Slide 1: KeyCorp Third Quarter 2020 Earnings Review
KeyCorp Third Quarter 2020 Earnings Review October 21, 2020 Chris Gorman Don Kimble Chairman and Vice Chairman and Chief Executive Officer 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: 3Q20 Highlights
3Q20 Highlights Revenue up 3% from year-ago period, reflecting balance sheet growth and momentum in fee businesses − Loan balances reflect PPP and strong production from consumer mortgage and Laurel Road − Deposits reflect continued growth, resulting in elevated liquidity levels − Strength in fees
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q20 2Q20 3Q19 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .41 $ .16 $ .38 156 % 8 % Cash efficiency ratio(a) 60.6 % 57.9 % 56.0 % 270 bps 460 bps Return on average tangible common equity(a) 12.2 5.0 12.4 723 (19) Profitability Return on av
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $110 6.00% $105 PPP $6 Average loans up 14% from 3Q19 $100 $8 $92 − Commercial balances reflect $8 B of average 5.00% $90 PPP balances, as well as broad-based core C&I 4.67% growth and increased utilization $80 4.00% − Consumer loan
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $140 $135 1.50% Interest-bearing deposit costs down 20 bps from 2Q20, reflecting impact of lower interest rates $120 $110 1.25% Strong and stable deposit base $100 1.09% 1.00% − 32% noninterest-bearing(a) $80 0.75% − ~60% stable retail and low-c
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations vs. Prior Year $1,100 4.0% $980 $1,006 Net interest income up $26 MM (+3%) from 3Q19 $1,000 3.5% − Largely driven by higher earning asset $900 balances 3.00% $800 3.0
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 3Q20 vs. 3Q19 vs. 2Q20 Noninterest income up $31 MM (+5%) from 3Q19 Trust and investment services income $ 128 $ 10 $ 5 Investment banking and debt 146 (30) (10) − Continued strength in consumer mortgage plac
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions favorable / (unfavorable) 3Q20 vs. 3Q19 vs. 2Q20 vs. Prior Year Personnel $ 588 $ 41 $ 16 Noninterest expense up $98 MM (+10%) from Net occupancy 76 4 5 3Q19 Computer processing 59 6 3 − Payments-related expense of $52 million Busine
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses $ in millions CECL Implementation $500 1.00% .85% $400 .80% 3Q19 reflects Provision for $123 MM from $300 .49% .60% credit losses previously $200 exceeds net $196 disclosed fraud $200 .40% charge-offs by .31% $160 loss $128 $32 MM $100 .20
Slide 12: Select Commercial Portfolio Focus Areas
Select Commercial Portfolio Focus Areas Active Portfolio Surveillance Portfolios in Focus Ongoing portfolio reviews 6/30/20 9/30/20 % of Total Outstandings Outstandings Loans as of 9/30 $ in millions Monitoring ratings migration Consumer behavior(a) $ 5,206 $ 5,020 4.9% Central reporting on Ed
Slide 13: Pandemic Credit Metrics: Outperforming Peers
Pandemic Credit Metrics: Outperforming Peers Deferrals (% of Total Loans ($)) 11.2% Peer Median: 7.4% 4.3% 1.8% KEY KEY Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 3Q20 2Q20 KEY COVID-19 Hardship Support Commercial Consumer Deferral or forbearance options as of 9/30: .7% of Deferral
Slide 14: Capital
Capital Common Equity Tier 1(a) Highlights 11.0% Strong capital position: CET1 ratio up 40 bps from 2Q20 to 9.5%(a) at 9/30/2020 – top of targeted range 10.0% 9.5% 9.5% Well-positioned to weather adverse operating 9.0% environments: − Announced 3Q20 quarterly common share 8.0% dividend of $.185
Slide 15: Fourth Quarter 2020 Trends & Long-term Targets
Fourth Quarter 2020 Trends & Long-term Targets Fourth Quarter 2020 Trend (vs. Third Quarter 2020) Average Loans: down low-single digits (reflective of lower starting point at 9/30/20) Deposits: relatively stable Net interest income: up low-single digits with a relatively stable NIM − Includes
Slide 16: Appendix
Appendix 16
Slide 17: Commercial Loan Portfolio Detail
Commercial Loan Portfolio Detail Total Commercial Loans Commercial & Industrial (C&I) Solid middle market portfolio $ in billions 9/30/20 % of total loans Aligning bankers to areas of market opportunity and growth - Commercial and industrial $ 55.0 53 investing in strategic hires with industry v
Slide 18: Consumer Loan Portfolio Detail
Consumer Loan Portfolio Detail Laurel Road Total Consumer Loans $ in millions Origination Volume $ in billions 9/30/20 % of total WA FICO at loans origination $801 $706 Residential mortgage 8.7 9 769 $552 $611 $419 Home equity C&I 9.5 9 CRE 808 3Q19 4Q19 1Q20 2Q20 3Q20 Consumer direct $40 4.4 $18 4
Slide 19: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.6 $33.6 Portfolio used for funding and liquidity management $32.0 3.00% ‒ Portfolio composed primarily of fixed-rate GNMA and 2.49% GSE-backed MBS and CMOs 2.50% $24.0 2.05% ‒ Reinvestments continue to be in High
Slide 20: Asset & Liability Management
Asset & Liability Management Hedging strategy utilizes comprehensive toolkit to promote net interest income stability Fixed Rate as % of Earning Assets(a),(b) Highlights 76% Loan book repricing characteristics well-positioned − A lower exposure to unhedged floating rate loans combined with floors
Slide 21: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations .80% 6.0% .60% 3.9% 4.0% .39% .40% .33% 2.7% 2.0% .20% .06% .07% .00% .0% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 30 – 89 days deli
Slide 22: 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 allowance offs loans (%) (%) $ in millions (%) 9/30/20 3Q20 3Q20 3Q20 9/30/20 9/30/20 9/30/20 9/30/20
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2020 6/30/2020 9/30/2019 Notable Items Provision for credit losses - - $ (123) - Efficiency initiative expenses - - - Laurel Road acquisition expenses - - - Total notable items - - $ (123) Income taxes - - (29) Total notable items
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2020 6/30/2020 9/30/2019 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 397 $ 159 $ 383 Plus: Notable items, after