KeyCorp on Tuesday disclosed that margin compression and slowing loan growth would drag its profits to the lower end of the 54- to-57-cent per share range that analysts had projected.

KeyCorp's guidance to the analysts during an annual investor conference at its Cleveland headquarters came days after Bank One Corp. gave similar guidance, telling analysts its earnings would fall at the low end of the expected 60- to 70-cent range.

The moves demonstrate the need banks feel to micromanage expectations in order to prevent share prices from crashing when earnings come in shy of forecasts. With investors frustrated by unspectacular loan growth and disappointing merger deals, they tend to overreact to such reports, analysts said.

"In this kind of market, being conservative is the name of the game," said Stephen Biggar, an analyst with the equity group of Standard & Poor's.

"KeyCorp highlighted that while January figures were in line with expectations, the month of February was less stellar," Lehman Brothers' Michael Plodwick wrote in adjusting his first-quarter estimate for the company by a penny, to 54 cents. "Along with many other financial institutions, KeyCorp is realizing continued margin compression and deposit cost increase."

The company also had slower consumer loan growth in February, Mr. Plodwick said. KeyCorp said it was "comfortable with" its analysts' estimates for the year at $2.35 a share.

Earnings warnings have battered shares of banks recently. When First Security Corp., a Utah banking company that is merging with Zions Bancorp., said it would fail to meet first-quarter estimates, investors took its stock down 37.9% in a single day's trading. Similarly, when First Tennessee National Corp. announced diminished profits last week, investors shaved its shares 26.5%.

But Bank One's shares fell only 3% when it gave an impromptu mid quarter earnings guidance downward.

KeyCorp's attempt to give its stock a soft landing was less successful. Its shares dropped nearly 8%, to $16, on news of the conference call.

The company has routinely announced earnings shortfalls since it merged with Society Corp. in 1994. In November it said fourth-quarter earnings would be below expectations and started a restructuring in which 3,000 employees would be let go in an attempt to save $170 million in costs by 2002.

R. Jay Tejera, an analyst at Ragen Mackenzie in Seattle, who did not attend the meeting, said he was not surprised by KeyCorp's move. "Growth is a persistent problem with this company," he said.

Investors see little prospect for a sale of the company, according to Mr. Tejera. There are few candidates big enough to buy it, and many of them are burdened by low stock prices, he said.


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