses from delinquent loans to stabilize "in the next couple of quarters," but that his bank has built a strong reserve for loan losses and that he does not expect Fifth Third to need to add significantly to that reserve this quarter.

He said Fifth Third is working on shifting the fees it charges customers away from penalties and more toward services the bank provides, perhaps a nod to one potential focus of President Obama's plans to form a consumer protection agency.

Kabat also said he continues to be interested in acquisitions, but sees weak loan demand.

“We expect conditions in Florida to remain difficult until the end of the year," he said, but added that he sees signs of improvement in Michigan; Florida and Michigan are two of the markets that caused much pain to Fifth Third's loan portfolio.

In a filing with the Securities and Exchange Commission ahead of Kabat's presentation, Fifth Third said it "currently expects net charge-offs to include approximately $110 million in net charge-offs related to (Shared National Credits) compared with $17 million in the second quarter."

Such losses from syndicated loans are "higher than we expected," Kabat said. However, the filing said the bank expects losses from shared national credits to improve "significantly" in the fourth quarter.

Fifth Third said it expects commercial loan losses to be approximately $500 million to $525 million and consumer loan losses to be approximately $250 million to $260 million. The bank expects nonperforming loans, those for which repayment is doubtful, "to increase approximately 20% from $2.8 billion at the end of the second quarter to approximately $3.4 billion at the end of the third quarter, with approximately $150 million of the growth related to SNC credits," the bank said in its filing.

"Operating trends for the third quarter are expected to be broadly in line with trends previously expected and communicated at the time of our second quarter 2009 earnings announcement on July 23, 2009," Fifth Third's filing said.

Kabat said the bank remains interested in purchasing failed banks from the Federal Deposit Insurance Corp. and other acquisitions, though Fifth Third would only make acquisitions in markets where it already has branches - the Midwest, Georgia, and Florida - and only if they are sizable enough to improve the bank's market share.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com