Oct 18 (Reuters) - U.S. regional bank Regions Financial ( RF )

reported a fall in its third-quarter profit on Friday, as

its interest income took a hit due to higher deposit costs and

tepid loan demand.

To keep customers from shifting to competitors or

higher-yield options like money market funds, banks have

increased deposit rates. Meanwhile, the industry also faces

subdued loan demand as borrowers wait for a more favorable

interest-rate environment.

The Birmingham, Alabama-headquartered bank's net interest

income (NII) - the difference between what a bank earns on loans

and pays out on deposits - fell 5.7% to $1.22 billion in the

quarter.

However, the U.S. Federal Reserve's monetary policy easing

in September along with further anticipated rate cuts has fueled

hopes for a revival in loan growth and relief from the cost

pressures on deposits.

The lender now expects its 2024 NII to be $4.8 billion, at

the upper end of the previous forecast of $4.7 billion to $4.8

billion.

In a bright spot, Regions Financial's ( RF ) capital markets income

jumped 43.8%, driven by higher dealmaking and debt underwriting

fees, while wealth management income rose 14.3% in the quarter.

These gains mirror trends seen by larger rivals, benefitting

from a recovery in investment banking activity in the third

quarter.

Provision for credit losses, or the capital lenders set

aside for loans that may not be paid back, decreased to $113

million in the quarter, from $145 million in the year-ago

period.

Net income fell 4.1% to $446 million, in the three months

ended Sept. 30, compared with $465 million, a year earlier.

On a per-share basis, third-quarter profit was unchanged at

49 cents.

Shares of the lender have gained roughly 24% so far this

year through the previous close.