UPDATE 1-Huntington Bancshares cuts interest income forecast as recession looms

(Adds CEO comments)

By Saeed Azhar

NEW YORK, April 20 (Reuters) - Regional U.S. lender Huntington Bancshares Inc cut its forecast for net interest income (NII) this year as a recession becomes more likely, its chief executive told Reuters on Thursday.

Huntington expects NII, which reflects how much money it makes from charging interest to customers, to grow 6% to 9% in 2023, compared with an earlier range of 8% to 11%.

"There's a higher probability of a recession this year at this stage," said Steve Steinour, CEO of the Columbus, Ohio-based lender. "Our customers are starting to defer investments, postpone acquisitions."

Huntington Bancshares reported first-quarter profit that narrowly beat analysts' estimates on Thursday as it got a boost from higher interest rates, which offset larger provisions to cover potential loan losses.

The bank also added deposits in the first three months of the year. That contrasts with other lenders, including Fifth Third Bancorp, Comerica, Truist Financial Corp and KeyCorp, whose deposits dropped, curtailing their profits from collecting interest payments.

Average deposits are expected to grow 1% to 3% this year against a previous projection of 1% to 4%, while loans will expand 5% to 7%, driven by commercial customers and modest growth in consumer, Huntington said.

Investors have focused on the balance sheets of smaller lenders to gauge the impact of March turmoil after the collapses of Silicon Valley Bank and Signature Bank, the biggest failures since the 2008 financial crisis.

Steinour likened the episode to a bad storm, but said, "It has settled very, very substantially and I think is passing in nature now." (Reporting by Saeed Azhar; Editing by Lananh Nguyen and Mark Porter)