The U.S. Federal Reserve’s higher-for-longer interest rate environment has spurred customers into pursuing high-yielding alternatives to bank deposits, like money market funds.
Texas-based Comerica sees its net interest income (NII) – the difference between interest banks earn on loans and pay out on deposits – to decline between 5% and 6% in the fourth quarter.
The lender reported a $106 million decline in third-quarter NII to $601 million, compared with last year. Its net interest margin contracted to 2.84% from 3.51%, a year earlier.
However, the bank managed to beat per-share profit estimates for the quarter as its non-interest income rose 6% to $295 million from the year-ago period.
Comerica earned a profit of $1.84 per share in the quarter ended Sept. 30, compared with analysts’ estimates of a $1.69 per share profit, as per LSEG data.
Its average deposits grew 2.4% to $65.88 billion in the quarter.
Bank deposits have steadied recently as customers regained confidence in regional banks after a sector-wide crisis in March saw them move money away from smaller lenders seeking the security of large “too-big-to-fail” institutions.
Peers Fifth Third Bancorp (NASDAQ:FITB) and Regions Financial (NYSE:RF) also forecast a decline in their fourth-quarter NII.
(This story has been corrected to say that the Q3 NII declined by $106 million, not 106%, in paragraph 4; the non-interest income rose 6%, not 17%, in paragraph 5 and the average deposits amount was $65.88 billion, not $65.89 billion, in paragraph 7.)
Source: Economy - investing.com
