Yahoo Finance KeyCorp profit falls as higher deposit costs hurt interest income
(Reuters) — KeyCorp reported a 33.5% drop in first-quarter profit on Thursday as its net interest income was eroded by higher deposit costs and elevated interest rates kept borrowers on the sidelines.
U.S. banks have been grappling with increased funding costs as elevated interest rates prompt customers to move cash from banks to safe-haven higher-yielding alternatives like money-market funds for better returns.
Net interest income (NII) — the difference between what a bank earns on loans and pays out on deposits — fell 20% to $886 million in the quarter.
Net interest margin in the first quarter contracted to 2.02%, versus 2.47% in the year-ago period.
The bank kept its forecast of NII declining between 2% and 5% in 2024 unchanged. Analysts on average expect it to fall 3.4%, according to LSEG data.
Meanwhile, loan growth has also receded as higher benchmark lending rates keep borrowers on the sidelines. In recent weeks, analysts have pushed back expectations of interest rate cuts this year due to strong economic data.
KeyCorp's average loans and leases decreased $2.6 billion, or 6.1% in the quarter versus a year earlier.
It maintained its forecast of average loans declining between 5% and 7% this year.
The company's net income fell to $183 million, or 20 cents per share, in the three months ended March 31 from $275 million, or 30 cents per share, in the year-ago period.
(Reporting by Sri Hari N S and Manya Saini in Bengaluru; Editing by Maju Samuel)
