KeyCorp (NYSE: KEY) stock saw a modest decline in its value in intraday trading Thursday following a reported decline in first-quarter profit due to higher deposit costs affecting interest income.
KeyCorp (KEY) disclosed a 33.5% drop in first-quarter profit on Thursday due to a decline in net interest income (NII) caused by higher deposit costs and persistently elevated interest rates, which deterred borrowers.
The ongoing challenge for U.S. banks revolves around managing increased funding costs amid heightened interest rates. This environment prompts customers to seek higher-yielding alternatives, such as money-market funds, for better returns.
Net interest income (NII), representing the difference between a bank’s earnings on loans and its payouts on deposits, plunged by 20% to $886 million during the quarter. Furthermore, the net interest margin for the first quarter contracted to 2.02%, marking a decline from 2.47% recorded in the corresponding period of the previous year.
KeyCorp maintained its previous forecast of NII declining between 2% and 5% in 2024, with analysts expecting a 3.4% decrease on average, according to LSEG data.
Meanwhile, loan growth has slowed as elevated benchmark lending rates deter borrowers from taking action. Over the past few weeks, analysts have delayed their predictions of interest rate cuts for this year, citing robust economic data.
KeyCorp saw a $2.6 billion decrease, or 6.1%, in average loans and leases compared to the previous year. The company reiterated its projection of average loans declining between 5% and 7% throughout the year.
In terms of financial performance, KeyCorp reported a net income of $183 million, or 20 cents per share, for the three months ended March 31. This marked a decrease from $275 million, or 30 cents per share, recorded in the corresponding period of the previous year.
KeyCorp (NYSE: KEY) Stock Reaction
At the time of publication, KEY stock has traded at $14.38, marking a 0.35% decrease from the previous trading session. Traders have exchanged 32,085,016 (32.08 million) shares, surpassing the average daily trading volume of 15.69 million.
