(Reuters) – U.S. regional bank Regions Financial (NYSE:) reported a fall in its third-quarter profit on Friday, as its interest income took a hit due to higher deposit costs and tepid loan demand.
To keep customers from shifting to competitors or higher-yield options like money market funds, banks have increased deposit rates. Meanwhile, the industry also faces subdued loan demand as borrowers wait for a more favorable interest-rate environment.
The Birmingham, Alabama-headquartered bank’s net interest income (NII) — the difference between what a bank earns on loans and pays out on deposits — fell 5.7% to $1.22 billion in the quarter.
However, the U.S. Federal Reserve’s monetary policy easing in September along with further anticipated rate cuts has fueled hopes for a revival in loan growth and relief from the cost pressures on deposits.
The lender now expects its 2024 NII to be $4.8 billion, at the upper end of the previous forecast of $4.7 billion to $4.8 billion.
In a bright spot, Regions Financial’s capital markets income jumped 43.8%, driven by higher dealmaking and debt underwriting fees, while wealth management income rose 14.3% in the quarter.
These gains mirror trends seen by larger rivals, benefitting from a recovery in investment banking activity in the third quarter.
Provision for credit losses, or the capital lenders set aside for loans that may not be paid back, decreased to $113 million in the quarter, from $145 million in the year-ago period.
Net income fell 4.1% to $446 million, in the three months ended Sept. 30, compared with $465 million, a year earlier.
On a per-share basis, third-quarter profit was unchanged at 49 cents.
Shares of the lender have gained roughly 24% so far this year through the previous close.
