Jan 19 (Reuters) - Huntington Bancshares reported a 62% fall in fourth-quarter profit on Friday, hurt by a $214 million charge related to replenishing a government deposit insurance fund and a decline in the lender's income from interest on loans.

The bank signaled a better outlook for 2024 with improving loan growth and more opportunities to expand in new growth markets.

The Federal Deposit Insurance Corporation's (FDIC) fund was drained of about $16 billion after two mid-sized banks collapsed in early 2023.

Several financial institutions across the United States are required to refill the fund, which insures customer deposits in the case of a bank failure.

The U.S. Federal Reserve's monetary policy to curb inflation helped lenders rake in higher net interest income (NII), or the difference between what banks earn on loans and give out on deposits, for most of last year.

However, high interest rates pushed up deposit costs as lenders pay more to keep clients from migrating to seek higher returns in money market funds, which are benefiting from the high interest rate environment.

Huntington's NII in the fourth quarter fell 10% to $1.32 billion. The lender forecast 2024 NII to rise or fall 2% from $5.48 billion in 2023, which was relatively better than many of its peers.

Huntington's CEO Steve Steinour told Reuters the NII outlook takes into account the wide range of interest rate outlooks for this year on how much the Federal Reserve could cut.

"If rates fall dramatically fast this year...our deposit repricing just can't match that rate of decline," he said.

Huntington expects 3% to 5% loan growth in 2024, versus 2% last year.

"There'll be core growth within the regional bank, small business loans, consumer loans," Steiner said, adding there are also opportunities to grow the business in Chicago and Denver.

The company, in line with other banking peers, also increased its provision for credit losses to $126 million in the fourth quarter from $91 million, anticipating loan losses.

Huntington posted a net profit of $243 million, or 15 cents per share, in the fourth quarter, compared with $645 million, or 42 cents per share, a year earlier. (Reporting by Pritam Biswas in Bengaluru and Saeed Azhar in New York; Editing by Shounak Dasgupta)