Key Hole: KeyCorp May Miss Fourth-Quarter Earnings Estimate

According to one analyst, the bank is attributing the shortfall to a squeeze in its net interest margin.
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(KEY) - Get Report

says it could miss its fourth-quarter earnings estimate by 3 cents a share, according to an analyst who spoke to the company on Tuesday.

Instead of earning 60 cents a share, the consensus estimate compiled by

First Call/Thomson Financial

, the nation's 11th-largest banking institution expects to make 57 cents in the year's last quarter, says Joe Duwan, who covers Midwestern banks for

Keefe Bruyette & Woods

, the New York-based brokerage focused on banks. Duwan says he received the information from the bank Tuesday when he called to find out how the quarter has been progressing. (Keefe hasn't performed recent underwriting for KeyCorp. Duwan has a hold rating on the bank's shares.)

KeyCorp, with $83 billion in assets,

announced a restructuring to boost efficiency on Nov. 23. But the bank didn't publicly indicate that it could soon announce below-consensus earnings. A bank spokesman declined to comment.

According to Duwan, the bank is attributing the shortfall to a squeeze in its net interest margin, the percentage difference between interest earned on loans and interest paid on deposits and borrowed funds. In a recent


examined whether compression of this margin would depress profits at KeyCorp and other institutions.

KeyCorp has had to borrow a relatively large amount of money in the market to fund its lending. But these borrowed funds have become pricier as interest rates have risen this year, compressing the margin. Deposits -- the bank's other funding source -- have been under pressure. Duwan says that a penny of 3-cent drop can be attributed to deposits offloaded by KeyCorp when it sold its Long Island banking business to