Keycorp · NYSE:KEY
Keycorp — Morgan Stanley Financials Conference 2018
24 slides from Keycorp's conference presentation, Jun 12, 2018
Slide 1: Morgan Stanley Financials Conference
Morgan Stanley Financials Conference June 12, 2018 KeyCorp Chris Gorman Don Kimble President, Banking Chief Financial Officer
Slide 2: Forward-Looking Statements and Additional Information
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION 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
Slide 3: A Transformed Franchise
A Transformed Franchise Sustained discipline and focused execution has improved market positioning, enhanced productivity and resulted in strong business growth Five-year 2012 2017 Growth Clients +48% 2.3 MM 3.4 MM Presence Market # Top 5 markets(a) +29% 17 22 Deposits per branch +44% $61 MM $88 MM
Slide 4: Serving Targeted Clients
Serving Targeted Clients Leveraging broad capabilities, insights and expertise Community Bank Corporate Bank Client Continuum High Net Worth Individuals & Small Commercial Individuals & Corporations Families Businesses Businesses Families $500 MM+ Commercial Client Revenue: < $10 MM $10 MM - $500 MM
Slide 5: Distinctive Offering
Distinctive Offering Delivering ease, value and expertise to build enduring client relationships Consumer Commercial Regional Universal Boutiques Banks Banks Wellness tools Active dialogue and Capital and insight wellness conversations Markets Financial Wellness: Commercial Banking Understanding our
Slide 6: Executing on Long-term Targets
Executing on Long-term Targets Focused execution of relationship-based model drives ability to achieve targets Long-term Targets Cash Efficiency Ratio(a) 66% Positive operating leverage 64% 60% 54% - 56% Cash efficiency ratio: 54% - 56% 2015 2016 2017 Target Return on Average Tangible Common Equity(
Slide 7: Appendix
Appendix 7
Slide 8: Targeted Technology Investments
Targeted Technology Investments Strengthening our offering and maximizing client impact Optimizing Systems & Processes; Recent Enhancements Enabling Business Growth Platform and process enhancements support and drive business momentum New and improved consumer digital platforms Ongoing modernization
Slide 9: Outlook and Expectations
Outlook and Expectations FY 2018 Average Balance • Loans: average balances in the range of $88.5 B - $89.5 B Sheet • Deposits: average balances in the range of $104.5 B - $105.5 B Net Interest • Net interest income expected to be in the range of $3.95 B - $4.05 B Income (TE) • Outlook includes rate
Slide 10: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 1Q18 4Q17 1Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution .38 .17 .27 124 % 41 % EPS – excl. notable items(a), (b) .38 .36 .32 6 19 Cash efficiency ratio(a) 62.9 % 66.7 % 65.8 % (376) bps (289) bps Profitability Cash efficiency –excl. notabl
Slide 11: Loans
Loans Total Average Loans Highlights $ in billions $90 $86 $87 vs. Prior Year Average loans up 1% from 1Q17 $60 – Broad-based C&I growth with middle-market clients $30 – Expansion of auto lending into existing geographies and dealer relationships $0 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 vs. Prior
Slide 12: Loan Portfolio Detail, at 3/31/18
Loan Portfolio Detail, at 3/31/18 Total Loans Commercial Loans $ in billions 3/31/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 44.3 50 Transportation Automotive Business Products Commercial real estate 15.9 18 Technol
Slide 13: Deposits
Deposits Average Deposits Highlights $ in billions $102 $103 Deposit cost up 5 bps from 4Q17, reflecting: $105 .70% – Higher interest rates .60% $85 – Continued migration of portfolio into higher- .50% yielding products .40% $65 Strong and stable deposit base .30% .36% .20% – 30% noninterest-bearing
Slide 14: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.2 $29.9 $30.0 2.50% backed MBS and CMOs 2.16% 2.25% ‒ Primarily fixed rate $20.0 1.98% ‒ GNMA 47% of 1Q18 average balances 2.00% Portfolio used for funding and liquidit
Slide 15: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations Excluding PAA, 1Q18 net interest income was $919 MM $33 $1,000 $929 $952 4.0% and net interest margin was 3.04% $53 – NII up 5% from prior year and up 1% from prior qua
Slide 16: Interest Rate Risk Management
Interest Rate Risk Management The strength and diversity of our franchise positions Key to benefit from economic growth and a rising rate environment Business and Balance Sheet Highlights Net Interest Income Sensitivities (FY18) ($MM) • Strong, low-cost deposit base March Rate Hike embedded – $72 B
Slide 17: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 vs. Prior Year Trust and investment services income $ 133 $ (2) $ 2 Noninterest income up $24 MM from 1Q17 Investment banking and debt 143 16 (57) placement fees Continued momentum in many fee-based Ser
Slide 18: Noninterest Expense
Noninterest Expense Noninterest Expense Linked Quarter Change $ in millions; excludes notable items(a) $ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 Personnel $ 594 $ 38 $ (14) $11 Net occupancy 78 (9) (14) $(24) Computer processing 52 (8) (2) $10 $31 $(35) Business services, professional fees 41
Slide 19: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 1Q18 allowance for loan losses to $100 1.00% period-end loans of 1.00% $900 $870 $881 250% .80% $75 $63 $61 200% $58 $54 .60% $800 $50 150% 163% .40% 152% 100% $700 $25 .27% .25% .20% 50% $
Slide 20: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan Net loan Allowance / Allowance / Period- Average charge-offs(b) / Nonperforming Ending charge- period-end NPLs end loans loans average loans loans(c) allowance offs loans (%) (%) $ in millions (%) 3/31/18 1Q18 1Q18 1Q18 3/31/18 3/31/18 3/31/18 3/31
Slide 21: Capital
Capital Common Equity Tier 1 Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 9.99% at 3/31/18 9.91% 9.99% 10.00% Repurchased $199 MM(b) in common shares during 1Q18 8.00% 6.00% 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Tangible Common Equity to Tangible Assets(a) 10.00% 8.
Slide 22: 2017 FNFG Merger-related Charges
2017 FNFG Merger-related Charges $ in millions Increase / (Decrease) 4Q17 3Q17 2Q17 1Q17 Personnel expense $ 26 $ 25 $ 31 $ 30 Net Occupancy $ 12 $ (2) $ (1) $ 5 Business services and professional fees 3 2 6 5 Computer processing 1 4 2 5 Marketing 5 5 6 6 All other non-personnel 9 2 - 30 Total non-p
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 3/31/2018 12/31/2017 3/31/2017 Notable Items Merger-related charges - $ (56) $ (81) Impacts of tax reform and related actions - (30) - Total notable items - $ (86) $ (81) Income taxes - (26) (30) Revaluation of certain tax related asse
Slide 24: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 3/31/2018 12/31/17 9/30/17 6/30/17 3/31/17 Average tangible common equity Average Key shareholders' equity (GAAP) $ 14,889 $ 15,268 $ 15,241 $ 15,200 $ 15,184 Less: Intangible assets (average) (a) 2,916 2,939 2,878 2,756 2,