Oct 16 (Reuters) - KeyCorp ( KEY ) 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 ( KEY ) - 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 ( KEY ) rose

7.6% in the quarter, marking the second-best year-to-date

performance in the bank's history.

KeyCorp ( KEY ) 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.