KeyCorp profit shrinks after FDIC charge, amid slump in interest income

Jan 18 (Reuters) — KeyCorp posted a drop in its fourth-quarter profit on Thursday as the lender recorded costs associated with replenishing a government deposit insurance fund, sending its shares down nearly 5% in the premarket trading.

The bank's fourth-quarter profit slumped to $0.03 per share from $0.38 per share in the prior-year quarter, also hit by a drop in interest income.

The Federal Deposit Insurance Corporation (FDIC) directed a group of banks to restore the government insurance fund that got depleted by $16 billion following the collapse of some regional lenders.

KeyCorp recorded expenses of $190 million in the quarter in relation to the FDIC special assessment.

Elevated interest rates have raised borrowing costs and diminished the demand for loans, hurting interest income at banks.

KeyCorp's net interest income (NII) for the three months ended Dec. 30 fell 24.4% to $928 million.

With the Federal Reserve pausing its monetary tightening policy and hinting at rate cuts later this year, the bank said it expects NII to decline by 2%-5% in 2024.

Average deposits at the bank dropped to $145.08 billion in the fourth quarter from $145.67 billion in the year-ago quarter.

(Reporting by Sri Hari N S in Bengaluru; Editing by Krishna Chandra Eluri and Saumyadeb Chakrabarty)