Huntington Bancshares profit drops 8% as interest income declines

Oct 20 (Reuters) - Huntington Bancshares posted an 8% drop in third-quarter profit on Friday, as the lender's income from interest on loans declined.

U.S. banks are beginning to see the boost from rising benchmark interest rates fade as the Federal Reserve heads toward the end of its monetary policy tightening cycle.

Growth in interest income has also been pressured by higher costs of deposits as customers withdraw cash to seek better returns in higher-yielding alternatives such as money market funds.

Huntington said net interest income in the third quarter declined 3%, or $36 million, from the year-ago quarter.

The bank's shares, down 29% so far this year, were up 1% in premarket trading after results.

The bank's total deposits at the end of the reported quarter stood at $148.1 billion, compared with $146 billion, a year earlier.

Deposits at regional lenders have been in focus since the sectorwide crisis in March saw customers pull out billions, sparking bank runs at three mid-sized lenders.

Huntington set aside $99 million in provisions for potential credit losses as lenders take into account the increased risk of customers defaulting on their mortgages and credit-card debt.

On a per-share basis, Huntington earned 35 cents in the three months ended Sept. 30, a drop of 4 cents from a year earlier. (Reporting by Manya Saini in Bengaluru; Editing by Arun Koyyur)