Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q3 2017 Earnings Presentation
22 slides from Keycorp's earnings presentation, Oct 19, 2017
Slide 1: KeyCorp Third Quarter 2017 Earnings Review
KeyCorp Third Quarter 2017 Earnings Review October 19, 2017 Beth E. Mooney Chairman and Chief Executive Officer Don Kimble 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: Investor Highlights – 3Q17
3 Investor Highlights – 3Q17 Positive Operating Leverage Strong Risk Management Disciplined Capital Management Maintained strong capital position − CET1 ratio of 10.3%(b) Repurchased $277 MM in common shares(c) Maintained credit discipline, strong asset quality NCOs to average loans of .15%
Slide 4: Financial Review
4 Financial Review
Slide 5: Financial Highlights
64.9% 63.3% 60.4% 59.4% 59.7% 3Q16 4Q16 1Q17 2Q17 3Q17 5 Financial Highlights EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliation (b) Notable items include merger-related charges (all periods), the 2Q17 merchant services gain and 3Q17 adjustment, 2Q17 purchase accounting finali
Slide 6: Loans
$0 $30 $60 $90 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 $10 $20 $30 $40 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 6 Loans $ in billions Average Commercial & Industrial Loans Total Average Loans ConsumerCommercial $ in billions vs. Prior Year Highlights Average loans up 12% from 3Q16 – Growth reflects
Slide 7: Deposits
Average deposit balances up .3% from 2Q17 – Noninterest bearing deposits up 2.5% (commercial deposit inflows and short-term escrow balances) – Growth in certificates of deposit also helped offset managed exit of certain public sector deposits $31.5 $53.8 $6.7 $11.1 .00% .10% .20% .30% .40% .50% .6
Slide 8: Net Interest Income and Margin
2.85% 3.15% 2.79% 2.99% 2.0% 2.5% 3.0% 3.5% 4.0% $0 $200 $400 $600 $800 $1,000 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 NIM Change vs. Prior Quarter 2Q17: 3.30% PAA finalization (.14) PAA (3Q vs. 2Q) (.03) Net interest rate benefit .03 Loan fees (.01) Total change (.15) 3Q17: 3.15% Net interest inc
Slide 9: Noninterest Income
9 Noninterest Income Noninterest Income $ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 Trust and investment services income $ 135 $ 13 $ 1 Investment banking and debt placement fees 141 (15) 6 Service charges on deposit accounts 91 6 1 Operating lease income and other leasing gains 16 10 (14) Corp
Slide 10: Noninterest Expense
$ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 Personnel $ 558 $ (36) $ 7 Net occupancy 74 1 (4) Computer processing 56 (14) 1 Business services, professional fees 49 (27) 4 Equipment 29 3 2 Operating lease expense 24 9 3 Marketing 34 2 4 FDIC assessment 21 - - Intangible asset amortization 25 12
Slide 11: Credit Quality
11 Nonperforming Loans(a) Net Charge-offs & Provision for Credit Losses $ in millions Credit Quality Allowance for Loan and Lease Losses $ in millions $44 $32 $59 $51 .23% .15% .00% .20% .40% .60% .80% 1.00% $0 $25 $50 $75 $100 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 NCOs Provision for credit losses
Slide 12: Capital
12 Strong capital position with Common Equity Tier 1 ratio of 10.26%(a) at 9/30/17 − Increase in 9/30/17 capital measures primarily reflects a change in methodology for multipurpose facilities(c) Repurchased $277 MM(d) in common shares during 3Q17 Tangible Common Equity to Tangible Assets(b) Hig
Slide 13: Outlook and Expectations
Outlook and Expectations Average Balance Sheet • Loans: 4Q17 average balances in the range of $87.0 B - $87.5 B • Deposits: FY17 average balances in the range of $102.5 B - $103.0 B Net Interest Income • Net interest income expected to be in the range of $3.8 B - $3.9 B • Outlook includes no additio
Slide 14: Appendix
14 Appendix
Slide 15: Loan Portfolio Detail, at 9/30/17
Agriculture Automotive Business Products Business Services Construction Consumer Discretionary Consumer Services Equipment Finance Healthcare Materials/ ExtractionMedia Oil & Gas Other Public Sector Real Estate Technology Transportation Utilities 15 Loan Portfolio Detail, at 9/30/17 Commercial Loans
Slide 16: Investment Portfolio
16 Average Total Investment Securities Highlights Average AFS securities Investment Portfolio Portfolio composed primarily of GNMA and GSE- backed MBS and CMOs; primarily fixed rate Continue to position portfolio for regulatory liquidity requirements: – Reinvesting cash flows into High Quality L
Slide 17: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet with Relatively Short Duration(a) Actively Managing Rate Risk $15.4 $20.4$9.9 $9.9 Size of swap portfolio: Modeled asset sensitivity : 1-3% (b) 0%6-8%(b) $9.9 Loans 1-mo. Libor: 43% Fixed: 31% Deposits Flexibility to adjust rate s
Slide 18: Credit Quality Trends
18 Credit Quality Trends Criticized Outstandings(a) to Period-end Total LoansDelinquencies to Period-end Total Loans (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $783
Slide 19: Credit Quality by Loan Type
Period- end loans Average loans Net loan charge- offs Net loan charge-offs(b) / average loans (%) Nonperforming loans(c) Ending allowance(d) Allowance / period-end loans(d) (%) Allowance / NPLs (%) 9/30/17 3Q17 3Q17 3Q17 9/30/17 9/30/17 9/30/17 9/30/17 Commercial and industrial(a) $ 41,147 $ 41,416
Slide 20: FNFG Merger-related Charges
3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Net interest income - - - $ (6) - - - Operating lease income and other leasing gains - - - $ (2) - - - Other income - - $ 9 (10) - - - Noninterest income - - $ 9 $ (12) - - - Personnel expense $ 25 $ 31 $ 30 $ 80 $ 97 $ 35 $ 16 - Net Occupancy $ (2) $ (1) $ 5
Slide 21: Non-GAAP Reconciliations: Tangible Common Equity and Notable Items
Three months ended 9/30/17 6/30/17 9/30/16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $15,249 $15,253 14,996$ Less: Intangible assets (a) 2,870 2,866 2,855 Preferred Stock (b) 1,009 1,009 1,150 Tangible common equity (non-GAAP) $11,370 $11,378 10,991$ Tot
Slide 22: Return on Average Tangible Common Equity Reconciliation
Three months ended 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 Average tangible common equity Average Key shareholders' equity (GAAP) 15,241$ 15,200$ 15,184$ 14,901$ 13,552$ Less: Intangible assets (average) (a) 2,878 2,756 2,772 2,874 2,255 Preferred Stock (average) 1,025 1,025 1,480 1,274 648 Average