Banks
KeyCorp lifts EPS 24% and reaches 15% return target a year early
Wider margins and a rebound in investment banking fees drove the quarter, though rising yields pulled KeyCorp's marked capital ratio down to 9%.
HedgeWeekly News Desk ·
KeyCorp reported third-quarter earnings of $0.51 a diluted share on Tuesday, up from $0.41 a year earlier and $0.44 in the second quarter. Net income available to common shareholders from continuing operations rose 18.3% to $537 million, and return on tangible common equity climbed to 15.11% from 12.51%.
Net interest income grew 9.8% to $1.30 billion as the taxable-equivalent net interest margin widened 20 basis points to 2.95%. Fee income rose 6% to $744 million, led by investment banking and debt placement fees of $214 million, up 16% from a year earlier and almost 27% from the second quarter. Total revenue was $2.04 billion, up 8.4%, while expenses grew a slower 5.8%.
Credit improved. The provision for credit losses fell 43% to $61 million, net charge-offs eased to 0.32% of average loans from 0.42%, and nonperforming assets dropped to $627 million. Average loans rose 5% to $111.6 billion, while average deposits were roughly flat. Key bought back $320 million of stock in the quarter, cutting its share count 4.9% from a year ago, and held its dividend at $0.205.
Why it matters: Chief executive Chris Gorman reaffirmed a goal of reaching and sustaining a ROTCE of 15% or more by the end of 2027, and the bank is already slightly above that level. The figure to watch is capital. Key's estimated CET1 ratio slipped to 11.1% from 11.8%, but its marked CET1 ratio, which counts unrealized securities losses, fell to 9.0% from 10.3%. With yields rising and a Fed hike priced for December, that gap shows how exposed regional lenders' buyback plans still are to bond prices.