US lender KeyCorp's profit rises on higher interest income

(Reuters) -KeyCorp reported a jump in third-quarter profit on Thursday as net interest income surged on lower deposit costs and a shift toward higher-yielding assets.

Shares in the Cleveland, Ohio-based bank rose 1.6% in premarket trading after results.

The regional banking industry has benefited from the Federal Reserve interest rate cuts, which have reduced deposit costs, the amount banks pay customers to hold their savings.

Banks also reshaped their balance sheets by moving money from low-interest investments that matured into higher-yielding ones, offsetting softer loan demand from consumers and businesses.

Net interest income at KeyCorp - the difference between what a lender earns off loans and pays out on deposits - jumped 23.8% in the quarter to $1.19 billion.

Its net interest margin, a key measure of how profitably a bank lends, widened to 2.75% in the quarter from 2.17% a year earlier.

"We are on track to deliver record revenue in 2025," said CEO Chris Gorman in a statement. "Investment banking pipelines grew from already elevated levels, including M&A pipelines which are up materially."

Smaller U.S. banks have made inroads into investment banking, capturing a growing share of middle-market dealmaking that was traditionally concentrated among Wall Street’s largest institutions.

Investment banking and debt placement fees at KeyCorp rose 7.6% in the quarter, marking the second-best year-to-date performance in the bank's history.

KeyCorp posted adjusted income from continuing operations of $450 million in the three months ended September 30, up from $285 million a year earlier.

Revenue increased 17% in the quarter to $1.9 billion.

(Reporting by Manya Saini in Bengaluru; Editing by Tasim Zahid)

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