KeyCorp could not have chosen a better day than Wednesday to reveal bad news on first-quarter earnings as the Federal Reserve pleasantly surprised the market with another half-point cut in interest rates.

But though other financial stocks were buoyed by the market’s resulting exuberance, KeyCorp’s shares fell dramatically after the Cleveland banking company reported a 41% drop in profits and missed analysts’ consensus estimate by 4 cents per share. As if that were not enough, the company lost its last favorable analyst recommendation. Peter Winter of CIBC World Markets changed his “strong buy” recommendation to “hold,” in line with all the other analysts covering the stock. Not surprisingly, he cited lower earnings and an uncertain outlook.

“We are extremely disappointed with the weak first-quarter results,” Mr. Winter wrote in his research note on Wednesday. But he conceded that KeyCorp’s problems may well be beyond its control, and he does not dismiss the stock entirely.

“The uncertainty regarding the depth and length of the economic recession in the Midwest as well as the persistence of the capital market slowdown appears to be having an above-average negative impact on KeyCorp’s revenue growth,” he wrote.

KeyCorp fell 3.2% on Thursday after losing 6.7% Wednesday. Financial stocks were mixed Thursday, and some gave back some of Wednesday’s gains. The American Banker index of 225 banks was up 0.97%, the Standard & Poor’s 500 index 1.25%, and the Nasdaq composite 4.93%.

Vernon L. Patterson, director of investor relations at KeyCorp, acknowledged the disappointment among analysts over the shortfall in revenues from capital markets and continuing weakness in credit quality.

Net income fell to $217 million. But at 51 cents, earnings per share fell just 4% from the year earlier, Mr. Patterson said. And he added that three of four business lines had positive earnings growth.

Compared with the first quarter of 2000, KeyCorp reported increases of 21.7% in net income from retail banking, to $73 million; 11.1% from home equity and consumer finance products, to $20 million; and 1.8% from corporate finance, to $112 million. Deposits grew 7%.

Brent Somers, the company’s chief financial officer, told investors and analysts on Wednesday that he expects “to at least match last year’s level of earnings per share.”

But net income from Key Capital Partners dropped from $22 million to $2 million, and analysts are concerned about the 77% increase in loan-loss provisions, to $110 million, and the 75% increase in net chargeoffs.

“Core activities in capital markets seemed to follow the industry’s overall performance,” Mr. Patterson commented. KeyCorp’s principal investment portfolio lost $16 million of value after gaining $15 million in the preceding quarter. Noninterest income fell 42% after rising the same amount in the fourth quarter.

“We find this mathematically fascinating,” said Katrina Blecher of Sandler O’Neill & Partners, who anticipates a slight improvement in capital market revenues but was less upbeat about credit quality.

“We are sorry to lose CIBC’s recommendation,” said Mr. Patterson. “We hope to regain the confidence of Peter Winter in the future,” he added.

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