(Reuters) – Fifth Third Bancorp reported first-quarter profit down 10% on Friday as higher deposit costs weighed on the lender’s interest income.
Regional banks have steadily increased the interest rates they offer on deposit accounts to retain customers seeking better returns by putting their money in higher-yielding alternatives.
Cincinnati, Ohio-based Fifth Third’s reported net interest income — the difference between what a bank earns on its loans and what it pays on its deposits — fell nearly 8.8%. % to $1.38 billion during the quarter.
The net interest margin contracted to 2.86% in the first quarter compared to 3.29% a year earlier.
Fifth Third continues to expect its 2024 NII to decline between 2% and 4%. Analysts on average expect a drop of 3.4%, according to LSEG data.
Regional peers US Bancorp and KeyCorp reported results on Thursday and posted similar declines in NII.
The allowance for credit losses fell to $94 million in the quarter from $164 million last year.
Rising interest rates have also dampened demand for loans as borrowers remain on the sidelines waiting for rate cuts.
Fifth Third’s average total loan and lease portfolio fell 4% to $117.33 billion in the quarter, impacted by a decline in its consumer and commercial portfolios.
At the same time, the bank’s average total deposits rose 5% to $168.12 billion, helped by higher interest rates on checking and money market accounts.
The lender’s net income available to common shareholders fell to $480 million, or 70 cents per share, for the quarter ended March 31, from $535 million, or 78 cents per share, a year earlier.
Shares of Fifth Third have fallen 0.8% year-to-date from the previous close, compared with a 14.2% decline for the KBW regional banking index.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Ravi Prakash Kumar)
