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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Date of Report (Date of earliest event reported): July 18, 2024
KeyCorp
(Exact name of registrant as specified in its charter)
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Ohio | | 001-11302 | | 34-6542451 |
State or other jurisdiction of incorporation or organization: | | Commission File Number | | I.R.S. Employer Identification Number: |
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127 Public Square, | Cleveland, | Ohio | | 44114-1306 |
Address of principal executive offices: | | Zip Code: |
(216) 689-3000
Registrant’s telephone number, including area code:
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |
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☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities Registered Pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares, $1 par value | KEY | New York Stock Exchange |
Depositary Shares (each representing a 1/40th interest in a share of Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series E) | KEY PrI | New York Stock Exchange |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Perpetual Non-Cumulative Preferred Stock, Series F) | KEY PrJ | New York Stock Exchange |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Perpetual Non-Cumulative Preferred Stock, Series G) | KEY PrK | New York Stock Exchange |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Reset Perpetual Non-Cumulative Preferred Stock, Series H) | KEY PrL | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 18, 2024, KeyCorp issued a press release announcing its financial results for the three- and six-month period ended June 30, 2024 (the “Press Release”), and posted on its website its second quarter 2024 Supplemental Information Package (the “Supplemental Information Package”). The Press Release and Supplemental Information Package are being furnished as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in the preceding paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”).
KeyCorp’s Consolidated Balance Sheets and Consolidated Statements of Income (collectively, the “Financial Statements”), included as part of the Press Release, are filed as Exhibit 99.3 to this report. Exhibit 99.3 is deemed “filed” for purposes of Section 18 of the Exchange Act and, therefore, may be incorporated by reference in filings under the Securities Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished, or filed in the case of Exhibit 99.3, herewith:
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
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SIGNATURE |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. |
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| | KEYCORP |
| | (Registrant) |
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Date: July 18, 2024 | | /s/ Stacy L. Gilbert |
| | By: Stacy L. Gilbert |
| | Chief Accounting Officer |
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KEYCORP REPORTS SECOND QUARTER 2024 NET INCOME OF $237 MILLION,
OR $.25 PER DILUTED COMMON SHARE
Average deposits up $1.3 billion compared to the prior quarter and the second quarter of 2023, with client deposits up 5% year-over-year
Disciplined expense management: expenses declined approximately 6% from the prior quarter and were stable versus the year-ago period
Common Equity Tier 1 ratio rose 20 basis points to 10.5%(a)
Credit quality remains solid: net charge-offs to average loans of 34 basis points
CLEVELAND, July 18, 2024 - KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $237 million, or $.25 per diluted common share, for the second quarter of 2024. Net income from continuing operations attributable to Key common shareholders was $183 million, or $.20 per diluted common share, for the first quarter of 2024 and $250 million, or $.27 per diluted common share, for the second quarter of 2023.
Comments from Chairman and CEO, Chris Gorman
"This was a solid quarter for Key as we continued to execute on our clearly defined path to enhanced profitability. Sequentially, net interest income grew as we benefited from fixed asset repricing and continued to grow client deposits while the pace of deposit repricing slowed. Client deposits were up 5% from the prior year. Loan demand remained tepid, however, we are optimistic that we will begin to see growth in the second half of the year.
We continued to make progress against our most important strategic fee-based initiatives where we benefit from a differentiated value proposition. We demonstrated momentum in Wealth Management and Commercial Payments. Additionally, our Investment Banking pipelines are meaningfully higher from prior periods.
Expenses continue to be well-managed, and net charge-offs remained low. We built our Common Equity Tier 1 ratio another 23 basis points to 10.5%, bringing our organic capital build to approximately 120 basis points over the past twelve months.
I am excited for our path forward and energized by our momentum which positions us to deliver sound, profitable growth."
(a)June 30, 2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 2
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Selected Financial Highlights | | | | | | |
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Dollars in millions, except per share data | | | | | Change 2Q24 vs. |
| | 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Income (loss) from continuing operations attributable to Key common shareholders | $ | 237 | | $ | 183 | | $ | 250 | | | 29.5 | % | (5.2) | % |
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Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution | .25 | | .20 | | .27 | | | 25.0 | | (7.4) | |
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Return on average tangible common equity from continuing operations (a) | 10.39 | % | 7.87 | % | 11.04 | % | | N/A | N/A |
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Return on average total assets from continuing operations | .59 | | .47 | | .58 | | | N/A | N/A |
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Common Equity Tier 1 ratio (b) | 10.5 | | 10.3 | | 9.3 | | | N/A | N/A |
Book value at period end | $ | 13.09 | | $ | 12.84 | | $ | 12.18 | | | 1.9 | | 7.5 | |
Net interest margin (TE) from continuing operations | 2.04 | % | 2.02 | % | 2.12 | % | | N/A | N/A |
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(a)The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(b)June 30, 2024 ratio is estimated.
TE = Taxable Equivalent, N/A = Not Applicable
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INCOME STATEMENT HIGHLIGHTS | | | | | | |
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Revenue | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Net interest income (TE) | $ | 899 | | $ | 886 | | $ | 986 | | | 1.5 | % | (8.8) | % |
Noninterest income | 627 | | 647 | | 609 | | | (3.1) | | 3.0 | |
Total revenue (TE) | $ | 1,526 | | $ | 1,533 | | $ | 1,595 | | | (.5) | % | (4.3) | % |
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TE = Taxable Equivalent
Taxable-equivalent net interest income was $899 million for the second quarter of 2024 and the net interest margin was 2.04%. Compared to the second quarter of 2023, net interest income decreased by $87 million, and the net interest margin decreased by eight basis points. Both net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing investment securities into higher yielding but still liquid investments, and the replacement of low-yielding interest rate swaps with higher-yield interest rate swaps. Net interest income and the net interest margin declined year-over-year, however, reflecting lower loan balances from Key's balance sheet optimization actions during 2023 and higher deposit costs in the higher interest rate environment relative to a year ago. Additionally, the balance sheet experienced a shift in funding mix from noninterest-bearing deposits to higher-cost deposits and borrowings.
Compared to the first quarter of 2024, taxable-equivalent net interest income increased by $13 million, and the net interest margin increased by two basis points for the second quarter of 2024. Both net interest income and the net interest margin benefited from the reinvestment of proceeds from maturing investment securities into higher yielding but still liquid investments, and the replacement of low-yielding interest rate swaps with higher-yield interest rate swaps. Lower loan balances, higher funding costs, and an unfavorable funding mix partly offset the increase in net interest income and the net interest margin from higher yielding reinvestments.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 3
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Noninterest Income | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Trust and investment services income | $ | 139 | | $ | 136 | | $ | 126 | | | 2.2 | % | 10.3 | % |
Investment banking and debt placement fees | 126 | | 170 | | 120 | | | (25.9) | | 5.0 | |
Cards and payments income | 85 | | 77 | | 85 | | | 10.4 | | — | |
Service charges on deposit accounts | 66 | | 63 | | 69 | | | 4.8 | | (4.3) | |
Corporate services income | 68 | | 69 | | 86 | | | (1.4) | | (20.9) | |
Commercial mortgage servicing fees | 61 | | 56 | | 50 | | | 8.9 | | 22.0 | |
Corporate-owned life insurance income | 34 | | 32 | | 32 | | | 6.3 | | 6.3 | |
Consumer mortgage income | 16 | | 14 | | 14 | | | 14.3 | | 14.3 | |
Operating lease income and other leasing gains | 21 | | 24 | | 23 | | | (12.5) | | (8.7) | |
Other income | 11 | | 6 | | 4 | | | 83.3 | | 175.0 | |
Total noninterest income | $ | 627 | | $ | 647 | | $ | 609 | | | (3.1) | % | 3.0 | % |
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N/M = Not Meaningful
Compared to the second quarter of 2023, noninterest income increased by $18 million. The increase was driven by trust and investment services, up $13 million, reflective of strong market performance as well as an increase in commercial mortgage servicing fees, which increased $11 million.
Compared to the first quarter of 2024, noninterest income decreased by $20 million. The decrease was driven by investment banking and debt placement fees, down $44 million, reflective of strong merger and acquisition advisory fees and syndication fees in the first quarter. The decline was partly offset by an $8 million increase in cards and payments income due to higher seasonal transactions in debit and credit cards and a $5 million increase in commercial mortgage servicing fees.
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Noninterest Expense | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Personnel expense | $ | 636 | | $ | 674 | | $ | 622 | | | (5.6) | % | 2.3 | % |
Net occupancy | 66 | | 67 | | 65 | | | (1.5) | | 1.5 | |
Computer processing | 101 | | 102 | | 95 | | | (1.0) | | 6.3 | |
Business services and professional fees | 37 | | 41 | | 41 | | | (9.8) | | (9.8) | |
Equipment | 20 | | 20 | | 22 | | | — | | (9.1) | |
Operating lease expense | 17 | | 17 | | 21 | | | — | | (19.0) | |
Marketing | 21 | | 19 | | 29 | | | 10.5 | | (27.6) | |
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Other expense | 181 | | 203 | | 181 | | | (10.8) | | .0 | |
Total noninterest expense | $ | 1,079 | | $ | 1,143 | | $ | 1,076 | | | (5.6) | % | .3 | % |
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Compared to the second quarter of 2023, noninterest expense increased $3 million, driven by a $14 million increase in personnel expense, reflective of a higher stock price compared to the year-ago period. The increase was partly offset by lower marketing expense and lower business services and professional fees.
Compared to the first quarter of 2024, noninterest expense decreased by $64 million. The decrease was driven by a $38 million decline in personnel expense, related to lower incentive compensation and lower employee benefits. The decline in noninterest expense was also reflective of a higher FDIC special assessment in the prior quarter. For more information on the FDIC special assessment, see the Selected Items Impact on Earnings table on page 25.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 4
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BALANCE SHEET HIGHLIGHTS | | | | | | |
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Average Loans | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Commercial and industrial (a) | $ | 54,599 | | $ | 55,220 | | $ | 61,426 | | | (1.1) | % | (11.1) | % |
Other commercial loans | 20,500 | | 21,222 | | 22,623 | | | (3.4) | | (9.4) | |
Total consumer loans | 33,862 | | 34,592 | | 36,623 | | | (2.1) | | (7.5) | |
Total loans | $ | 108,961 | | $ | 111,034 | | $ | 120,672 | | | (1.9) | % | (9.7) | % |
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(a)Commercial and industrial average loan balances include $218 million, $211 million, and $194 million of assets from commercial credit cards at June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
Average loans were $109.0 billion for the second quarter of 2024, a decrease of $11.7 billion compared to the second quarter of 2023, reflective of Key's planned balance sheet optimization efforts in 2023. The decline in average loans was mostly driven by a $9.0 billion decline in average commercial loans, driven by lower commercial and industrial loans and commercial mortgage real estate loans. Additionally, average consumer loans declined by $2.8 billion, driven by declines across all consumer loan categories.
Compared to the first quarter of 2024, average loans decreased by $2.1 billion. Average commercial loans declined by $1.3 billion, primarily driven by a decrease in commercial and industrial loans and commercial mortgage real estate loans. Additionally, average consumer loans declined $730 million, driven by declines across all consumer loan categories.
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Average Deposits | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Non-time deposits | $ | 128,161 | | $ | 128,448 | | $ | 127,687 | | | (.2) | % | 0.4 | % |
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Time deposits | 16,019 | | 14,430 | | 15,216 | | | 11.0 | | 5.3 | |
Total deposits | $ | 144,180 | | $ | 142,878 | | $ | 142,903 | | | .9 | % | .9 | % |
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Cost of total deposits | 2.28 | % | 2.20 | % | 1.49 | % | | N/A | N/A |
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N/A = Not Applicable
Average deposits totaled $144.2 billion for the second quarter of 2024, an increase of $1.3 billion compared to the year-ago quarter. The increase was reflective of growth in retail deposit balances and our focus on growing deposits across our commercial businesses.
Compared to the first quarter of 2024, average deposits increased by $1.3 billion. The increase was reflective of growth in retail certificate of deposit balances and stronger commercial deposit balances.
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ASSET QUALITY | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Net loan charge-offs | $ | 91 | | $ | 81 | | $ | 52 | | | 12.3 | % | 75.0 | % |
Net loan charge-offs to average total loans | .34 | % | .29 | % | .17 | % | | N/A | N/A |
Nonperforming loans at period end | $ | 710 | | $ | 658 | | $ | 431 | | | 7.9 | | 64.7 | |
Nonperforming assets at period end | 727 | | 674 | | 462 | | | 7.9 | | 57.4 | |
Allowance for loan and lease losses | 1,547 | | 1,542 | | 1,480 | | | 0.3 | | 4.5 | |
Allowance for credit losses | 1,833 | | 1,823 | | 1,771 | | | 0.5 | | 3.5 | |
Provision for credit losses | 100 | | 101 | | 167 | | | (1.0) | | (40.1) | |
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Allowance for loan and lease losses to nonperforming loans | 218 | % | 234 | % | 343 | % | | N/A | N/A |
Allowance for credit losses to nonperforming loans | 258 | | 277 | | 411 | | | N/A | N/A |
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N/A = Not Applicable
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 5
Key's provision for credit losses was $100 million, compared to $167 million in the second quarter of 2023 and $101 million in the first quarter of 2024. The decline from the year-ago period reflects a more stable economic outlook and the impact of balance sheet optimization efforts, partly offset by credit portfolio migration.
Net loan charge-offs for the second quarter of 2024 totaled $91 million, or 0.34% of average total loans. These results compare to $52 million, or 0.17%, for the second quarter of 2023 and $81 million, or 0.29%, for the first quarter of 2024. Key’s allowance for credit losses was $1.8 billion, or 1.71% of total period-end loans at June 30, 2024, compared to 1.49% at June 30, 2023, and 1.66% at March 31, 2024.
At June 30, 2024, Key’s nonperforming loans totaled $710 million, which represented 0.66% of period-end portfolio loans. These results compare to 0.36% at June 30, 2023, and 0.60% at March 31, 2024. Nonperforming assets at June 30, 2024, totaled $727 million, and represented 0.68% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.39% at June 30, 2023, and 0.61% at March 31, 2024.
CAPITAL
Key’s estimated risk-based capital ratios, included in the following table, continued to exceed all “well-capitalized” regulatory benchmarks at June 30, 2024.
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Capital Ratios | | | |
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| 6/30/2024 | 3/31/2024 | 6/30/2023 |
Common Equity Tier 1 (a) | 10.5 | % | 10.3 | % | 9.3 | % |
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Tier 1 risk-based capital (a) | 12.2 | | 12.0 | | 10.8 | |
Total risk-based capital (a) | 14.7 | | 14.5 | | 13.1 | |
Tangible common equity to tangible assets (b) | 5.2 | | 5.0 | | 4.5 | |
Leverage (a) | 9.1 | | 9.1 | | 8.7 | |
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(a)June 30, 2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
(b)The table entitled “GAAP to Non-GAAP Reconciliations” in the attached financial supplement presents the computations of certain financial measures related to “tangible common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
Key's regulatory capital position remained strong in the second quarter of 2024. As shown in the preceding table, at June 30, 2024, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.5% and 12.2%, respectively. Key's tangible common equity ratio was 5.2% at June 30, 2024.
Key elected the CECL phase-in option provided by regulatory guidance which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. Effective for the first quarter 2022, Key is now in the three-year transition period. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by four basis points.
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Summary of Changes in Common Shares Outstanding | | | | |
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In thousands | | | | | Change 2Q24 vs. |
| | 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Shares outstanding at beginning of period | 942,776 | | 936,564 | | 935,229 | | | .7 | % | .8 | % |
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Shares issued under employee compensation plans (net of cancellations and returns) | 424 | | 6,212 | | 504 | | | (93.2) | | (16) | |
| Shares outstanding at end of period | 943,200 | | 942,776 | | 935,733 | | | — | % | .8 | % |
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Key declared a dividend of $.205 per common share for the third quarter of 2024.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 6
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key’s taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
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Major Business Segments | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| | 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Revenue from continuing operations (TE) | | | | | | |
Consumer Bank | $ | 769 | | $ | 757 | | $ | 787 | | | 1.6 | % | (2.3) | % |
Commercial Bank | 769 | | 799 | | 823 | | | (3.8) | | (6.6) | |
Other (a) | (12) | | (23) | | (15) | | | 47.8 | | 20.0 | |
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| Total | $ | 1,526 | | $ | 1,533 | | $ | 1,595 | | | (.5) | % | (4.3) | % |
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Income (loss) from continuing operations attributable to Key | | | | | | |
Consumer Bank | $ | 67 | | $ | 41 | | $ | 71 | | | 63.4 | % | (5.6) | % |
Commercial Bank | 207 | | 205 | | 227 | | | 1.0 | | (8.8) | |
Other (a) | (1) | | (27) | | (12) | | | 96.3 | | 91.7 | |
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| Total | $ | 273 | | $ | 219 | | $ | 286 | | | 24.7 | % | (4.5) | % |
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(a)Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.
TE = Taxable Equivalent
N/M = Not Meaningful
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Consumer Bank | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Summary of operations | | | | | | |
Net interest income (TE) | $ | 535 | | $ | 532 | | $ | 544 | | | .6 | % | (1.7) | % |
Noninterest income | 234 | | 225 | | 243 | | | 4.0 | | (3.7) | |
Total revenue (TE) | 769 | | 757 | | 787 | | | 1.6 | | (2.3) | |
Provision for credit losses | 33 | | (2) | | 32 | | | N/M | 3.1 | |
Noninterest expense | 648 | | 704 | | 662 | | | (8.0) | | (2.1) | |
Income (loss) before income taxes (TE) | 88 | | 55 | | 93 | | | 60.0 | | (5.4) | |
Allocated income taxes (benefit) and TE adjustments | 21 | | 14 | | 22 | | | 50.0 | | (4.5) | |
Net income (loss) attributable to Key | $ | 67 | | $ | 41 | | $ | 71 | | | 63.4 | % | (5.6) | % |
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Average balances | | | | | | |
Loans and leases | $ | 39,174 | | $ | 39,919 | | $ | 42,297 | | | (1.9) | % | (7.4) | % |
Total assets | 42,008 | | 42,710 | | 45,116 | | | (1.6) | | (6.9) | |
Deposits | 85,397 | | 84,075 | | 81,406 | | | 1.6 | | 4.9 | |
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Assets under management at period end | $ | 57,602 | | $ | 57,305 | | $ | 53,952 | | | .5 | % | 6.8 | % |
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TE = Taxable Equivalent
N/M = Not Meaningful
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 7
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Additional Consumer Bank Data | | | | | | |
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Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Noninterest income | | | | | | |
Trust and investment services income | $ | 112 | | $ | 110 | | $ | 101 | | | 1.8 | % | 10.9 | % |
Service charges on deposit accounts | 34 | | 33 | | 40 | | | 3.0 | | (15.0) | |
Cards and payments income | 61 | | 57 | | 65 | | | 7.0 | | (6.2) | |
Consumer mortgage income | 16 | | 14 | | 14 | | | 14.3 | | 14.3 | |
Other noninterest income | 11 | | 11 | | 23 | | | — | | (52.2) | |
Total noninterest income | $ | 234 | | $ | 225 | | $ | 243 | | | 4.0 | % | (3.7) | % |
| | | | | | |
Average deposit balances | | | | | | |
Money market deposits | $ | 30,229 | | $ | 29,875 | | $ | 27,217 | | | 1.2 | % | 11.1 | % |
Demand deposits | 22,292 | | 22,213 | | 23,322 | | | .4 | | (4.4) | |
Savings deposits | 4,791 | | 4,986 | | 6,294 | | | (3.9) | | (23.9) | |
| | | | | | |
Time deposits | 13,039 | | 11,808 | | 6,413 | | | 10.4 | | 103.3 | |
Noninterest-bearing deposits | 15,047 | | 15,193 | | 18,160 | | | (1.0) | | (17.1) | |
Total deposits | $ | 85,398 | | $ | 84,075 | | $ | 81,406 | | | 1.6 | % | 4.9 | % |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
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Other data | | | | | | |
Branches | 946 | | 957 | | 965 | | | | |
Automated teller machines | 1,199 | | 1,214 | | 1,255 | | | | |
| | | | | | |
Consumer Bank Summary of Operations (2Q24 vs. 2Q23)
•Key's Consumer Bank recorded net income attributable to Key of $67 million for the second quarter of 2024, compared to $71 million for the year-ago quarter
•Taxable-equivalent net interest income decreased by $9 million, or 1.7%, compared to the second quarter of 2023, primarily reflective of a decline in loan spreads as a result of lower loan balances
•Average loans and leases decreased $3.1 billion, or 7.4%, from the second quarter of 2023, driven by broad-based declines across loan categories
•Average deposits increased $4.0 billion, or 4.9%, from the second quarter of 2023, driven by strong retail deposit growth
•Provision for credit losses increased $1 million compared to the second quarter of 2023
•Noninterest income decreased $9 million from the year-ago quarter, driven by declines in service charges on deposit accounts and cards and payments income
•Noninterest expense decreased $14 million from the year-ago quarter, reflective of lower marketing expense
| | | | | | | | | | | | | | | | | | | | |
Commercial Bank | | | | | | |
| | | | | | |
Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Summary of operations | | | | | | |
Net interest income (TE) | $ | 411 | | $ | 397 | | $ | 475 | | | 3.5 | % | (13.5) | % |
Noninterest income | 358 | | 402 | | 348 | | | (10.9) | | 2.9 | |
Total revenue (TE) | 769 | | 799 | | 823 | | | (3.8) | | (6.6) | |
Provision for credit losses | 87 | | 102 | | 134 | | | (14.7) | | (35.1) | |
Noninterest expense | 431 | | 443 | | 406 | | | (2.7) | | 6.2 | |
Income (loss) before income taxes (TE) | 251 | | 254 | | 283 | | | (1.2) | | (11.3) | |
Allocated income taxes and TE adjustments | 44 | | 49 | | 56 | | | (10.2) | | (21.4) |
| | | | | | |
| | | | | | |
Net income (loss) attributable to Key | $ | 207 | | $ | 205 | | $ | 227 | | | 1.0 | % | (8.8) | % |
| | | | | | |
Average balances | | | | | | |
Loans and leases | $ | 69,248 | | $ | 70,633 | | $ | 77,922 | | | (2.0) | % | (11.1) | % |
Loans held for sale | 522 | | 840 | | 1,014 | | | (37.9) | | (48.5) | |
Total assets | 78,328 | | 80,000 | | 87,759 | | | (2.1) | | (10.7) | |
Deposits | 57,360 | | 56,331 | | 52,512 | | | 1.8 | % | 9.2 | % |
| | | | | | |
TE = Taxable Equivalent
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 8
| | | | | | | | | | | | | | | | | | | | |
Additional Commercial Bank Data | | | | | | |
| | | | | | |
Dollars in millions | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 2Q23 | | 1Q24 | 2Q23 |
Noninterest income | | | | | | |
Trust and investment services income | $ | 27 | | $ | 26 | | $ | 25 | | | 3.8 | % | 8.0 | % |
Investment banking and debt placement fees | 126 | | 170 | | 120 | | | (25.9) | | 5.0 | |
Cards and payments income | 21 | | 20 | | 23 | | | 5.0 | | (8.7) | |
Service charges on deposit accounts | 31 | | 29 | | 28 | | | 6.9 | | 10.7 | |
Corporate services income | 61 | | 63 | | 77 | | | (3.2) | | (20.8) | |
Commercial mortgage servicing fees | 61 | | 56 | | 50 | | | 8.9 | | 22.0 | |
Operating lease income and other leasing gains | 21 | | 24 | | 24 | | | (12.5) | | (12.5) | |
Other noninterest income | 10 | | 13 | | 1 | | | (23.1) | | 900.0 | |
Total noninterest income | $ | 358 | | $ | 401 | | $ | 348 | | | (10.7) | % | 2.9 | % |
| | | | | | |
Commercial Bank Summary of Operations (2Q24 vs. 2Q23)
•Key's Commercial Bank recorded net income attributable to Key of $207 million for the second quarter of 2024 compared to $227 million for the year-ago quarter
•Taxable-equivalent net interest income decreased by $64 million, or 13.5%, compared to the second quarter of 2023, primarily reflecting higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits, as well as a decline in loan balances
•Average loan and lease balances decreased $8.7 billion, or 11.1%, compared to the second quarter of 2023, driven by a decline in commercial and industrial loans
•Average deposit balances increased $4.8 billion compared to the second quarter of 2023, driven by our focus on growing deposits across our commercial businesses
•Provision for credit losses decreased $47 million compared to the second quarter of 2023, driven by a more stable economic outlook and the impact of balance sheet optimization efforts, partly offset by credit portfolio migration
•Noninterest income increased $10 million from the year-ago quarter, primarily driven by an increase in investment banking and debt placement fees and commercial mortgage servicing fees
•Noninterest expense increased $25 million compared to the second quarter of 2023, driven by higher business services and professional fees and broad-based increases across other expense categories
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 9
*******************************************
KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $187 billion at June 30, 2024.
Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,200 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 10
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CONTACTS: | |
| |
ANALYSTS | MEDIA |
Brian Mauney | Susan Donlan |
216.689.0521 | 216.471.3133 |
Brian_Mauney@KeyBank.com | Susan_E_Donlan@KeyBank.com |
| |
Halle Nichols | Beth Strauss |
216.689.5305 | 216.471.2787 |
Halle_A_Nichols@KeyBank.com | Beth_A_Strauss@KeyBank.com |
| |
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| |
INVESTOR RELATIONS: | KEY MEDIA NEWSROOM: |
www.key.com/ir | www.key.com/newsroom |
| | |
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “assume,” “anticipate,” “intend,” “project,” “believe,” “estimate,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2023 and in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the “SEC”) and are or will be available on Key’s website (www.key.com/ir) and on the SEC’s website (www.sec.gov). These factors may include, among others, deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, the soundness of other financial institutions and the impact of changes in the interest rate environment. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. |
Notes to Editors:
A live Internet broadcast of KeyCorp’s conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts’ questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on July 18, 2024. A replay of the call will be available on our website through July 18, 2025.
For up-to-date company information, media contacts, and facts and figures about Key’s lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
*****
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 11
KeyCorp
Second Quarter 2024
Financial Supplement
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 12
Basis of Presentation
Use of Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management
believes it to be helpful in understanding Key’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document, the financial supplement, or conference call slides related to this document, all of which can be found on Key’s website (www.key.com/ir).
Annualized Data
Certain returns, yields, performance ratios, or quarterly growth rates are presented on an “annualized”
basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts.
Taxable Equivalent
Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at the federal statutory rate. This adjustment puts all earning assets, most notably tax-exempt municipal securities, and certain lease assets, on a common basis that facilitates comparison of results to results of peers.
Earnings Per Share Equivalent
Certain income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total consolidated earnings per share performance excluding the impact of such items. When the impact of certain income or expense items is disclosed separately, the after-tax amount is computed using the marginal tax rate, with this then being the amount used to calculate the earnings per share equivalent.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 13
| | | | | | | | | | | | | | | | | |
Financial Highlights |
(Dollars in millions, except per share amounts) |
| | | Three months ended |
| | | 6/30/2024 | 3/31/2024 | 6/30/2023 |
Summary of operations | | | |
| Net interest income (TE) | $ | 899 | | $ | 886 | | $ | 986 | |
| Noninterest income | 627 | | 647 | | 609 | |
| | Total revenue (TE) | 1,526 | | 1,533 | | 1,595 | |
| Provision for credit losses | 100 | | 101 | | 167 | |
| Noninterest expense | 1,079 | | 1,143 | | 1,076 | |
| Income (loss) from continuing operations attributable to Key | 273 | | 219 | | 286 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | — | | 1 | |
| Net income (loss) attributable to Key | 274 | | 219 | | 287 | |
| | | | | |
| Income (loss) from continuing operations attributable to Key common shareholders | 237 | | 183 | | 250 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | — | | 1 | |
| Net income (loss) attributable to Key common shareholders | 238 | | 183 | | 251 | |
| | | | | |
Per common share | | | |
| Income (loss) from continuing operations attributable to Key common shareholders | $ | .25 | | $ | .20 | | $ | .27 | |
| Income (loss) from discontinued operations, net of taxes | — | | — | | — | |
| Net income (loss) attributable to Key common shareholders (a) | .25 | | .20 | | .27 | |
| | | | | |
| Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .25 | | .20 | | .27 | |
| Income (loss) from discontinued operations, net of taxes — assuming dilution | — | | — | | — | |
| Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .25 | | .20 | | .27 | |
| | | | | |
| Cash dividends declared | .205 | | .205 | | .205 | |
| Book value at period end | 13.09 | | 12.84 | | 12.18 | |
| Tangible book value at period end | 10.13 | | 9.87 | | 9.16 | |
| Market price at period end | 14.21 | | 15.81 | | 9.24 | |
| | | | | |
Performance ratios | | | |
| From continuing operations: | | | |
| Return on average total assets | .59 | % | .47 | % | .58 | % |
| Return on average common equity | 7.96 | | 6.06 | | 8.42 | |
| Return on average tangible common equity (b) | 10.39 | | 7.87 | | 11.04 | |
| Net interest margin (TE) | 2.04 | | 2.02 | | 2.12 | |
| Cash efficiency ratio (b) | 70.2 | | 74.0 | | 66.8 | |
| | | | | |
| From consolidated operations: | | | |
| Return on average total assets | .59 | % | .47 | % | .58 | % |
| Return on average common equity | 7.99 | | 6.06 | | 8.45 | |
| Return on average tangible common equity (b) | 10.43 | | 7.87 | | 11.09 | |
| Net interest margin (TE) | 2.04 | | 2.02 | | 2.12 | |
| Loan to deposit (c) | 74.0 | | 76.6 | | 83.0 | |
| | | | | |
Capital ratios at period end | | | |
| Key shareholders’ equity to assets | 7.9 | % | 7.8 | % | 7.1 | % |
| Key common shareholders’ equity to assets | 6.6 | | 6.5 | | 5.8 | |
| Tangible common equity to tangible assets (b) | 5.2 | | 5.0 | | 4.5 | |
| Common Equity Tier 1 (d) | 10.5 | | 10.3 | | 9.3 | |
| Tier 1 risk-based capital (d) | 12.2 | | 12.0 | | 10.8 | |
| Total risk-based capital (d) | 14.7 | | 14.5 | | 13.1 | |
| Leverage (d) | 9.1 | | 9.1 | | 8.7 | |
| | | | | |
Asset quality — from continuing operations | | | |
| Net loan charge-offs | $ | 91 | | $ | 81 | | $ | 52 | |
| Net loan charge-offs to average loans | .34 | % | .29 | % | .17 | % |
| Allowance for loan and lease losses | $ | 1,547 | | $ | 1,542 | | $ | 1,480 | |
| Allowance for credit losses | 1,833 | | 1,823 | | 1,771 | |
| Allowance for loan and lease losses to period-end loans | 1.44 | % | 1.40 | % | 1.24 | % |
| Allowance for credit losses to period-end loans | 1.71 | | 1.66 | | 1.49 | |
| Allowance for loan and lease losses to nonperforming loans | 218 | | 234 | | 343 | |
| Allowance for credit losses to nonperforming loans | 258 | | 277 | | 411 | |
| Nonperforming loans at period-end | $ | 710 | | $ | 658 | | $ | 431 | |
| Nonperforming assets at period-end | 727 | | 674 | | 462 | |
| Nonperforming loans to period-end portfolio loans | .66 | % | .60 | % | .36 | % |
| Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .68 | | .61 | | .39 | |
| | | | | |
Trust assets | | | |
| Assets under management | $ | 57,602 | | $ | 57,305 | | $ | 53,952 | |
| | | | |
| | | | | |
Other data | | | |
| Average full-time equivalent employees | 16,646 | | 16,752 | | 17,754 | |
| Branches | 946 | | 957 | | 965 | |
| Taxable-equivalent adjustment | $ | 12 | | $ | 11 | | $ | 8 | |
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 14
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| | | |
Financial Highlights (continued) |
(Dollars in millions, except per share amounts) |
| | Six months ended |
| | 6/30/2024 | 6/30/2023 |
Summary of operations | | |
| Net interest income (TE) | $ | 1,785 | | $ | 2,092 | |
| Noninterest income | 1,274 | | 1,217 | |
| Total revenue (TE) | 3,059 | | 3,309 | |
| Provision for credit losses | 201 | | 306 | |
| Noninterest expense | 2,222 | | 2,252 | |
| Income (loss) from continuing operations attributable to Key | 492 | | 597 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | 2 | |
| Net income (loss) attributable to Key | 493 | | 599 | |
| | | |
| Income (loss) from continuing operations attributable to Key common shareholders | 420 | | 525 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | 2 | |
| Net income (loss) attributable to Key common shareholders | 421 | | 527 | |
| | | |
Per common share | | |
| Income (loss) from continuing operations attributable to Key common shareholders | $ | .45 | | $ | .57 | |
| Income (loss) from discontinued operations, net of taxes | — | | — | |
| Net income (loss) attributable to Key common shareholders (a) | .45 | | .57 | |
| | | |
| Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution | .45 | | .56 | |
| Income (loss) from discontinued operations, net of taxes — assuming dilution | — | | — | |
| Net income (loss) attributable to Key common shareholders — assuming dilution (a) | .45 | | .57 | |
| | | |
| Cash dividends paid | .41 | | .41 | |
| | | |
Performance ratios | | |
| From continuing operations: | | |
| Return on average total assets | .53 | % | .62 | % |
| Return on average common equity | 7.00 | | 9.11 | |
| Return on average tangible common equity (b) | 9.12 | | 12.06 | |
| Net interest margin (TE) | 2.03 | | 2.29 | |
| Cash efficiency ratio (b) | 72.1 | | 67.5 | |
| | | |
| From consolidated operations: | | |
| Return on average total assets | .53 | % | .62 | % |
| Return on average common equity | 7.02 | | 9.15 | |
| Return on average tangible common equity (b) | 9.14 | | 12.10 | |
| Net interest margin (TE) | 2.03 | | 2.29 | |
| | | |
Asset quality — from continuing operations | | |
| Net loan charge-offs | $ | 172 | | $ | 97 | |
| Net loan charge-offs to average total loans | .31 | % | .16 | % |
| | | |
Other data | | |
| Average full-time equivalent employees | 16,699 | | 17,987 | |
| | | |
Taxable-equivalent adjustment | 23 | | 15 | |
(a)Earnings per share may not foot due to rounding.
(b)The following table entitled “GAAP to Non-GAAP Reconciliations” presents the computations of certain financial measures related to “tangible common equity” and “cash efficiency.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.
(c)Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits.
(d)June 30, 2024, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 15
GAAP to Non-GAAP Reconciliations
(Dollars in millions)
The table below presents certain non-GAAP financial measures related to “tangible common equity,” “return on average tangible common equity,” “pre-provision net revenue," and “cash efficiency ratio."
The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key’s capital position without regard to the effects of intangible assets and preferred stock.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key’s intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key’s results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
| | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Tangible common equity to tangible assets at period-end | | | | | | |
Key shareholders’ equity (GAAP) | $ | 14,789 | | $ | 14,547 | | $ | 13,844 | | | | |
Less: Intangible assets (a) | 2,793 | | 2,799 | | 2,826 | | | | |
Preferred Stock (b) | 2,446 | | 2,446 | | 2,446 | | | | |
Tangible common equity (non-GAAP) | $ | 9,550 | | $ | 9,302 | | $ | 8,572 | | | | |
Total assets (GAAP) | $ | 187,450 | | $ | 187,485 | | $ | 195,037 | | | | |
Less: Intangible assets (a) | 2,793 | | 2,799 | | 2,826 | | | | |
Tangible assets (non-GAAP) | $ | 184,657 | | $ | 184,686 | | $ | 192,211 | | | | |
Tangible common equity to tangible assets ratio (non-GAAP) | 5.17 | % | 5.04 | % | 4.46 | % | | | |
| | | | | | |
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Pre-provision net revenue | | | | | | |
Net interest income (GAAP) | $ | 887 | | $ | 875 | | $ | 978 | | | $ | 1,762 | | $ | 2,077 | |
Plus: Taxable-equivalent adjustment | 12 | | 11 | | 8 | | | 23 | | 15 | |
Noninterest income | 627 | | 647 | | 609 | | | 1,274 | | 1,217 | |
Less: Noninterest expense | 1,079 | | 1,143 | | 1,076 | | | 2,222 | | 2,252 | |
Pre-provision net revenue from continuing operations (non-GAAP) | $ | 447 | | $ | 390 | | $ | 519 | | | $ | 837 | | $ | 1,679 | |
Average tangible common equity | | | | | | |
Average Key shareholders' equity (GAAP) | $ | 14,474 | | $ | 14,649 | | $ | 14,412 | | | $ | 14,561 | | $ | 14,116 | |
Less: Intangible assets (average) (c) | 2,796 | | 2,802 | | 2,831 | | | 2,798 | | 2,836 | |
Preferred stock (average) | 2,500 | | 2,500 | | 2,500 | | | 2,500 | | 2,500 | |
Average tangible common equity (non-GAAP) | $ | 9,178 | | $ | 9,347 | | $ | 9,081 | | | $ | 9,263 | | $ | 8,780 | |
Return on average tangible common equity from continuing operations | | | | | | |
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) | $ | 237 | | $ | 183 | | $ | 250 | | | $ | 420 | | $ | 525 | |
| | | | | | |
| | | | | | |
Average tangible common equity (non-GAAP) | 9,178 | | 9,347 | | 9,081 | | | 9,263 | | 8,780 | |
| | | | | | |
Return on average tangible common equity from continuing operations (non-GAAP) | 10.39 | % | 7.87 | % | 11.04 | % | | 9.12 | % | 12.06 | % |
| | | | | | |
Return on average tangible common equity consolidated | | | | | | |
Net income (loss) attributable to Key common shareholders (GAAP) | $ | 238 | | $ | 183 | | $ | 251 | | | $ | 421 | | $ | 527 | |
Average tangible common equity (non-GAAP) | 9,178 | | 9,347 | | 9,081 | | | 9,263 | | 8,780 | |
| | | | | | |
Return on average tangible common equity consolidated (non-GAAP) | 10.43 | % | 7.87 | % | 11.09 | % | | 9.14 | % | 12.10 | % |
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KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 16
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GAAP to Non-GAAP Reconciliations (continued) |
(Dollars in millions) |
| Three months ended | | Six months ended |
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Cash efficiency ratio | | | | | | |
Noninterest expense (GAAP) | $ | 1,079 | | $ | 1,143 | | $ | 1,076 | | | $ | 2,222 | | $ | 2,252 | |
Less: Intangible asset amortization | 7 | | 8 | | 10 | | | 15 | | 20 | |
Adjusted noninterest expense (non-GAAP) | $ | 1,072 | | $ | 1,135 | | $ | 1,066 | | | $ | 2,207 | | $ | 2,232 | |
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Net interest income (GAAP) | $ | 887 | | $ | 875 | | $ | 978 | | | $ | 1,762 | | $ | 2,077 | |
Plus: Taxable-equivalent adjustment | 12 | | 11 | | 8 | | | 23 | | 15 | |
Net interest income TE (non-GAAP) | 899 | | 886 | | 986 | | | 1,785 | | 2,092 | |
Noninterest income (GAAP) | 627 | | 647 | | 609 | | | 1,274 | | 1,217 | |
Total taxable-equivalent revenue (non-GAAP) | $ | 1,526 | | $ | 1,533 | | $ | 1,595 | | | $ | 3,059 | | $ | 3,309 | |
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Cash efficiency ratio (non-GAAP) | 70.2 | % | 74.0 | % | 66.8 | % | | 72.1 | % | 67.5 | % |
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(a)For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, intangible assets exclude less than $1 million, $1 million, and $1 million, respectively, of period-end purchased credit card receivables.
(b)Net of capital surplus.
(c)For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, average intangible assets exclude less than $1 million, $1 million, and $1 million, respectively, of average purchased credit card receivables.
GAAP = U.S. generally accepted accounting principles
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 17
| | | | | | | | | | | | | | | | | |
Consolidated Balance Sheets |
(Dollars in millions) |
| | | | | |
| | | 6/30/2024 | 3/31/2024 | 6/30/2023 |
Assets | | | |
| Loans | $ | 107,078 | | $ | 109,885 | | $ | 119,011 | |
| Loans held for sale | 517 | | 228 | | 1,130 | |
| Securities available for sale | 37,460 | | 37,298 | | 37,908 | |
| Held-to-maturity securities | 7,968 | | 8,272 | | 9,189 | |
| Trading account assets | 1,219 | | 1,171 | | 1,177 | |
| Short-term investments | 15,536 | | 13,205 | | 8,959 | |
| Other investments | 1,259 | | 1,247 | | 1,474 | |
| | Total earning assets | 171,037 | | 171,306 | | 178,848 | |
| Allowance for loan and lease losses | (1,547) | | (1,542) | | (1,480) | |
| Cash and due from banks | 1,326 | | 1,247 | | 758 | |
| Premises and equipment | 631 | | 650 | | 652 | |
| Goodwill | 2,752 | | 2,752 | | 2,752 | |
| Other intangible assets | 41 | | 48 | | 75 | |
| Corporate-owned life insurance | 4,382 | | 4,392 | | 4,378 | |
| Accrued income and other assets | 8,532 | | 8,314 | | 8,668 | |
| Discontinued assets | 296 | | 318 | | 386 | |
| | Total assets | $ | 187,450 | | $ | 187,485 | | $ | 195,037 | |
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Liabilities | | | |
| Deposits in domestic offices: | | | |
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| | Interest-bearing deposits | $ | 117,570 | | $ | 114,593 | | $ | 111,766 | |
| | Noninterest-bearing deposits | 28,150 | | 29,638 | | 33,366 | |
| | Total deposits | 145,720 | | 144,231 | | 145,132 | |
| Federal funds purchased and securities sold under repurchase agreements | 25 | | 27 | | 1,702 | |
| Bank notes and other short-term borrowings | 5,292 | | 2,896 | | 6,949 | |
| Accrued expense and other liabilities | 4,755 | | 5,008 | | 5,339 | |
| Long-term debt | 16,869 | | 20,776 | | 22,071 | |
| | Total liabilities | 172,661 | | 172,938 | | 181,193 | |
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Equity | | | |
| Preferred stock | 2,500 | | 2,500 | | 2,500 | |
| Common shares | 1,257 | | 1,257 | | 1,257 | |
| Capital surplus | 6,185 | | 6,164 | | 6,231 | |
| Retained earnings | 15,706 | | 15,662 | | 15,759 | |
| Treasury stock, at cost | (5,715) | | (5,722) | | (5,859) | |
| Accumulated other comprehensive income (loss) | (5,144) | | (5,314) | | (6,044) | |
| | Key shareholders’ equity | 14,789 | | 14,547 | | 13,844 | |
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Total liabilities and equity | $ | 187,450 | | $ | 187,485 | | $ | 195,037 | |
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Common shares outstanding (000) | 943,200 | | 942,776 | | 935,733 | |
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 18
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Consolidated Statements of Income |
(Dollars in millions, except per share amounts) |
| | | Three months ended | | Six months ended |
| | | 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Interest income | | | | | | |
| Loans | $ | 1,524 | | $ | 1,538 | | $ | 1,576 | | | $ | 3,062 | | $ | 3,052 | |
| Loans held for sale | 8 | | 14 | | 17 | | | 22 | | 30 | |
| Securities available for sale | 259 | | 232 | | 194 | | | 491 | | 388 | |
| Held-to-maturity securities | 73 | | 75 | | 81 | | | 148 | | 155 | |
| Trading account assets | 16 | | 14 | | 15 | | | 30 | | 27 | |
| Short-term investments | 192 | | 142 | | 111 | | | 334 | | 153 | |
| Other investments | 16 | | 17 | | 16 | | | 33 | | 29 | |
| | Total interest income | 2,088 | | 2,032 | | 2,010 | | | 4,120 | | 3,834 | |
Interest expense | | | | | | |
| Deposits | 817 | | 782 | | 531 | | | 1,599 | | 881 | |
| Federal funds purchased and securities sold under repurchase agreements | 1 | | 1 | | 48 | | | 2 | | 70 | |
| Bank notes and other short-term borrowings | 51 | | 46 | | 104 | | | 97 | | 182 | |
| Long-term debt | 332 | | 328 | | 349 | | | 660 | | 624 | |
| | Total interest expense | 1,201 | | 1,157 | | 1,032 | | | 2,358 | | 1,757 | |
Net interest income | 887 | | 875 | | 978 | | | 1,762 | | 2,077 | |
Provision for credit losses | 100 | | 101 | | 167 | | | 201 | | 306 | |
Net interest income after provision for credit losses | 787 | | 774 | | 811 | | | 1,561 | | 1,771 | |
Noninterest income | | | | | | |
| Trust and investment services income | 139 | | 136 | | 126 | | | 275 | | 254 | |
| Investment banking and debt placement fees | 126 | | 170 | | 120 | | | 296 | | 265 | |
| Cards and payments income | 85 | | 77 | | 85 | | | 162 | | 166 | |
| Service charges on deposit accounts | 66 | | 63 | | 69 | | | 129 | | 136 | |
| Corporate services income | 68 | | 69 | | 86 | | | 137 | | 162 | |
| Commercial mortgage servicing fees | 61 | | 56 | | 50 | | | 117 | | 96 | |
| Corporate-owned life insurance income | 34 | | 32 | | 32 | | | 66 | | 61 | |
| Consumer mortgage income | 16 | | 14 | | 14 | | | 30 | | 25 | |
| Operating lease income and other leasing gains | 21 | | 24 | | 23 | | | 45 | | 48 | |
| Other income | 11 | | 6 | | 4 | | | 17 | | 4 | |
| | Total noninterest income | 627 | | 647 | | 609 | | | 1,274 | | 1,217 | |
Noninterest expense | | | | | | |
| Personnel | 636 | | 674 | | 622 | | | 1,310 | | 1,323 | |
| Net occupancy | 66 | | 67 | | 65 | | | 133 | | 135 | |
| Computer processing | 101 | | 102 | | 95 | | | 203 | | 187 | |
| Business services and professional fees | 37 | | 41 | | 41 | | | 78 | | 86 | |
| Equipment | 20 | | 20 | | 22 | | | 40 | | 44 | |
| Operating lease expense | 17 | | 17 | | 21 | | | 34 | | 41 | |
| Marketing | 21 | | 19 | | 29 | | | 40 | | 50 | |
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| Other expense | 181 | | 203 | | 181 | | | 384 | | 386 | |
| | Total noninterest expense | 1,079 | | 1,143 | | 1,076 | | | 2,222 | | 2,252 | |
Income (loss) from continuing operations before income taxes | 335 | | 278 | | 344 | | | 613 | | 736 | |
| Income taxes | 62 | | 59 | | 58 | | | 121 | | 139 | |
Income (loss) from continuing operations | 273 | | 219 | | 286 | | | 492 | | 597 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | — | | 1 | | | 1 | | 2 | |
Net income (loss) | 274 | | 219 | | 287 | | | 493 | | 599 | |
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Net income (loss) attributable to Key | $ | 274 | | $ | 219 | | $ | 287 | | | $ | 493 | | $ | 599 | |
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Income (loss) from continuing operations attributable to Key common shareholders | $ | 237 | | $ | 183 | | $ | 250 | | | $ | 420 | | $ | 525 | |
Net income (loss) attributable to Key common shareholders | 238 | | 183 | | 251 | | | 421 | | 527 | |
Per common share | | | | | | |
Income (loss) from continuing operations attributable to Key common shareholders | $ | .25 | | $ | .20 | | $ | .27 | | | $ | .45 | | $ | .57 | |
Income (loss) from discontinued operations, net of taxes | — | | — | | — | | | — | | — | |
Net income (loss) attributable to Key common shareholders (a) | .25 | | .20 | | .27 | | | .45 | | .57 | |
Per common share — assuming dilution | | | | | | |
Income (loss) from continuing operations attributable to Key common shareholders | $ | .25 | | $ | .20 | | $ | .27 | | | $ | .45 | | $ | .56 | |
Income (loss) from discontinued operations, net of taxes | — | | — | | — | | | — | | — | |
Net income (loss) attributable to Key common shareholders (a) | .25 | | .20 | | .27 | | | .45 | | .57 | |
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Cash dividends declared per common share | $ | .205 | | $ | .205 | | $ | .205 | | | $ | .410 | | $ | .410 | |
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Weighted-average common shares outstanding (000) | 931,726 | | 929,692 | | 926,741 | | | 930,776 | | 926,807 | |
| Effect of common share options and other stock awards | 6,761 | | 7,319 | | 3,713 | | | 7,040 | | 5,513 | |
Weighted-average common shares and potential common shares outstanding (000) (b) | 938,487 | | 937,011 | | 930,454 | | | 937,816 | | 932,320 | |
(a)Earnings per share may not foot due to rounding.
(b)Assumes conversion of common share options and other stock awards, as applicable.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 19
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Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
(Dollars in millions) |
| | Second Quarter 2024 | | First Quarter 2024 | | Second Quarter 2023 |
| | Average | | Yield/ | | Average | | Yield/ | | Average | | Yield/ |
| | Balance | Interest (a) | Rate (a) | | Balance | Interest (a) | Rate (a) | | Balance | Interest (a) | Rate (a) |
Assets | | | | | | | | | | | |
| Loans: (b), (c) | | | | | | | | | | | |
| Commercial and industrial (d) | $ | 54,599 | | $ | 860 | | 6.34 | % | | $ | 55,220 | | $ | 853 | | 6.22 | % | | $ | 61,426 | | $ | 881 | | 5.76 | % |
| Real estate — commercial mortgage | 14,287 | | 217 | | 6.10 | | | 14,837 | | 229 | | 6.21 | | | 16,226 | | 235 | | 5.80 | |
| Real estate — construction | 3,020 | | 56 | | 7.51 | | | 3,039 | | 57 | | 7.50 | | | 2,641 | | 44 | | 6.64 | |
| Commercial lease financing | 3,193 | | 28 | | 3.46 | | | 3,346 | | 27 | | 3.23 | | | 3,756 | | 29 | | 3.07 | |
| Total commercial loans | 75,099 | | 1,161 | | 6.22 | | | 76,442 | | 1,166 | | 6.14 | | | 84,049 | | 1,189 | | 5.67 | |
| Real estate — residential mortgage | 20,515 | | 169 | | 3.30 | | | 20,814 | | 171 | | 3.29 | | | 21,659 | | 176 | | 3.25 | |
| Home equity loans | 6,817 | | 102 | | 5.98 | | | 7,024 | | 104 | | 5.97 | | | 7,620 | | 109 | | 5.75 | |
| Other consumer loans | 5,597 | | 70 | | 5.00 | | | 5,800 | | 72 | | 4.99 | | | 6,360 | | 77 | | 4.86 | |
| Credit cards | 933 | | 34 | | 14.63 | | | 954 | | 36 | | 14.93 | | | 984 | | 33 | | 13.49 | |
| | | | | | | | | | | | |
| Total consumer loans | 33,862 | | 375 | | 4.44 | | | 34,592 | | 383 | | 4.44 | | | 36,623 | | 395 | | 4.33 | |
| Total loans | 108,961 | | 1,536 | | 5.66 | | | 111,034 | | 1,549 | | 5.61 | | | 120,672 | | 1,584 | | 5.26 | |
| Loans held for sale | 599 | | 8 | | 5.42 | | | 888 | | 14 | | 6.15 | | | 1,087 | | 17 | | 6.16 | |
| Securities available for sale (b), (e) | 36,764 | | 259 | | 2.42 | | | 37,089 | | 232 | | 2.17 | | | 38,899 | | 194 | | 1.74 | |
| Held-to-maturity securities (b) | 8,123 | | 73 | | 3.59 | | | 8,423 | | 75 | | 3.57 | | | 9,371 | | 81 | | 3.47 | |
| Trading account assets | 1,231 | | 16 | | 5.38 | | | 1,110 | | 14 | | 5.21 | | | 1,244 | | 15 | | 4.64 | |
| Short-term investments | 13,729 | | 192 | | 5.62 | | | 10,243 | | 142 | | 5.59 | | | 7,798 | | 111 | | 5.73 | |
| Other investments (e) | 1,234 | | 16 | | 5.19 | | | 1,236 | | 17 | | 5.39 | | | 1,566 | | 16 | | 4.03 | |
| Total earning assets | 170,641 | | 2,100 | | 4.77 | | | 170,023 | | 2,043 | | 4.67 | | | 180,637 | | 2,018 | | 4.34 | |
| Allowance for loan and lease losses | (1,534) | | | | | (1,505) | | | | | (1,379) | | | |
| Accrued income and other assets | 17,476 | | | | | 17,350 | | | | | 17,202 | | | |
| Discontinued assets | 305 | | | | | 329 | | | | | 394 | | | |
| Total assets | $ | 186,888 | | | | | $ | 186,197 | | | | | $ | 196,854 | | | |
Liabilities | | | | | | | | | | | |
| Money market deposits | $ | 39,364 | | $ | 290 | | 2.97 | % | | $ | 37,659 | | $ | 264 | | 2.82 | % | | $ | 32,419 | | $ | 123 | | 1.53 | % |
| Demand deposits | 54,629 | | 340 | | 2.50 | | | 56,137 | | 357 | | 2.56 | | | 53,569 | | 256 | | 1.91 | |
| Savings deposits | 5,189 | | 2 | | .19 | | | 5,253 | | 1 | | .07 | | | 6,592 | | 1 | | .04 | |
| | | | | | | | | | | | |
| Time deposits | 16,019 | | 185 | | 4.64 | | | 14,430 | | 160 | | 4.45 | | | 15,216 | | 151 | | 3.99 | |
| Total interest-bearing deposits | 115,201 | | 817 | | 2.85 | | | 113,479 | | 782 | | 2.77 | | | 107,796 | | 531 | | 1.98 | |
| Federal funds purchased and securities sold under repurchase agreements | 124 | | 1 | | 4.76 | | | 106 | | 1 | | 4.03 | | | 3,767 | | 48 | | 5.07 | |
| Bank notes and other short-term borrowings | 3,617 | | 51 | | 5.57 | | | 3,325 | | 46 | | 5.63 | | | 7,982 | | 104 | | 5.22 | |
| Long-term debt (f) | 19,219 | | 332 | | 6.91 | | | 19,537 | | 328 | | 6.72 | | | 22,284 | | 349 | | 6.26 | |
| Total interest-bearing liabilities | 138,161 | | 1,201 | | 3.49 | | | 136,447 | | 1,157 | | 3.41 | | | 141,829 | | 1,032 | | 2.91 | |
| Noninterest-bearing deposits | 28,979 | | | | | 29,399 | | | | | 35,107 | | | |
| Accrued expense and other liabilities | 4,969 | | | | | 5,373 | | | | | 5,112 | | | |
| Discontinued liabilities (f) | 305 | | | | | 329 | | | | | 394 | | | |
| Total liabilities | $ | 172,414 | | | | | $ | 171,548 | | | | | $ | 182,442 | | | |
Equity | | | | | | | | | | | |
| Key shareholders’ equity | $ | 14,474 | | | | | $ | 14,649 | | | | | $ | 14,412 | | | |
| Noncontrolling interests | — | | | | | — | | | | | — | | | |
| Total equity | 14,474 | | | | | 14,649 | | | | | 14,412 | | | |
| Total liabilities and equity | $ | 186,888 | | | | | $ | 186,197 | | | | | $ | 196,854 | | | |
Interest rate spread (TE) | | | 1.28 | % | | | | 1.26 | % | | | | 1.43 | % |
Net interest income (TE) and net interest margin (TE) | | $ | 899 | | 2.04 | % | | | $ | 886 | | 2.02 | % | | | $ | 986 | | 2.12 | % |
TE adjustment (b) | | 12 | | | | 11 | | | | 8 | |
| Net interest income, GAAP basis | | $ | 887 | | | | | $ | 875 | | | | | $ | 978 | | |
(a)Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023.
(c)For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)Commercial and industrial average balances include $218 million, $211 million, and $194 million of assets from commercial credit cards for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
(e)Yield presented is calculated on the basis of amortized cost. The average amortized cost for securities available for sale was $42.8 billion, $42.7 billion, and $44.6 billion for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively. Yield based on the fair value of securities available for sale was 2.82%, 2.50%, and 2.00% for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
(f)A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 20
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| | | | | | | | |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
(Dollars in millions) |
| | Six months ended June 30, 2024 | | Six months ended June 30, 2023 |
| | Average | | Yield/ | | Average | | Yield/ |
| | Balance | Interest (a) | Rate (a) | | Balance | Interest (a) | Rate (a) |
Assets | | | | | | | |
| Loans: (b), (c) | | | | | | | |
| Commercial and industrial (d) | $ | 54,909 | | $ | 1,714 | | 6.28 | % | | $ | 60,857 | | $ | 1,688 | | 5.59 | % |
| Real estate — commercial mortgage | 14,562 | | 446 | 6.16 | | | 16,347 | | 459 | 5.66 | |
| Real estate — construction | 3,030 | | 113 | | 7.51 | | | 2,583 | | 83 | | 6.47 | |
| Commercial lease financing | 3,269 | | 55 | | 3.34 | | | 3,770 | | 56 | | 2.97 | |
| Total commercial loans | 75,770 | | 2,328 | | 6.18 | | | 83,557 | | 2,286 | | 5.51 | |
| Real estate — residential mortgage | 20,664 | | 340 | | 3.30 | | | 21,548 | | 348 | | 3.23 | |
| Home equity loans | 6,921 | | 206 | | 5.98 | | | 7,749 | | 215 | | 5.61 | |
| Other consumer loans | 5,699 | | 142 | | 5.00 | | | 6,419 | | 153 | | 4.78 | |
| Credit cards | 943 | | 69 | | 14.78 | | | 984 | | 65 | | 13.43 | |
| | | | | | | | |
| Total consumer loans | 34,227 | | 757 | | 4.44 | | | 36,700 | | 781 | | 4.28 | |
| Total loans | 109,997 | | 3,085 | | 5.64 | | | 120,257 | | 3,067 | | 5.14 | |
| Loans held for sale | 744 | | 22 | | 5.86 | | | 997 | | 30 | | 6.02 | |
| Securities available for sale (b), (e) | 36,926 | | 491 | | 2.29 | | | 39,034 | | 388 | | 1.73 | |
| Held-to-maturity securities (b) | 8,273 | | 148 | | 3.58 | | | 9,152 | | 155 | | 3.40 | |
| Trading account assets | 1,171 | | 30 | | 5.30 | | | 1,123 | | 27 | | 4.74 | |
| Short-term investments | 11,986 | | 334 | | 5.61 | | | 5,677 | | 153 | | 5.44 | |
| Other investments (e) | 1,235 | | 33 | | 5.29 | | | 1,438 | | 29 | | 4.02 | |
| Total earning assets | 170,332 | | 4,143 | | 4.72 | | | 177,678 | | 3,849 | | 4.22 | |
| Allowance for loan and lease losses | (1,519) | | | | | (1,357) | | | |
| Accrued income and other assets | 17,412 | | | | | 17,351 | | | |
| Discontinued assets | 317 | | | | | 406 | | | |
| Total assets | $ | 186,542 | | | | | $ | 194,078 | | | |
Liabilities | | | | | | | |
| Money market deposits | $ | 38,512 | | $ | 554 | | 2.89 | | | $ | 33,110 | | $ | 201 | | 1.23 | |
| Other demand deposits | 55,383 | | 697 | | 2.53 | | | 52,993 | | 440 | | 1.67 | |
| Savings deposits | 5,221 | | 3 | | .13 | | | 6,967 | | 1 | | .04 | |
| | | | | | | | |
| Time deposits | 15,225 | | 345 | | 4.55 | | | 12,870 | | 239 | | 3.75 | |
| Total interest-bearing deposits | 114,341 | | 1,599 | | 2.81 | | | 105,940 | | 881 | | 1.68 | |
| Federal funds purchased and securities sold under repurchase agreements | 115 | | 2 | | 4.42 | | | 2,932 | | 70 | | 4.81 | |
| Bank notes and other short-term borrowings | 3,471 | | 97 | | 5.60 | | | 7,293 | | 182 | | 5.03 | |
| Long-term debt (f) | 19,378 | | 660 | | 6.81 | | | 21,218 | | 624 | | 5.88 | |
| Total interest-bearing liabilities | 137,305 | | 2,358 | | 3.45 | | | 137,383 | | 1,757 | | 2.57 | |
| Noninterest-bearing deposits | 29,189 | | | | | 37,213 | | | |
| Accrued expense and other liabilities | 5,170 | | | | | 4,960 | | | |
| Discontinued liabilities (f) | 317 | | | | | 406 | | | |
| Total liabilities | $ | 171,981 | | | | | $ | 179,962 | | | |
Equity | | | | | | | |
| Key shareholders’ equity | $ | 14,561 | | | | | $ | 14,116 | | | |
| Noncontrolling interests | — | | | | | — | | | |
| Total equity | 14,561 | | | | | 14,116 | | | |
| Total liabilities and equity | $ | 186,542 | | | | | $ | 194,078 | | | |
Interest rate spread (TE) | | | 1.27 | % | | | | 1.65 | % |
Net interest income (TE) and net interest margin (TE) | | $ | 1,785 | | 2.03 | % | | | $ | 2,092 | | 2.29 | % |
TE adjustment (b) | | 23 | | | | 15 | | |
| Net interest income, GAAP basis | | $ | 1,762 | | | | | $ | 2,077 | | |
| | | | | | | | |
(a)Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology.
(b)Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the six months ended June 30, 2024, and June 30, 2023, respectively.
(c)For purposes of these computations, nonaccrual loans are included in average loan balances.
(d)Commercial and industrial average balances include $214 million and $186 million of assets from commercial credit cards for the six months ended June 30, 2024, and June 30, 2023, respectively.
(e)Yield presented is calculated on the basis of amortized cost. The average amortized cost for securities available for sale was $42.8 billion and $45.0 billion for the six months ended June 30, 2024, and June 30, 2023, respectively. Yield based on the fair value of securities available for sale was 2.66% and 1.99% for the six months ended June 30, 2024, and June 30, 2023, respectively.
(f)A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key’s matched funds transfer pricing methodology to discontinued operations.
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 21
| | | | | | | | | | | | | | | | | | | | |
Noninterest Expense |
(Dollars in millions) |
| | | | | | |
| Three months ended | | Six months ended |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Personnel (a) | $ | 636 | | $ | 674 | | $ | 622 | | | $ | 1,310 | | $ | 1,323 | |
Net occupancy | 66 | | 67 | | 65 | | | 133 | | 135 | |
Computer processing | 101 | | 102 | | 95 | | | 203 | | 187 | |
Business services and professional fees | 37 | | 41 | | 41 | | | 78 | | 86 | |
Equipment | 20 | | 20 | | 22 | | | 40 | | 44 | |
Operating lease expense | 17 | | 17 | | 21 | | | 34 | | 41 | |
Marketing | 21 | | 19 | | 29 | | | 40 | | 50 | |
| | | | | | |
| | | | | | |
| | | | | | |
Other expense | 181 | | 203 | | 181 | | | 384 | | 386 | |
Total noninterest expense | $ | 1,079 | | $ | 1,143 | | $ | 1,076 | | | $ | 2,222 | | $ | 2,252 | |
| | | | | | |
| | | | | | |
Average full-time equivalent employees (b) | 16,646 | | 16,752 | | 17,754 | | | 16,699 | | 17,987 | |
(a)Additional detail provided in Personnel Expense table below.
(b)The number of average full-time equivalent employees has not been adjusted for discontinued operations.
| | | | | | | | | | | | | | | | | | | | |
Personnel Expense |
(Dollars in millions) |
| | | | | | |
| Three months ended | | Six months ended |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Salaries and contract labor | $ | 394 | | $ | 389 | | $ | 416 | | | $ | 783 | | $ | 835 | |
Incentive and stock-based compensation | 143 | | 159 | | 93 | | | 302 | | 245 | |
Employee benefits | 98 | | 126 | | 103 | | | 224 | | 202 | |
Severance | 1 | | — | | 10 | | | 1 | | 41 | |
Total personnel expense | $ | 636 | | $ | 674 | | $ | 622 | | | $ | 1,310 | | $ | 1,323 | |
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 22
| | | | | | | | | | | | | | | | | | | | |
Loan Composition |
(Dollars in millions) |
| | | | | | |
| | | Change 6/30/2024 vs. |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 3/31/2024 | 6/30/2023 |
Commercial and industrial (a)(b) | $ | 53,129 | | $ | 54,793 | | $ | 60,059 | | | (3.0) | % | (11.5) | % |
Commercial real estate: | | | | | | |
Commercial mortgage | 14,218 | | 14,540 | | 16,048 | | | (2.2) | | (11.4) | |
Construction | 3,077 | | 3,013 | | 2,646 | | | 2.1 | | 16.3 | |
Total commercial real estate loans | 17,295 | | 17,553 | | 18,694 | | | (1.5) | | (7.5) | |
Commercial lease financing (b) | 3,101 | | 3,305 | | 3,801 | | | (6.2) | | (18.4) | |
Total commercial loans | 73,525 | | 75,651 | | 82,554 | | | (2.8) | | (10.9) | |
Residential — prime loans: | | | | | | |
Real estate — residential mortgage | 20,380 | | 20,704 | | 21,637 | | | (1.6) | | (5.8) | |
Home equity loans | 6,729 | | 6,905 | | 7,529 | | | (2.5) | | (10.6) | |
Total residential — prime loans | 27,109 | | 27,609 | | 29,166 | | | (1.8) | | (7.1) | |
Other consumer loans | 5,514 | | 5,690 | | 6,290 | | | (3.1) | | (12.3) | |
Credit cards | 930 | | 935 | | 1,001 | | | (.5) | | (7.1) | |
| | | | | | |
Total consumer loans | 33,553 | | 34,234 | | 36,457 | | | (2.0) | | (8.0) | |
Total loans (c), (d) | $ | 107,078 | | $ | 109,885 | | $ | 119,011 | | | (2.6) | % | (10.0) | % |
(a)Loan balances include $217 million, $214 million, and $200 million of commercial credit card balances at June 30, 2024, March 31, 2024, and June 30, 2023, respectively.
(b)Commercial and industrial includes receivables held as collateral for a secured borrowing of $285 million at June 30, 2024, $349 million at March 31, 2024 and no amounts held as collateral for a secured borrowing at June 30, 2023. Commercial lease financing includes receivables held as collateral for a secured borrowing of $5 million, $6 million, and $5 million at June 30, 2024, March 31, 2024, and June 30, 2023, respectively. Principal reductions are based on the cash payments received from these related receivables.
(c)Total loans exclude loans of $291 million at June 30, 2024, $313 million at March 31, 2024, and $381 million at June 30, 2023, related to the discontinued operations of the education lending business.
(d)Accrued interest of $502 million, $522 million, and $500 million at June 30, 2024, March 31, 2024, and June 30, 2023, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.
| | | | | | | | | | | | | | | | | | | | |
Loans Held for Sale Composition |
(Dollars in millions) |
| | | | | | |
| | | | | Change 6/30/2024 vs. |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 3/31/2024 | 6/30/2023 |
Commercial and industrial | $ | 72 | | $ | — | | $ | 221 | | | N/M | (67.4) | % |
Real estate — commercial mortgage | 354 | | 155 | | 829 | | | 128.4 | | (57.3) | |
| | | | | | |
Commercial lease financing | — | | — | | 13 | | | — | | (100.0) | |
Real estate — residential mortgage | 91 | | 73 | | 67 | | | 24.7 | | 35.8 | |
| | | | | | |
Total loans held for sale | $ | 517 | | $ | 228 | | $ | 1,130 | | | 126.8 | % | (54.2) | % |
| | | | | | |
N/M = Not Meaningful
| | | | | | | | | | | | | | | | | |
Summary of Changes in Loans Held for Sale |
(Dollars in millions) |
| | | | | |
| 2Q24 | 1Q24 | 4Q23 | 3Q23 | 2Q23 |
Balance at beginning of period | $ | 228 | | $ | 483 | | $ | 730 | | $ | 1,130 | | $ | 1,211 | |
New originations | 1,532 | | 1,738 | | 1,879 | | 3,035 | | 1,798 | |
Transfers from (to) held to maturity, net | (1) | | (105) | | (31) | | (94) | | (52) | |
Loan sales | (1,234) | | (1,893) | | (2,095) | | (3,312) | | (1,798) | |
Loan draws (payments), net | (7) | | 4 | | — | | (29) | | (28) | |
Valuation and other adjustments | (1) | | 1 | | — | | — | | (1) | |
Balance at end of period | $ | 517 | | $ | 228 | | $ | 483 | | $ | 730 | | $ | 1,130 | |
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 23
| | | | | | | | | | | | | | | | | | | | |
Summary of Loan and Lease Loss Experience From Continuing Operations |
(Dollars in millions) |
| | | | | | |
| Three months ended | | Six months ended |
| 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Average loans outstanding | $ | 108,961 | | $ | 111,034 | | $ | 120,672 | | | $ | 109,997 | | $ | 120,257 | |
| | | | | | |
| | | | | | |
Allowance for loan and lease losses at the beginning of the period | $ | 1,542 | | $ | 1,508 | | $ | 1,380 | | | $ | 1,508 | | $ | 1,337 | |
Loans charged off: | | | | | | |
Commercial and industrial | 86 | | 62 | | 42 | | | 148 | | 77 | |
| | | | | | |
Real estate — commercial mortgage | 10 | | 5 | | 9 | | | 15 | | 14 | |
Real estate — construction | — | | — | | — | | | — | | — | |
Total commercial real estate loans | 10 | | 5 | | 9 | | | 15 | | 14 | |
Commercial lease financing | 6 | | — | | 1 | | | 6 | | — | |
Total commercial loans | 102 | | 67 | | 52 | | | 169 | | 91 | |
Real estate — residential mortgage | 1 | | 1 | | 1 | | | 2 | | 1 | |
Home equity loans | — | | 1 | | 2 | | | 1 | | 3 | |
Other consumer loans | 16 | | 16 | | 12 | | | 32 | | 23 | |
Credit cards | 12 | | 12 | | 9 | | | 24 | | 18 | |
| | | | | | |
Total consumer loans | 29 | | 30 | | 24 | | | 59 | | 45 | |
Total loans charged off | 131 | | 97 | | 76 | | | 228 | | 136 | |
Recoveries: | | | | | | |
Commercial and industrial | 31 | | 8 | | 15 | | | 39 | | 23 | |
| | | | | | |
Real estate — commercial mortgage | 1 | | — | | 1 | | | 1 | | 1 | |
Real estate — construction | — | | — | | — | | | — | | — | |
Total commercial real estate loans | 1 | | — | | 1 | | | 1 | | 1 | |
Commercial lease financing | 3 | | 2 | | 2 | | | 5 | | 3 | |
Total commercial loans | 35 | | 10 | | 18 | | | 45 | | 27 | |
Real estate — residential mortgage | 1 | | 2 | | 1 | | | 3 | | 2 | |
Home equity loans | — | | 1 | | 1 | | | 1 | | 2 | |
Other consumer loans | 2 | | 2 | | 2 | | | 4 | | 5 | |
Credit cards | 2 | | 1 | | 2 | | | 3 | | 3 | |
| | | | | | |
Total consumer loans | 5 | | 6 | | 6 | | | 11 | | 12 | |
Total recoveries | 40 | | 16 | | 24 | | | 56 | | 39 | |
Net loan charge-offs | (91) | | (81) | | (52) | | | (172) | | (97) | |
Provision (credit) for loan and lease losses | 96 | | 115 | | 152 | | | 211 | | 240 | |
| | | | | | |
Allowance for loan and lease losses at end of period | $ | 1,547 | | $ | 1,542 | | $ | 1,480 | | | $ | 1,547 | | $ | 1,480 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Liability for credit losses on lending-related commitments at beginning of period | $ | 281 | | $ | 296 | | $ | 276 | | | $ | 296 | | $ | 225 | |
Provision (credit) for losses on lending-related commitments | 4 | | (14) | | 15 | | | (10) | | 66 | |
Other | 1 | | (1) | | — | | | — | | — | |
Liability for credit losses on lending-related commitments at end of period (a) | $ | 286 | | $ | 281 | | $ | 291 | | | $ | 286 | | $ | 291 | |
| | | | | | |
Total allowance for credit losses at end of period | $ | 1,833 | | $ | 1,823 | | $ | 1,771 | | | $ | 1,833 | | $ | 1,771 | |
| | | | | | |
Net loan charge-offs to average total loans | .34 | % | .29 | % | .17 | % | | .31 | % | .16 | % |
Allowance for loan and lease losses to period-end loans | 1.44 | | 1.40 | | 1.24 | | | 1.44 | | 1.24 | |
Allowance for credit losses to period-end loans | 1.71 | | 1.66 | | 1.49 | | | 1.71 | | 1.49 | |
Allowance for loan and lease losses to nonperforming loans | 218 | | 234 | | 343 | | | 218 | | 343 | |
Allowance for credit losses to nonperforming loans | 258 | | 277 | | 411 | | | 258 | | 411 | |
| | | | | | |
Discontinued operations — education lending business: | | | | | | |
Loans charged off | $ | 1 | | $ | 1 | | $ | 2 | | | $ | 2 | | $ | 3 | |
Recoveries | 1 | | — | | 1 | | | 1 | | 1 | |
Net loan charge-offs | $ | — | | $ | (1) | | $ | (1) | | | $ | (1) | | $ | (2) | |
(a)Included in "Accrued expense and other liabilities" on the balance sheet.
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 24
| | | | | | | | | | | | | | | | | |
Asset Quality Statistics From Continuing Operations |
(Dollars in millions) |
| 2Q24 | 1Q24 | 4Q23 | 3Q23 | 2Q23 |
Net loan charge-offs | $ | 91 | | $ | 81 | | $ | 76 | | $ | 71 | | $ | 52 | |
Net loan charge-offs to average total loans | .34 | % | .29 | % | .26 | % | .24 | % | .17 | % |
Allowance for loan and lease losses | $ | 1,547 | | $ | 1,542 | | $ | 1,508 | | $ | 1,488 | | $ | 1,480 | |
Allowance for credit losses (a) | 1,833 | | 1,823 | | 1,804 | | 1,778 | | 1,771 | |
Allowance for loan and lease losses to period-end loans | 1.44 | % | 1.40 | % | 1.34 | % | 1.29 | % | 1.24 | % |
Allowance for credit losses to period-end loans | 1.71 | | 1.66 | | 1.60 | | 1.54 | | 1.49 | |
Allowance for loan and lease losses to nonperforming loans | 218 | | 234 | | 263 | | 327 | | 343 | |
Allowance for credit losses to nonperforming loans | 258 | | 277 | | 314 | | 391 | | 411 | |
Nonperforming loans at period end | $ | 710 | | $ | 658 | | $ | 574 | | $ | 455 | | $ | 431 | |
Nonperforming assets at period end | 727 | | 674 | | 591 | | 471 | | 462 | |
Nonperforming loans to period-end portfolio loans | .66 | % | .60 | % | .51 | % | .39 | % | .36 | % |
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .68 | | .61 | | .52 | | .41 | | .39 | |
(a)Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.
| | | | | | | | | | | | | | | | | |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
(Dollars in millions) |
| 6/30/2024 | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 |
Commercial and industrial | $ | 358 | | $ | 360 | | $ | 297 | | $ | 214 | | $ | 188 | |
| | | | | |
Real estate — commercial mortgage | 173 | | 113 | | 100 | | 63 | | 65 | |
Real estate — construction | — | | — | | — | | — | | — | |
Total commercial real estate loans | 173 | | 113 | | 100 | | 63 | | 65 | |
Commercial lease financing | 1 | | 1 | | — | | 1 | | 1 | |
Total commercial loans | 532 | | 474 | | 397 | | 278 | | 254 | |
Real estate — residential mortgage | 77 | | 79 | | 71 | | 72 | | 73 | |
Home equity loans | 91 | | 95 | | 97 | | 97 | | 97 | |
Other Consumer loans | 4 | | 4 | | 4 | | 4 | | 4 | |
Credit cards | 6 | | 6 | | 5 | | 4 | | 3 | |
| | | | | |
Total consumer loans | 178 | | 184 | | 177 | | 177 | | 177 | |
Total nonperforming loans (a) | 710 | | 658 | | 574 | | 455 | | 431 | |
OREO | 17 | | 16 | | 17 | | 16 | | 15 | |
Nonperforming loans held for sale | — | | — | | — | | — | | 16 | |
Other nonperforming assets | — | | — | | — | | — | | — | |
Total nonperforming assets | $ | 727 | | $ | 674 | | $ | 591 | | $ | 471 | | $ | 462 | |
Accruing loans past due 90 days or more | $ | 137 | | $ | 119 | | $ | 107 | | $ | 52 | | $ | 73 | |
Accruing loans past due 30 through 89 days | 282 | | 242 | | 222 | | 178 | | 139 | |
Nonperforming assets from discontinued operations — education lending business | 3 | | 2 | | 3 | | 2 | | 2 | |
Nonperforming loans to period-end portfolio loans | .66 | % | .60 | % | .51 | % | .39 | % | .36 | % |
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets | .68 | | .61 | | .52 | | .41 | | .39 | |
| | | | | | | | | | | | | | | | | |
Summary of Changes in Nonperforming Loans From Continuing Operations |
(Dollars in millions) |
| 2Q24 | 1Q24 | 4Q23 | 3Q23 | 2Q23 |
Balance at beginning of period | $ | 658 | | $ | 574 | | $ | 455 | | $ | 431 | | $ | 416 | |
Loans placed on nonaccrual status | 317 | | 243 | | 297 | | 159 | | 169 | |
| | | | | |
Charge-offs | (131) | | (97) | | (95) | | (87) | | (76) | |
Loans sold | (22) | | (5) | | (9) | | (4) | | (23) | |
Payments | (76) | | (35) | | (56) | | (25) | | (20) | |
Transfers to OREO | (1) | | (2) | | (2) | | (3) | | (2) | |
| | | | | |
| | | | | |
Loans returned to accrual status | (35) | | (20) | | (16) | | (16) | | (33) | |
Balance at end of period | $ | 710 | | $ | 658 | | $ | 574 | | $ | 455 | | $ | 431 | |
KeyCorp Reports Second Quarter 2024 Profit
July 18, 2024
Page 25
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Line of Business Results |
(Dollars in millions) |
| | | | | | | | |
| | | | | | | Change 2Q24 vs. |
| 2Q24 | 1Q24 | 4Q23 | 3Q23 | 2Q23 | | 1Q24 | 2Q23 |
Consumer Bank | | | | | | | | |
Summary of operations | | | | | | | | |
Total revenue (TE) | $ | 769 | | $ | 757 | | $ | 770 | | $ | 775 | | $ | 787 | | | 1.6 | % | (2.3) | % |
Provision for credit losses | 33 | | (2) | | 5 | | 14 | | 32 | | | N/M | 3.1 | |
Noninterest expense | 648 | | 704 | | 779 | | 676 | | 662 | | | (8.0) | | (2.1) | |
Net income (loss) attributable to Key | 67 | | 41 | | (11) | | 65 | | 71 | | | 63.4 | | (5.6) | |
Average loans and leases | 39,174 | | 39,919 | | 40,763 | | 41,610 | | 42,297 | | | (1.9) | | (7.4) | |
Average deposits | 85,397 | | 84,075 | | 83,557 | | 82,683 | | 81,406 | | | 1.6 | | 4.9 | |
Net loan charge-offs | 45 | | 44 | | 40 | | 36 | | 32 | | | 2.3 | | 40.6 | |
Net loan charge-offs to average total loans | .46 | % | .44 | % | .39 | % | .34 | % | .30 | % | | 4.5 | | 53.3 | |
Nonperforming assets at period end | $ | 190 | | $ | 196 | | $ | 190 | | $ | 190 | | $ | 193 | | | (3.1) | | (1.6) | |
Return on average allocated equity | 7.93 | % | 4.69 | % | (1.28) | % | 7.42 | % | 8.00 | % | | 69.1 | | (.9) | |
| | | | | | | | |
| | | | | | | | |
Commercial Bank | | | | | | | | |
Summary of operations | | | | | | | | |
Total revenue (TE) | $ | 769 | | $ | 799 | | $ | 804 | | $ | 809 | | $ | 823 | | | (3.8) | % | (6.6) | % |
Provision for credit losses | 87 | | 102 | | 96 | | 68 | | 134 | | | (14.7) | | (35.1) | |
Noninterest expense | 431 | | 443 | | 526 | | 433 | | 406 | | | (2.7) | | 6.2 | |
Net income (loss) attributable to Key | 207 | | 205 | | 150 | | 240 | | 227 | | | 1.0 | | (8.8) | |
Average loans and leases | 69,248 | | 70,633 | | 72,713 | | 75,598 | | 77,922 | | | (2.0) | | (11.1) | |
Average loans held for sale | 522 | | 840 | | 635 | | 1,268 | | 1,014 | | | (37.9) | | (48.5) | |
Average deposits | 57,360 | | 56,331 | | 58,196 | | 56,078 | | 52,512 | | | 1.8 | | 9.2 | |
Net loan charge-offs | 64 | | 37 | | 35 | | 35 | | 20 | | | 73.0 | | 220.0 | |
Net loan charge-offs to average total loans | .37 | % | .21 | % | .19 | % | .18 | % | .10 | % | | 76.2 | | 270.0 | |
Nonperforming assets at period end | $ | 537 | | $ | 479 | | $ | 401 | | $ | 281 | | $ | 269 | | | 12.1 | | 99.6 | |
Return on average allocated equity | 8.31 | % | 8.24 | % | 5.88 | % | 9.11 | % | 8.61 | % | | .8 | | (3.5) | |
| | | | | | | | |
TE = Taxable Equivalent; N/M = Not Meaningful
| | | | | | | | | | | | | | |
Selected Items Impact on Earnings(a) |
(Dollars in millions, except per share amounts) |
| Pretax(b) | | After-tax at marginal rate(b) |
Quarter to date results | Amount | | Net Income | EPS(c) |
Three months ended June 30, 2024 | | | | |
| | | | |
| | | | |
FDIC special assessment (other expense)(d) | $ | (5) | | | $ | (4) | | $ | — | |
| | | | |
| | | | |
Three months ended March 31, 2024 | | | | |
| | | | |
| | | | |
FDIC special assessment (other expense)(d) | (29) | | | (22) | | (0.02) | |
| | | | |
| | | | |
| | | | |
Three months ended June 30, 2023 | | | | |
No items | — | | | — | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
(a)Includes items impacting results or trends during the period but are not considered non-GAAP adjustments.
(b)Favorable (unfavorable) impact.
(c)Impact to EPS reflected on a fully diluted basis.
(d)In November 2023, the FDIC issued a final rule implementing a special assessment on insured depository institutions to recover the loss to the FDIC’s deposit insurance fund (DIF) associated with protecting uninsured depositors following the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the initial loss estimate related to the special assessment during the fourth quarter of 2023. In late February 2024, the FDIC provided updated estimates on the uninsured deposit losses and recoverable assets related to the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the additional expense related to the revised special assessment during the first quarter of 2024. In June 2024, Key received its quarterly invoice from the FDIC which included amounts due under the special assessment. As such, Key recorded an additional expense in the second quarter of 2024 to true-up initial estimates to the invoiced amount.
KeyCorp Second Quarter 2024 Earnings Review July 18, 2024 Chris Gorman Chairman and Chief Executive Officer Clark Khayat Chief Financial Officer
2 Note: All metrics are as of 6/30/2024 unless otherwise noted (1) 1H24 Annualized growth; (2) 6/30/2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision ✓Enhanced underwrite-to- distribute platform through partnership with Blackstone+5% YoY Client Deposit Growth Differentiated Fee Businesses Focused on Targeted Scale Driving New Relationships Focused on Primacy +3% YoY Increase in noninterest incom Strengthening the Balance Sheet 34bps NCOs / Average Loans Risk Management Excellence Momentum across Wealth Management, Payments, and Commercial Mortgage Servicing IB pipelines continue to build +3.3% Net New Relationship Household Growth(1) 2Q24 Results 68bps NPAs / Period-end Loans 10.5% Common Equity Tier 1(2), up 120bps year-over-year Continued to reduce reliance on wholesale funding and brokered deposits
Financial Review
4 Reported QoQ▪ EPS of $0.25, up 25% sequentially ▪ Net interest income up 1.5% QoQ driven by fixed-rate asset repricing, partly offset by higher funding costs and impact of forward-starting swaps ▪ Noninterest income up 3% YoY primarily driven by trust and investment services and commercial mortgage servicing fees ▪ Expenses essentially flat YoY ▪ Provision for Credit Losses of $100MM, down 1% QoQ and included $91MM of NCOs and ~$10MM build to the allowance for credit losses ▪ CET1 increased 23 basis points QoQ to 10.5%, and tangible book value per common share increased ~3% sequentially YoY EPS $0.25 25.0% (7.4)% Net Interest Income (TE) $899 1.5% (8.8)% Noninterest Income $627 (3.1)% 3.0% Revenue $1,526 (0.5)% (4.3)% Noninterest Expense $1,079 (5.6)% 0.3% Provision for Credit Losses $100 (1.0)% (40.1)% CET1(1) 10.5% 23 bps 122 bps $ in millions, excluding EPS From continuing operations, unless otherwise noted (1) 6/30/2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision; (2) Non-GAAP measure: see appendix for reconciliation Tangible Book Value per Common Share $10.13 2.6% 10.6% Cash Efficiency Ratio(2) 70.2% (380) bps 340 bps ROTCE(2) 10.39% 252 bps (65) bps 2Q24 Highlights
$84.0 $81.6 $78.6 $76.4 $75.1 $36.6 $36.1 $35.3 $34.6 $33.9 1.00% 2Q23 3Q23 4Q23 1Q24 2Q24 $109.0 5 ▪ Average loans down 1.9% from 1Q24 − Decline in commercial loans (-$1.3Bn), driven by lower C&I and commercial real estate loans − Decline in average consumer loans (-$730MM), driven by declines across all consumer loan categories vs. Prior Quarter Portfolio Highlights ▪ ~63% variable rate, or 46% after adjusting for loans swapped to a fixed rate; loan yields would have been 6.4% in second quarter 2024 excluding the impact from hedges(3) ▪ ~89% of commercial loans are made to clients who do additional business with Key(4) ▪ 53% of the C&I portfolio is investment grade; Consumer book has a 766 weighted average FICO at origination ▪ C&I loan utilization: 31% in 2Q24 QoQ Avg Balances by Type C&I Commercial Leases 1Q24 2Q24Other Consumer (2) CRE(1) Residential Mortgage Note: Graphs may not foot due to rounding (1) CRE includes real estate – commercial mortgage and real estate – construction; (2) Other Consumer includes home equity loans, credit cards, and other consumer loans; (3) Non-GAAP measure: see appendix for reconciliation; (4) Defined as capital markets, payments or deposits Average Loans Consumer Commercial Loan Yield $120.7 $117.6 $113.9 $111.0 $ in billions 5.26% 5.41% 5.51% 5.61% 5.66% EOP Loans: $107.1Bn
vs. Prior Quarter Deposit Franchise Highlights 6 ▪ Average deposits were up 1% from from 1Q24 − Growth in retail CD balances and commercial deposits − Included ~$200MM decline in brokered CDs ▪ Total deposit costs rose by 8 basis points − Reflects increase in time deposits and continued deposit mix shift − Cumulative total interest-bearing deposit beta: ~53%(2) ▪ Client deposits up 5% year-over-year ▪ Commercial deposit balances driven by relationship clients − 76% of commercial deposits in core operating accounts − 94% of commercial deposits have an operating account ▪ Loan-to-deposit ratio: 74%(3) 2Q24 Product Mix Time deposits Savings Noninterest- bearing Demand 38% 20% 27% 4% 2Q24 Interest-bearing Mix Consumer 21% 11% MMDA Other Commercial / Treasury Managed Indexed Commercial Wealth 55% 6% ~30% ~10% Note: Graphs may not foot due to rounding (1) Other includes treasury brokered deposits and other deposits; (2) Cumulative beta indexed to 4Q21; (3) Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits Average Deposits Consumer Other(1) Commercial $81.4 $82.7 $83.6 $84.1 $85.4 $52.5 $56.1 $58.2 $56.3 $57.4 $9.0 $6.0 $3.3 $2.5 $1.4 2Q23 3Q23 4Q23 1Q24 2Q24 $144.8$142.9 $145.1 $142.9 Total deposit cost $ in billions 1.49% 1.88% 2.06% 2.20% 2.28% $144.2
2Q23 3Q23 4Q23 1Q24 2Q24 TE = Taxable equivalent Note: NIM Walk may not foot due to rounding 7 $923 $886 NII Walk (TE) NIM Walk (TE) 2.12% $986 $928 2.01% 2.07% 2.02% Swaps & UST Roll-off 1Q24 2Q24 Net Interest Income and Margin (TE) From continuing operations, $ in millions $899 2.04% Lower Loans (remixed into ST investments) Deposit Cost & Mix ~$39 $(18) Other (3)bps Increase in Time Deposits & Fed Account 1Q24 2Q24Higher Deposit Costs (ex Time Deposit Increase) Forward- starting Swaps $(9) $9 Swaps & UST Roll-off 3bps 8bps Other (net) (2)bps +1.5% Lower Loans / Forward- starting Swaps (4)bps
+3% +10% +9% +5% (1)% +8% +2% (26)% (3)% QoQ 8 % change YoY +22% (4)% (21)% +12% - +10% +5% vs. Prior Year $ in millions Investment Banking & Debt Placement Trust & Investment Services Cards & Payments Other(1) Corporate Services Service Charges on Deposit Acct Commercial Mortgage Servicing ▪ Noninterest income up $18MM (+3%) from 2Q23 − Trust & Investment Services growth (+$13MM) driven by strong market performance and momentum in Wealth Management mass affluent initiative − Increase in Commercial Mortgage Servicing fees (+$11MM) − Corporate Services decline ($18MM) reflects elevated LIBOR-SOFR related transition activity in the year ago quarter (1) Other includes Corporate-Owned Life Insurance Income, Consumer Mortgage Income, Operating Lease Income and Other Leasing Gains, and Other Income $120 $170 $126 $126 $136 $139 $85 $77 $85 $86 $69 $68 $69 $63 $66 $50 $56 $61 $73 $76 $82 2Q23 1Q24 2Q24 Noninterest Income $609 $647 $627 Total Noninterest Income
9 $622 $674 $636 $454 $440 $438 $29 2Q23 1Q24 2Q24 Personnel Non-personnel(1) vs. Prior Year % change YoY QoQ (4)% 2% (0.5)% (6)% 0.3% (6)% ▪ Noninterest expense up $3MM (0.3%) from 2Q23 − 2Q24 Noninterest expense included $5MM pre-tax, from the FDIC special assessment(2) ▪ Higher personnel expense due to KEY’s higher stock price, offset by lower marketing and business services and professional fees ▪ Noninterest expense down $64MM sequentially, or $40MM (or 4%) excluding FDIC special assessment(2) − Lower incentive compensation and employee benefits more than offset merit increases $ in millions (1) 1Q24 and 2Q24 exclude FDIC special assessments; (2) FDIC Special Assessment, please see slide 25 for breakout on Selected Items Impact on Earnings Noninterest Expense $1,079 $5 $1,143$1,076 Total Noninterest Expense (2) (2) vs. Prior Quarter
0.12% 0.15% 0.20% 0.22% 0.26% 0.06% 0.04% 0.09% 0.11% 0.13% 2Q23 3Q23 4Q23 1Q24 2Q24 NCO = Net charge-off (1) Loan and lease outstandings 10 $ in millions $3,921 $4,475 $4,984 $6,588 $6,973 2Q23 3Q23 4Q23 1Q24 2Q24 30 – 89 days delinquent 90+ days delinquent Net Charge-offs & Provision for Credit Losses Delinquencies to Period-end Total Loans Criticized Outstandings(1) to Period-end Total Loans $ in millions; Continuing Operations Criticized Outstandings to Period-end Total LoansCriticized Outstandings 3.3% 3.9% 4.4% 6.0% $52 $71 $76 $81 $91 $167 $81 $102 $101 $100 2Q23 3Q23 4Q23 1Q24 2Q24 NCOs Provision for credit losses NCOs to avg. loans 0.17% 0.24% 0.26% 0.29% $431 $455 $574 $658 $710 2Q23 3Q23 4Q23 1Q24 2Q24 Nonperforming Loans to Period-end Total Loans $ in millions Nonperforming Loans to Period-end Total LoansNonperforming Loans 0.36% 0.39% 0.51% 0.60% Credit Quality Continuing Operations 0.66% 0.34% 6.5% +8% +6%
2Q23 3Q23 4Q23 1Q24 2Q24 11 $ in billions Tangible Common Equity Ratio(2) Common Equity Tier 1(1) Projected AOCI Impacts(3) 4.5% 4.4% 5.1% 5.0% 5.2% 2Q23 3Q23 4Q23 1Q24 2Q24 9.3% 9.8% 10.0% Target operating range: 9% - 9.5% 10.3% Adjusted for unrealized AFS Securities and Pension losses(2) 6.2% 6.2% 7.0% 7.1% (1) 6/30/2024 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision; (2) Non-GAAP measure: see appendix for reconciliation; (3) Assumes market forwards as of 6/30/2024 Capital 10.5% 7.3% AFS AOCI ($5.1) ($4.6) ($4.7) ~12% ~28% ($3.7) ($4.1) AOCI Forward Rates YE 2024 AOCI Flat RatesAOCI Position 6/30/2024 ~8% ~21% AOCI burn down assumes ~4 rate cuts through 2025, ~6 cuts through 2026, and 3-5 year UST rates decline by ~25bps AOCI burn down assuming rates hold at 6/30/2024 levels ($3.9) ($3.4) ($4.0) ($3.4) ($4.3) Other AOCI ($2.9) ($2.9) ($3.2) ($3.4) ~39% ~34% YE 2025 YE 2026 YE 2024 YE 2025 YE 2026
Average Deposits relatively stable, with client deposits up (previously flat to down 2%) FY2024 (vs. FY2023)2023 12 Note: Guidance range: relatively stable: +/- 2% (1) The noninterest expense guidance excludes the FDIC special assessment of $190MM, efficiency related expenses of $131MM, and a pension settlement charge of $18MM in 2023; (2) The noninterest expense guidance excludes FDIC special assessments of $34MM in 2024; (3) To be updated upon the finalization of the currently proposed future capital requirements $118,004 $112,606 Average Loans Ending Loans Noninterest Income Noninterest Expense NCOs to Avg Loans GAAP Tax Rate down 7 – 8% (previously down 5 – 7%) down 4 – 5% (previously relatively stable) Long-term Targets(3) $144,059 $3,943 Positive operating leverage Cash efficiency ratio: 54% - 56% Moderate risk profile: Net charge-offs to avg. loans targeted range of 40-60 bps ROTCE: 16% - 19% down 2 – 5% up low-single digits vs. 4Q23 annualized exit rate 10%+ 4Q24 vs. 4Q23 up 5%+ relatively stable(1,2) 30 – 40 bps $2,470 $4,734 21 bps 16.9% ~20% $ in millions 2024 Outlook Net Interest Income (TE) Includes selected items of $339MM(1)
2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 (1) Assumes the forward curve as of 6/30/2024 and maturities to occur on the last day of each quarter; only includes swap and Treasury maturities 13 Treasuries SwapsBenefit Realized WA Maturity Yields ▪ ~$550MM expected total benefit in 2024 ▪ ~$470MM annualized benefit in 2Q run rate ▪ ~$80MM expected incremental benefit 4Q24 vs. 2Q24 1 Tailwinds from Short-term Swaps & Treasuries Maturities(1) Maturities Schedule ~$118 $151 $198 $238 $ in millions; cumulative view Terminated CF Swaps ▪ ~$950MM expected annualized NII opportunity by 1Q25 (~50% realized to date) 2 ~$79 NII Opportunity From Swaps and Treasuries $1.9 $1.9 $2.6 $2.9 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 $3.1 $2.8 $4.5 $4.8 $2.7 $1.7 $1.1 $ in billions 0.49% 0.50%
14 ▪ Loan Balances − Loans flat / up slightly vs 6/30/24 levels ▪ Deposit Costs − Cumulative beta reaches mid-50%’s − Lag in consumer betas for first few rate cuts ▪ Deposit Balances and Mix − Avg deposits flat to up 1% versus 2Q24, growth mostly driven by CDs (offset with lower FHLB borrowings) − Some continued slight migration from NIB to IB deposits ▪ Other Assets Repricing − ~$2Bn of securities cash flows roll-off at ~2.3% – 2.4% − ~$1.5Bn consumer loans roll off at ~3.7% − Variable-rate loans reprice to changes in benchmark SOFR monthly Achieving 4Q24 Exit Rate NII Target – One December Fed Rate Cut(1) Change to NII ($ in millions); Illustrative, not drawn to scale Other Key Inputs & Assumptions Net Interest Income Opportunity (1) Assumes one 25 basis point Fed rate cut in December; (2) Assumes two 25 basis point Fed rate cuts – one in September and one in December $899 $1Bn+ 2.40 – 2.50% NIM 2Q24 4Q24Swaps & UST Roll-off Other Fixed Rate Assets Roll Off Day Count & Loan Fees Improved Funding Mix Loan Growth (ex. Consumer) Higher Deposit Costs Impact of Dec Rate Cut +~$130MM Impact nets Achieving 4Q24 Exit Rate NII Target – Two Fed Rate Cuts(2) Change to NII ($ in millions); Illustrative, not drawn to scale $899 $1Bn+ 2Q24 4Q24Swaps & UST Roll-off Other Fixed Rate Assets Roll Off Day Count & Loan Fees Improved Funding Mix Loan Growth (ex. Consumer) Lower Deposit Costs Two Rate Cuts – Lower Loan Yields 2.40 – 2.50% NIM +$120-125MM Slightly negative impact
Appendix
Brokered Deposits ▪ Proactive balance sheet management − Right-sized the balance sheet − Significantly increased CET1 through RWA optimization − Vastly improved liquidity and funding profile ▪ Targeted expense reductions to hold expenses relatively stable − Simplified and streamlined businesses 16 ▪ Franchise momentum: client growth, consistent business flows, strong deposit base ▪ Upside to capital markets recovery ▪ Strengths play to market trends − Strong fee-based businesses − Underwrite-to-distribute business model ▪ Core funded balance sheet more resilient to changes in interest rates ▪ Outsized fixed asset repricing benefit from the roll-off of swaps and Treasuries ▪ High-quality portfolio with strong credit quality − Low exposure to leveraged lending, office, and construction Repositioned Company in 2023 Well-Positioned Moving Forward $31 $22 45107 45473 2Q23 2Q24 28% 6/30/23 6/30/24 6/30/23 6/30/24 Wholesale Funding(1) 44% (1) Wholesale funding includes Federal funds purchased and securities sold under repurchase agreements, bank notes and other short-term borrowings, and long-term debt Positioned for the Future $in billions $in billions $9 $5
1% Office 3% 4% 5% < Nonowner-occupied CRE Loan Portfolio Composition Category III banks KEY Regional bank peers All banks >$10Bn assets 13% Note: NOORE = Nonowner-occupied real estate (Commercial Real Estate); KEY data as of 6/30/2024 (1) Data as of 3/31/2024; Sourced from ffiec.gov ‘peer group average reports’; (2) Data as of 3/31/2024; Includes: CFG, CMA, FCNCA, FITB, HBAN, MTB, RF and ZION; (3) Data as of 3/31/2024; Includes: COF, PNC, TFC and USB; (4) Other NOORE includes Diversified, Industrial, Land & Residential, Retail, Senior Housing, Student Housing, Lodging, Medical Office, Self Storage, Skilled Nursing, and Other 17 Category III banks(3) KEY Regional bank peers(2) All banks >$10Bn assets(1) As a % Total Loans All other loans As a % Total Loans • $0 nonowner-occupied construction • Nonperforming loans: 5.5% • Reserves to loans: ~7% • B&C Class properties in CBDs <0.1% of total loans • Nonperforming loans: 1.17% • Reserves to loans: ~3% • No core-based statistical area >4.1% of total nonowner-occupied CRE Office Highlights Nonowner-occupied CRE Highlights Affordable Housing Other NOORE(4) Traditional Multifamily High-quality CRE portfolio has relatively limited exposure and is diversified by property type and geography 31% 17% 11% Commercial Real Estate
18 Multifamily Portfolio Highlights Affordable Housing Loan Portfolio Highlights ▪ Targeted clients utilize low-income housing tax credit (LIHTC) financing programs to build, acquire, rehab and preserve facilities ▪ Significant shortage requires continued investments in new supply, preservation of existing supply, and expansion of government subsidies and programs ▪ Long-term financing structures result in limited refinance and interest rate risk ▪ Construction loans underwritten with forward commitments for permanent financing as part of distribution model 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 ▪ Diversified - no more than ~4% of Multifamily loans concentrated in any market(1) ▪ No exposure to rent controlled properties in New York City ▪ Only ~5% of portfolio in NYC, Chicago, Los Angeles and San Francisco Affordable Housing Loans Driving Most of Multifamily Growth $5,074 $5,247 $6,736 $8,889 $8,853 Traditional Market Rate Multifamily Affordable Housing 23% 28% 28% 31% 37% +29% Affordable Housing CAGR +9% Traditional Multifamily CAGR $ in millions Note: All data as of 6/30/2024 unless otherwise noted (1) Measured as core-based statistical area (CBSA); (2) Defined as New York City, Los Angeles, Chicago, Washington DC, San Francisco, and Boston Market Rate Multifamily Loan Portfolio Highlights ▪ Relationship model focused on owners and operators of multifamily projects, rather than developers ▪ Gateway Markets(2) 5% of exposure – 2/3 of portfolio is suburban ▪ Loans underwritten based on long-term permanent rates on actual, non-trended rents, reducing refinance and interest rate risk ▪ Over 80% of exposure has recourse Business leverages our originate-to-distribute model and is a mixture of market rate and affordable housing Commercial Real Estate: Multifamily
0.41% 0.21% 0.00% 0.00% 4.31% 1.01% C&I CRE Resi Mtg Home Equity Credit Cards Other Consumer 19 Allowance to NPLs (%)(2) Criticized Outstandings to Period-end Loans (%)(2) 191% 259% 150% 78% N/M N/M C&I CRE Resi Mtg Home Equity Credit Cards Other Consumer 8.1% 13.8% 0.4% 1.4% 1.8% 0.3% C&I CRE Resi Mtg Home Equity Credit Cards Other Consumer Credit Quality by Portfolio (3), (4) (3), (4) (3), (4) N/M = Not Meaningful Note: All metrics are as of 6/30/2024 unless otherwise noted; (1) Net loan charge-off amounts are annualized in calculation; (2) Ratios calculated using unrounded figures and therefore may not foot to calculation using rounded figures presented in chart; (3) Loan balance includes $217 million of commercial credit card balances at June 30, 2024; (4) Commercial and industrial includes receivables held as collateral for a secured borrowing of $285 million at June 30, 2024. Principal reductions are based on the cash payments received from these related receivables Allowance for Credit Losses (ACL) $ in millions $1,771 $1,778 1,804 1,823 1,833 2Q23 3Q23 4Q23 1Q24 2Q24 Allowance for Credit Losses to Period-end LoansAllowance for Credit Losses 1.49% 1.54% 1.60% 1.66% 1.71% Net Loan Charge-offs(1) to Average Loans (%)(2)
$2.6 $2.9 $0.3 3Q24 4Q24 1Q25 Prime 8% 1M SOFR 21% 3M SOFR 7% O/N SOFR 25% Fixed 37% Other 2% Loan Composition(1) Earning Asset Mix(2) 63% 22% 5% 9% 2% Total Loans AFS Securities Other(3) $9.4 $9.0 $8.7 $8.4 $8.1 $38.9 $37.3 $35.6 $37.1 $36.8 2Q23 3Q23 4Q23 1Q24 2Q24 Average AFS Securities Average Yield(4)Average HTM Securities $ in billions Average Total Investment Securities Balance Sheet Mix and Trends $48.3 $44.3 $45.5 Fixed-rate Asset Repricing Tailwinds – 2H24 to 2026 0.47% WA yield on portfolio $ in billions Short-term Treasury Maturities WA Maturity Yield Short-term Treasury Maturities 20 2.04% 2.06% 2.26% .44% .48% .63% Balance Sheet Management Detail 2.40% $44.9$46.3 ST Investments HTM Securities 2.61% (1) Loan statistics based on 6/30/2024 period-end balances; (2) Based on 6/30/2024 period-end balances; chart may not foot due to rounding; (3) Other includes loans HFS and trading account assets; (4) Yield is calculated on the basis of amortized cost; (5) 2H24 receive fixed swaps were terminated in September 2023 and realized P&L from the terminated swaps that mature in 2H24 will be recognized throughout 2H24; (6) Excludes short-term Treasury maturities shown in the bottom right graph $ in billions 2H24 2025 2026 Projected receive fixed swaps(5) maturities $0.0 $5.2 $9.1 Weighted-average rate received (%) n/a 1.80% 2.78% Projected fixed rate loans cash flows / maturities $6.7 $11.2 $11.1 Weighted-average rate received (%) 3.89% 4.15% 4.47% Projected fixed rate investment securities CFs / maturities(6) $2.0 $4.2 $4.7 Weighted-average rate received (%) 2.33% 2.74% 3.04%
$18.5 $18.8 $18.8 $18.8 $19.6 $10.8 2Q24 3Q24 4Q24 YE24 YE25 YE26 Hedging Strategy Opportunity $ in billions 6/30/2024 Debt Hedges $10.8 Securities Hedges(2) $10.8 Floor Spreads $3.3 ▪ Executed $5.75Bn of forward-starting receive-fixed swaps – WA receive rate: 4.06% (March 2025 start date) ▪ Executed $1.35Bn of spot pay-fixed swaps to hedge securities – WA pay rate: 4.48% 21 (1) Portfolio as of 6/30/2024 and includes already executed forward starting swaps; (2) AFS securities swapped to floating rate Other Hedge Positions 2Q24 ALM Hedge Actions ~2.3% ~2.3% ~2.3% ~2.3% ~3.0% ~3.2% 3Q24 4Q24 FY24 FY25 FY26 $0 $0 $0 $5.2 $9.1 n/a n/a n/a 1.80% 2.78% W.A. Receive- fixed Rate at 6/30/24 Note: Maturing Swaps ($Bn) W.A. Receive-fixed Rate Receive-fixed Asset Swaps(1) $ in billions; ending balances 1Q24 ALM Hedge Actions ▪ Executed $250MM of forward-starting receive fixed swaps - WA receive rate: 3.85% (January 2025 start date) ▪ Executed $950MM of forward-starting debt hedges – WA receive rate: 3.77% (March 2025 start date) ▪ Executed $750MM of spot pay fix swaps to hedge securities – WA pay rate: 4.1%
GAAP to Non-GAAP Reconciliation (1) For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, intangible assets exclude less than $1 million, $1 million, and $1 million, respectively, of period-end purchased credit card receivables; (2) Net of capital surplus; (3) For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, average intangible assets exclude less than $1 million, $1 million, and $1 million, respectively, of average purchased credit card receivables. 22 $ in millions 2Q24 1Q24 2Q23 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 14,789 $ 14,547 $ 13,844 Less: Intangible assets(1) 2,793 2,799 2,826 Preferred stock(2) 2,446 2,446 2,446 Tangible common equity (non-GAAP) $ 9,550 $ 9,302 $ 8,572 Total assets (GAAP) $ 187,450 $ 187,485 $ 195,037 Less: Intangible assets(1) 2,793 2,799 2,826 Tangible assets (non-GAAP) $ 184,657 $ 184,686 $ 192,211 Tangible common equity to tangible assets ratio (non-GAAP) 5.17 % 5.04 % 4.46 % Average tangible common equity Average Key shareholders’ equity (GAAP) $ 14,474 $ 14,649 $ 14,412 Less: Intangible assets (average) (3) 2,796 2,802 2,831 Preferred stock (average) 2,500 2,500 2,500 Average tangible common equity (non-GAAP) $ 9,178 $ 9,347 $ 9,081
GAAP to Non-GAAP Reconciliation 23 $ in millions 2Q24 1Q24 2Q23 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 237 $ 183 $ 250 Average tangible common equity (non-GAAP) 9,178 9,347 9,081 Return on average tangible common equity from continuing operations (non-GAAP) 10.39 % 7.87 % 11.04 % Return on average tangible common equity consolidated Net income (loss) attributable to Key common shareholders (GAAP) $ 238 $ 183 $ 251 Average tangible common equity (non-GAAP) 9,178 9,347 9,081 Return on average tangible common equity consolidation (non-GAAP) 10.43 % 7.87 % 11.09 % Cash efficiency ratio Noninterest expense (GAAP) $ 1,079 $ 1,143 $ 1,076 Less: Intangible asset amortization 7 8 10 Adjusted noninterest expense (non-GAAP) $ 1,072 $ 1,135 $ 1,066 Net interest income (GAAP) $ 887 $ 875 $ 978 Plus: Taxable-equivalent adjustment 12 11 8 Noninterest income (GAAP) 627 647 609 Total taxable-equivalent revenue (non-GAAP) $ 1,526 $ 1,533 $ 1,595 Cash efficiency ratio (non-GAAP) 70.2 % 74.0 % 66.8 %
GAAP to Non-GAAP Reconciliation 24 CET1 – AOCI Impact(1) ($ in millions) 2Q23 3Q23 4Q23 1Q24 2Q24 Common Equity Tier 1 (A) $ 14,887 $ 15,007 $ 14,894 $ 14,821 $ 14,901 Add: AFS and Pension accumulated other Comprehensive income (loss) (4,961) (5,581) (4,573) (4,608) (4,530) Adjusted Common Equity Tier 1 (B) $ 9,926 $ 9,426 $ 10,321 $ 10,213 $ 10,371 Risk Weighted Assets (C) $ 160,422 $ 152,672 $ 148,575 $ 144,295 $ 141,971 Common Equity Tier 1 ratio (A/C) 9.28 % 9.83 % 10.02 % 10.27 % 10.50 % Adjusted CET1 Ratio (B/C) 6.19 % 6.17 % 6.95 % 7.08 % 7.30 % (1) Under the current applicable regulatory capital rules, Key has made the AOCI opt out election, which enables us to exclude components of AOCI from regulatory capital, notably the AOCI relative to securities and pension. Adjusted CET1 ratio is a non-GAAP measure and is calculated based on Common Equity Tier 1 capital, inclusive of the AOCI impact from securities and pension, divided by risk weighted assets. We believe this non-GAAP measure provides useful information in light of the potential for change in the regulatory capital framework; (2) Loan Yields Excluding Impact from Hedges is a non-GAAP metric and is calculated by excluding losses realized on derivatives which hedge the interest rate risk of our loans. We believe this metric is meaningful as it provides information on loan yields excluding the impacts of hedge-related interest rate risk management programs Loan Yields Excluding Impact from Hedges(2) 2Q23 3Q23 4Q23 1Q24 2Q24 Loan Yield 5.26 % 5.41 % 5.51 % 5.61 % 5.66 % Subtract: Loan Yield Impact of Realized Hedge Gains/(Losses) (0.82) % (0.86) % (0.84) % (0.78) % (0.73) % Loan Yield Excluding Impact from Hedges 6.08 % 6.27 % 6.35 % 6.39 % 6.39 %
25 (1) Includes items impacting results or trends during the period but are not considered non-GAAP adjustments; (2) Favorable (unfavorable) impact; (3) Impact to EPS reflected on a fully diluted basis; (4) In November 2023, the FDIC issued a final rule implementing a special assessment on insured depository institutions to recover the loss to the FDIC’s deposit insurance fund (DIF) associated with protecting uninsured depositors following the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the initial loss estimate related to the special assessment during the fourth quarter of 2023. In late February 2024, the FDIC provided updated estimates on the uninsured deposit losses and recoverable assets related to the 2023 closures of Silicon Valley Bank and Signature Bank. KeyCorp recorded the additional expense related to the revised special assessment during the first quarter of 2024. In June 2024, Key received its quarterly invoice from the FDIC which included amounts due under the special assessment. As such, Key recorded an additional expense in the second quarter of 2024 to true-up initial estimates to the invoiced amount. Selected Items Impact on Earnings(1) $ in millions, except per share amounts Pretax(2) After-tax at marginal rate(2) Quarter to date results Amount Net Income EPS(3) Three months ended June 30, 2024 FDIC special assessment (other expense)(4) $ (5) $ (4) $ - Three months ended March 31, 2024 FDIC special assessment (other expense)(4) (29) (22) (0.02) Three months ended June 30, 2023 No items - - - Selected Items Impact on Earnings
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “seek,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible,” “potential,” “strategy,” “opportunities,” or “trends,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are based on assumptions that involve risks and uncertainties, which are subject to change based on various important factors (some of which are beyond KeyCorp’s control). Actual results may differ materially from current projections. Actual outcomes may differ materially from those expressed or implied as a result of the factors described under “Forward-looking Statements” and “Risk Factors” in KeyCorp’s Annual Report on Form 10-K for the year ended December 31, 2023, and in subsequent filings of KeyCorp with the Securities and Exchange Commission (the “SEC”). Such forward- looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding KeyCorp, please refer to our SEC filings available at www.key.com/ir. This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Key’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in in the appendix to this presentation, the financial supplement, or the press release related to this presentation, all of which can be found on Key’s website (www.key.com/ir). Certain returns, yields, performance ratios, or quarterly growth rates are presented on an “annualized” basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at the federal statutory rate. This adjustment puts all earning assets, most notably tax-exempt municipal securities, and certain lease assets, on a common basis that facilitates comparison of results to results of peers. Certain income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total consolidated earnings per share performance excluding the impact of such items. When the impact of certain income or expense items is disclosed separately, the after-tax amount is computed using the marginal tax rate, with this then being the amount used to calculate the earnings per share equivalent. GAAP: Generally Accepted Accounting Principles 26 Forward-looking Statements and Additional Information
| | | | | | | | | | | | | | | | | | |
Consolidated Balance Sheets | |
(dollars in millions) | |
| | | | | | |
| | | 6/30/2024 | 3/31/2024 | 6/30/2023 | |
Assets | | | | |
| Loans | $ | 107,078 | | $ | 109,885 | | $ | 119,011 | | |
| Loans held for sale | 517 | | 228 | | 1,130 | | |
| Securities available for sale | 37,460 | | 37,298 | | 37,908 | | |
| Held-to-maturity securities | 7,968 | | 8,272 | | 9,189 | | |
| Trading account assets | 1,219 | | 1,171 | | 1,177 | | |
| Short-term investments | 15,536 | | 13,205 | | 8,959 | | |
| Other investments | 1,259 | | 1,247 | | 1,474 | | |
| | Total earning assets | 171,037 | | 171,306 | | 178,848 | | |
| Allowance for loan and lease losses | (1,547) | | (1,542) | | (1,480) | | |
| Cash and due from banks | 1,326 | | 1,247 | | 758 | | |
| Premises and equipment | 631 | | 650 | | 652 | | |
| Goodwill | 2,752 | | 2,752 | | 2,752 | | |
| Other intangible assets | 41 | | 48 | | 75 | | |
| Corporate-owned life insurance | 4,382 | | 4,392 | | 4,378 | | |
| Accrued income and other assets | 8,532 | | 8,314 | | 8,668 | | |
| Discontinued assets | 296 | | 318 | | 386 | | |
| | Total assets | $ | 187,450 | | $ | 187,485 | | $ | 195,037 | | |
| | | | | | |
Liabilities | | | | |
| Deposits in domestic offices: | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | Interest-bearing deposits | 117,570 | | 114,593 | | 111,766 | | |
| | Noninterest-bearing deposits | 28,150 | | 29,638 | | 33,366 | | |
| | Total deposits | 145,720 | | 144,231 | | 145,132 | | |
| Federal funds purchased and securities sold under repurchase agreements | 25 | | 27 | | 1,702 | | |
| Bank notes and other short-term borrowings | 5,292 | | 2,896 | | 6,949 | | |
| Accrued expense and other liabilities | 4,755 | | 5,008 | | 5,339 | | |
| Long-term debt | 16,869 | | 20,776 | | 22,071 | | |
| | Total liabilities | 172,661 | | 172,938 | | 181,193 | | |
| | | | | | |
Equity | | | | |
| Preferred stock | 2,500 | | 2,500 | | 2,500 | | |
| Common shares | 1,257 | | 1,257 | | 1,257 | | |
| Capital surplus | 6,185 | | 6,164 | | 6,231 | | |
| Retained earnings | 15,706 | | 15,662 | | 15,759 | | |
| Treasury stock, at cost | (5,715) | | (5,722) | | (5,859) | | |
| Accumulated other comprehensive income (loss) | (5,144) | | (5,314) | | (6,044) | | |
| | Key shareholders’ equity | 14,789 | | 14,547 | | 13,844 | | |
| Noncontrolling interests | — | | — | | — | | |
| | Total equity | 14,789 | | 14,547 | | 13,844 | | |
Total liabilities and equity | $ | 187,450 | | $ | 187,485 | | $ | 195,037 | | |
| | | | | | |
Common shares outstanding (000) | 943,200 | | 942,776 | | 935,733 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated Statements of Income |
(dollars in millions, except per share amounts) |
| | | Three months ended | | Six months ended |
| | | 6/30/2024 | 3/31/2024 | 6/30/2023 | | 6/30/2024 | 6/30/2023 |
Interest income | | | | | | |
| Loans | $ | 1,524 | | $ | 1,538 | | $ | 1,576 | | | $ | 3,062 | | $ | 3,052 | |
| Loans held for sale | 8 | | 14 | | 17 | | | 22 | | 30 | |
| Securities available for sale | 259 | | 232 | | 194 | | | 491 | | 388 | |
| Held-to-maturity securities | 73 | | 75 | | 81 | | | 148 | | 155 | |
| Trading account assets | 16 | | 14 | | 15 | | | 30 | | 27 | |
| Short-term investments | 192 | | 142 | | 111 | | | 334 | | 153 | |
| Other investments | 16 | | 17 | | 16 | | | 33 | | 29 | |
| | Total interest income | 2,088 | | 2,032 | | 2,010 | | | 4,120 | | 3,834 | |
Interest expense | | | | | | |
| Deposits | 817 | | 782 | | 531 | | | 1,599 | | 881 | |
| Federal funds purchased and securities sold under repurchase agreements | 1 | | 1 | | 48 | | | 2 | | 70 | |
| Bank notes and other short-term borrowings | 51 | | 46 | | 104 | | | 97 | | 182 | |
| Long-term debt | 332 | | 328 | | 349 | | | 660 | | 624 | |
| | Total interest expense | 1,201 | | 1,157 | | 1,032 | | | 2,358 | | 1,757 | |
Net interest income | 887 | | 875 | | 978 | | | 1,762 | | 2,077 | |
Provision for credit losses | 100 | | 101 | | 167 | | | 201 | | 306 | |
Net interest income after provision for credit losses | 787 | | 774 | | 811 | | | 1,561 | | 1,771 | |
Noninterest income | | | | | | |
| Trust and investment services income | 139 | | 136 | | 126 | | | 275 | | 254 | |
| Investment banking and debt placement fees | 126 | | 170 | | 120 | | | 296 | | 265 | |
| Service charges on deposit accounts | 66 | | 63 | | 69 | | | 129 | | 136 | |
| Operating lease income and other leasing gains | 21 | | 24 | | 23 | | | 45 | | 48 | |
| Corporate services income | 68 | | 69 | | 86 | | | 137 | | 162 | |
| Cards and payments income | 85 | | 77 | | 85 | | | 162 | | 166 | |
| Corporate-owned life insurance income | 34 | | 32 | | 32 | | | 66 | | 61 | |
| Consumer mortgage income | 16 | | 14 | | 14 | | | 30 | | 25 | |
| Commercial mortgage servicing fees | 61 | | 56 | | 50 | | | 117 | | 96 | |
| Other income | 11 | | 6 | | 4 | | | 17 | | 4 | |
| | Total noninterest income | 627 | | 647 | | 609 | | | 1,274 | | 1,217 | |
Noninterest expense | | | | | | |
| Personnel | 636 | | 674 | | 622 | | | 1,310 | | 1,323 | |
| Net occupancy | 66 | | 67 | | 65 | | | 133 | | 135 | |
| Computer processing | 101 | | 102 | | 95 | | | 203 | | 187 | |
| Business services and professional fees | 37 | | 41 | | 41 | | | 78 | | 86 | |
| Equipment | 20 | | 20 | | 22 | | | 40 | | 44 | |
| Operating lease expense | 17 | | 17 | | 21 | | | 34 | | 41 | |
| Marketing | 21 | | 19 | | 29 | | | 40 | | 50 | |
| | | | | | | |
| Intangible asset amortization | — | | — | | — | | | — | | — | |
| | | | | | | |
| Other expense | 181 | | 203 | | 181 | | | 384 | | 386 | |
| | Total noninterest expense | 1,079 | | 1,143 | | 1,076 | | | 2,222 | | 2,252 | |
Income (loss) from continuing operations before income taxes | 335 | | 278 | | 344 | | | 613 | | 736 | |
| Income taxes | 62 | | 59 | | 58 | | | 121 | | 139 | |
Income (loss) from continuing operations | 273 | | 219 | | 286 | | | 492 | | 597 | |
| Income (loss) from discontinued operations, net of taxes | 1 | | — | | 1 | | | 1 | | 2 | |
Net income (loss) | 274 | | 219 | | 287 | | | 493 | | 599 | |
| Less: Net income (loss) attributable to noncontrolling interests | — | | — | | — | | | — | | — | |
Net income (loss) attributable to Key | $ | 274 | | $ | 219 | | $ | 287 | | | $ | 493 | | $ | 599 | |
| | | | | | | | |
Income (loss) from continuing operations attributable to Key common shareholders | $ | 237 | | $ | 183 | | $ | 250 | | | $ | 420 | | $ | 525 | |
Net income (loss) attributable to Key common shareholders | 238 | | 183 | | 251 | | | 421 | | 527 | |
Per common share | | | | | | |
Income (loss) from continuing operations attributable to Key common shareholders | $ | .25 | | $ | .20 | | $ | .27 | | | $ | .45 | | $ | .57 | |
Income (loss) from discontinued operations, net of taxes | — | | — | | — | | | — | | — | |
Net income (loss) attributable to Key common shareholders (a) | .25 | | .20 | | .27 | | | .45 | | .57 | |
Per common share — assuming dilution | | | | | | |
Income (loss) from continuing operations attributable to Key common shareholders | $ | .25 | | $ | .20 | | $ | .27 | | | $ | .45 | | $ | .56 | |
Income (loss) from discontinued operations, net of taxes | — | | — | | — | | | — | | — | |
Net income (loss) attributable to Key common shareholders (a) | .25 | | .20 | | $ | .27 | | | .45 | | .57 | |
| | | | | | | | |
Cash dividends declared per common share | $ | .205 | | $ | .205 | | $ | .205 | | | $ | .41 | | $ | .41 | |
| | | | | | | | |
Weighted-average common shares outstanding (000) | 931,726 | | 929,692 | | 926,741 | | | 930,776 | | 926,807 | |
| Effect of common share options and other stock awards | 6,761 | | 7,319 | | 3,713 | | | 7,040 | | 5,513 | |
Weighted-average common shares and potential common shares outstanding (000) (b) | 938,487 | | 937,011 | | 930,454 | | | 937,816 | | 932,320 | |
| | | | | | | | |
(a)Earnings per share may not foot due to rounding.
(b)Assumes conversion of common share options and other stock awards and/or convertible preferred stock, as applicable.
v3.24.2
Cover Page
|
Jul. 18, 2024 |
Entity Information [Line Items] |
|
Document Type |
8-K
|
Document Period End Date |
Jul. 18, 2024
|
Entity Registrant Name |
KeyCorp
|
Entity Incorporation, State or Country Code |
OH
|
Entity File Number |
001-11302
|
Entity Tax Identification Number |
34-6542451
|
Entity Address, Address Line One |
127 Public Square,
|
Entity Address, City or Town |
Cleveland,
|
Entity Address, State or Province |
OH
|
Entity Address, Postal Zip Code |
44114-1306
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City Area Code |
216
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Local Phone Number |
689-3000
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Entity Central Index Key |
0000091576
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Common Stock |
|
Entity Information [Line Items] |
|
Title of 12(b) Security |
Common Shares, $1 par value
|
Trading Symbol |
KEY
|
Security Exchange Name |
NYSE
|
Series E Preferred Stock |
|
Entity Information [Line Items] |
|
Title of 12(b) Security |
Depositary Shares (each representing a 1/40th interest in a share of Fixed-to-Floating Rate Perpetual Non-Cumulative Preferred Stock, Series E)
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Trading Symbol |
KEY PrI
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Security Exchange Name |
NYSE
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Entity Information [Line Items] |
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Title of 12(b) Security |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Perpetual Non-Cumulative Preferred Stock, Series F)
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Trading Symbol |
KEY PrJ
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Security Exchange Name |
NYSE
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Series G Preferred Stock |
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Entity Information [Line Items] |
|
Title of 12(b) Security |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Perpetual Non-Cumulative Preferred Stock, Series G)
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Trading Symbol |
KEY PrK
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Security Exchange Name |
NYSE
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Entity Information [Line Items] |
|
Title of 12(b) Security |
Depositary Shares (each representing a 1/40th interest in a share of Fixed Rate Reset Perpetual Non-Cumulative Preferred Stock, Series H)
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Trading Symbol |
KEY PrL
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NYSE
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KeyCorp (NYSE:KEY-L)
過去 株価チャート
から 9 2024 まで 10 2024
KeyCorp (NYSE:KEY-L)
過去 株価チャート
から 10 2023 まで 10 2024