(Reuters) -Bank stocks were volatile in premarket trading on Thursday as lenders reported mixed quarterly results, while shares of Discover Financial Services tanked after it disclosed a regulatory review over some of its credit products.
Discover's shares dropped 12.2% before the bell as it revealed discussions with regulators about how it misclassified certain credit card products for about 15 years.
The company incorrectly classified certain credit card accounts into its highest merchant and merchant acquirer pricing tier, beginning around mid-2007, Discover said after markets closed on Wednesday, adding it has paused share buybacks.
Discover added it has also received a proposed consent order from the Federal Deposit Insurance Corporation (FDIC) in connection with consumer compliance that does not include the card product classification matter.
Meanwhile, two major mid-sized banks missed quarterly profit estimates, while one came ahead of Wall Street expectations on Thursday.
KeyCorp shares dropped 2.7% after the bank's profit plunged 50% and it forecast a decline in net interest income.
Analysts have warned that banks would need to raise the interest they offer clients on their account balances, bringing deposit costs in focus for the remainder of the year.
The bank said it expects NII to decline 4%-6% in the current quarter compared with the previous three months.
Truist Financial shares declined 2.6% premarket after the lender missed estimates for second-quarter profit.
Average deposits at Truist declined 2% sequentially as customers continue to chase higher yielding alternatives for better returns. They fell 5.7% in the second quarter compared with a year earlier.
Deposits at regional lenders have been in focus since a sector-wide crisis of confidence in March led to panicked customers moving their deposits to larger, "too-big-to-fail" rivals and money market funds.
Outperforming peers, Fifth Third Bancorp's shares rose 1.9% premarket as the bank's quarterly profit topped expectations, even as it trimmed its growth forecast for full-year NII.
Zions Bancorporation jumped 6.8% before the bell after the regional lender reported a sequential rise of about 7% in total deposits during the second quarter late on Wednesday.
Major U.S regional banks said their deposits mostly stabilized and NII rose in the second quarter as the sector looks to leave its biggest crisis since 2008 in the rear-view mirror.
(Reporting by Manya Saini in Bengaluru; Additional reporting by Jaiveer Shekhawat, Sri Hari N S and Niket Nishant; Editing by Shweta Agarwal and Krishna Chandra Eluri)