(Reuters) – Regions Financial said on Friday it expects its fourth-quarter net interest income (NII) to decline about 5% compared with the preceding three months, as banks pay more to retain deposits, sending its shares down about 2% before the bell.
Lenders such as Fifth Third Bancorp and Comerica have also forecast a drop in NII as rising interest rates have spurred customers into chasing high-yielding alternatives to bank deposits like money-market funds.
To stem the migration, banks are offering higher rates of interest on deposits. This has increased costs for an industry that has already warned of a slowdown in loan demand as borrowing becomes costlier.
Regions Financial reported profit of 49 cents per share in the third quarter, missing analysts’ average estimate of 58 cents, according to LSEG data. It, however, was up from 43 cents a year earlier.
The lender’s net interest income, or the difference between what a bank earns on loans and pays out on deposits, rose 2.3% to $1.29 billion in the quarter ended Sept. 30.
While the higher-for-longer interest rate environment allowed banks to earn more in customers’ loan payments, the lenders have also stockpiled more rainy-day funds to cover for potential defaults.
Regions Financial set aside $145 million as provisions for credit losses, compared with $135 million a year earlier.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Shilpi Majumdar)
