Keycorp · NYSE:KEY
Keycorp — Barclays 2014 Global Financial Services Conference
37 slides from Keycorp's conference presentation, Sep 8, 2014
Slide 1: Barclays 2014 Global Financial Services Conference
Barclays 2014 Global Financial Services Conference September 8, 2014 KeyCorp Beth Mooney Don Kimble Chairman and Chief Financial Officer Chief Executive Officer
Slide 2: Forward-Looking Statements and Additional Information Disclosure
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION DISCLOSURE This presentation contains forward-looking statements, including statements about our financial condition, results of operations, asset quality trends, capital levels and profitability. Forward-looking statements can often be identifie
Slide 3: Solid Progress in 2014
Solid Progress in 2014 A stronger, more targeted and focused Key Grew organically: acquired and Average balance Total loans CF&A loans Total deposits(a) expanded relationships growth: 6% 13% 2% 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 • Community Bank: 2Q14 consumer sales per FTE per day 30% from prior year Im
Slide 4: Business Model: Aligned and Targeted
Business Model: Aligned and Targeted Local delivery of broad product set and industry expertise Differentiated platform with depth and maturity Traditional Bank Products Capital Markets Capabilities Commercial mortgage Derivatives & foreign Loans Deposits & payments Equity capital markets Equity res
Slide 5: Business Model: Growing and Taking Share
Business Model: Growing and Taking Share Key’s business model creates a competitive advantage with targeted clients and has enabled us to take market share Winning with Clients 2014 2014 2014 Commercial and Investment Banking and Industrial Loans(a): Debt Placement Fees(b): % change vs. 2Q11 LTM; $
Slide 6: Channel Optimization: Redefining Convenience
Channel Optimization: Redefining Convenience Multi-channel delivery, with investment in digital channels and redefined support of branches, aligns with changing client preferences Changing Client Behavior Branches Important to Clients Online and mobile transactions now exceed branch Direct, positive
Slide 7: Consumer Products: Strengthening Our Offering
Consumer Products: Strengthening Our Offering Well-designed and delivered products build engaged client relationships What We Provide Recent Investments and New Products Ease, value and expertise Hassle-Free Checking • Deposit products • Promotes Key’s ease, value and expertise to acquire and expand
Slide 8: Commercial Payments: Accelerating Growth
Commercial Payments: Accelerating Growth Client-focused model and investments provide opportunity for accelerated growth What We Provide Monetizing Investments Working capital, efficiency, information and risk mitigation Purchase and Prepaid Cards: Launched in 1Q14 Foreign Exchange & • Capitalizing
Slide 9: Strategic Acquisition: Leading Technology Platform
Strategic Acquisition: Leading Technology Platform Underscores Key’s commitment to be the leading corporate and investment bank serving middle market companies Highlights Expected Benefits • Accelerates growth and impact in the market, consistent with Key’s strategy • Adds new expertise and clients
Slide 10: Expenses: Culture of Continuous Improvement
Expenses: Culture of Continuous Improvement Reducing expenses while investing in our businesses for growth Noninterest Expense Outlook $ in millions Continued cost savings enable investments and offset Expenses down 7%, ex. charges(a) normal expense growth $750 Y-o-Y: low to mid- single digit % decl
Slide 11: Efficiency Ratio: Driving to 60% and Below
Efficiency Ratio: Driving to 60% and Below Business plans and macroeconomic environment provide path to an efficiency ratio below 60% Cash Efficiency Ratio(a) Outlook 70% 65% 2-3 year outlook: 60% 60% 55% 50% (b) 2Q14 Business Growth, Expense Savings Rising Rate Benefit Long-term Target: <60% Net of
Slide 12: Risk Discipline
Risk Discipline Enterprise-wide risk management approach drives quality Targeted, Relationship-based Approach • Target specific segments and sectors where we • Clearly defined and well understood risk appetite have expertise and tolerances • Execute rigorous and disciplined sales approach • Risk man
Slide 13: Disciplined Capital Management
Disciplined Capital Management Disciplined in how we manage, invest, deploy and return our strong capital position Capital Organic Share Opportunistic Dividends Priorities Growth Repurchases Growth Strong Capital Position Peer-leading Return Tier 1 Common Equity(a) 2013 Total Shareholder Payout(b) 1
Slide 14: Focused Forward
Focused Forward Key is well-positioned to grow and improve returns Focused on executing our strategy and making progress on our commitments Positive Operating Leverage Risk Management Disciplined Capital Management 14
Slide 15: Appendix
Appendix 15
Slide 16: Focused on Driving Positive Operating Leverage
Focused on Driving Positive Operating Leverage Executing action plans across our organization Revenue Growth Expense Savings • Improving sales productivity Driving consumer sales • Optimizing branch channel Community • Strengthening product offering: per FTE per day: up 30% from prior year • Driving
Slide 17: Actively Managing Businesses
Actively Managing Businesses Key evaluates all of its businesses to maximize long-term value, aligning core businesses with core competencies Consumer and commercial Pacific Crest Securities(a) payments CRE servicing Invest Acquire Credit card Digital: online and mobile Western NY branch channels ac
Slide 18: Progress on Targets for Success
Progress on Targets for Success Metrics(a) 2Q14 1Q14 Targets Focus areas Improving balance Loan to deposit ratio(b) 87% 88% 90-100% sheet efficiency Maintaining NCOs to average loans .22% .15% moderate risk 40-60 bps profile Provision to average loans .07% .04% Net interest margin 2.98% 3.00% LT: >3
Slide 19: 2014 Outlook and Expectations
2014 Outlook and Expectations Loans Mid-single digit average balance growth Net Interest Relatively stable from 2013, with slight downward pressure from Income competitive environment Noninterest Low single-digit growth compared to prior year Income Expense Low to mid-single digit percentage decline
Slide 20: Investor Highlights: 2Q14
Investor Highlights: 2Q14 Positive operating leverage year-over-year Positive Total average loans up 6% from prior year, driven by CF&A up 13% Operating CF&A loan growth and investment banking and debt placement fees (up 18% Leverage year-over-year) reaffirms strength of business model Expenses rema
Slide 21: Financial Highlights
Financial Highlights Metrics 2Q14 1Q14 4Q13 3Q13 2Q13 EPS – assuming dilution $ .27 $ .26 $ .26 $ .25 $ .21 Financial Cash efficiency ratio(d) 65.8 % 64.9 % 67.4 % 67.5 % 69.1 % Performance(a) Net interest margin (TE) 2.98 3.00 3.01 3.11 3.13 Return on average total assets 1.14 1.13 1.08 1.12 .95 To
Slide 22: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 6% from prior year – Driven by 13% increase in CF&A $26.4 $28.0 $23.5 Total commitments continue to grow with utilization relatively stable $21.0 High quality new loan originations: consist
Slide 23: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Overall funding cost continues to improve 1.25% Transaction deposit balances up 4% from 2Q13 1.00% Growth from prior year reflects inflows from .75% .62% commercial clients as well as commercial .52% mortgage servicing .50% .26% .18% Total CD maturities
Slide 24: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income (TE) & Net Interest Margin (TE) Trend $ in millions Net interest income down 1% from prior year due to: Continuing Operations – Competitive environment and asset repricing $620 4.00% offsetting loan growth – 2Q14 leveraged lease terminati
Slide 25: Noninterest Income
Noninterest Income Highlights Noninterest Income Continuing Operations Noninterest income up 6% from prior year, due to: $ in millions – Investment banking and debt placement fees $525 up 18% $455 $450 $429 – Gains from leveraged lease termination and principal investing $375 $300 Change from prior
Slide 26: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 3% from prior year, benefitting $800 from continuous improvement efforts $711 $689 $700 Increase from prior quarter reflects: − Seasonal trends in marketing and personnel $600 − Higher level of efficiency charges $
Slide 27: Continued Improvement in Asset Quality
Continued Improvement in Asset Quality Highlights Net Charge-offs & Provision for Loan and Lease Losses $ in millions Net loan charge-offs decreased 33% from 2Q13 to $120 3.00% $30 MM, or 22 bps of average loans 2.00% Total gross charge-offs down 24% from 2Q13 and $80 down 2% from 1Q14 1.00% $45.34%
Slide 28: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets(a) Disciplined capital management 11.00% 10.15% − Continuing to invest in businesses 9.96% 10.00% − Increased quarterly common share dividend 9.00% by 18% − Repurchased $108 MM in common shares 8.00% 7.00% 6.00% 3Q12 4Q12 1Q13 2Q13
Slide 29: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintaining moderate asset sensitive position of ~3% Loan Portfolio Deposits - Assumes 200 basis point increase in short-term rates over a 12-month period CDs: 10% • Utilize swaps for debt hedging and
Slide 30: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed of Agency-backed CMOs: $20.0 5.00% $17.4 $17.4 Fannie, Freddie & GNMA $15.0 4.00% – No private label MBS or financial paper 3.00% $10.0 Currently reinvesting cash flows into GNMA 2.33% 2
Slide 31: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings(a) Continuing Operations Continuing Operations 0% 1.00% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 (2)% .75% (3)% (4)% .47% .49% (4)% .50% (6)% .25% .15% .15% (8)% .00% (10)% 3Q12 4Q12 1Q13 2Q13 3Q1
Slide 32: 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(d) offs loans(d) (%) (%) $ in millions (%) 6/30/14 2Q14 2Q14 2Q14 6/30/14 6/30/14 6/30/1
Slide 33: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $4.0 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 97% of total portfolio; branch- principal and interest payments; $6.7 billion are lines originated $1.5 billion in lines outstanding (14% of t
Slide 34: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 6-30-14 vs. 6-30-14 3-31-14 2Q14(c) 1Q14(c) 6-30-14 3-31-14 3-31-14 Residential properties – homebuilder $ 19 $ 20 $ (1) - $ (1) $ 7 $ 7 Marine and RV floor plan 23 2
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,504 $ 10,403 $ 10,303 $ 10,206 $ 10,229 Less: Intangible assets(a) 1,008 1,012 1,014 1,017 1,021 Pref
Slide 36: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Average tangible common equity Average Key shareholders’ equity (GAAP) $ 10,459 $ 10,371 $ 10,272 $ 10,237 $ 10,314 Less: Intangible assets (average)a) 1,010 1,013 1,016 1,019 1,023
Slide 37: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)(a) KeyCorp & Subsidiaries Quarter ended $ in billions June 30, 2014 Tier 1 common equity under current regulatory rules $ 9.5 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and PCCRs(b
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