Keycorp · NYSE:KEY
Keycorp — Barclays 2015 Global Financial Services Conference
33 slides from Keycorp's conference presentation, Sep 18, 2015
Slide 1: Barclays 2015 Global Financial Services Conference
Barclays 2015 Global Financial Services Conference September 18, 2015 KeyCorp Don Kimble Chris Gorman Chief Financial Officer President, Key Corporate Bank
Slide 2: Forward-Looking Statements and Additional Information Disclosure
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION DISCLOSURE This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usuall
Slide 3: Progress Made in 2015
Progress Made in 2015 Key continues to execute and deliver on commitments PPNR up 4% • Client growth: new and expanded relationships Driving Positive • Improved performance in core businesses Operating Leverage • Positive operating leverage • Business investments 1H14 1H15 1.00% • Strong asset quali
Slide 4: Focused Forward: Driving Positive Operating Leverage
Focused Forward: Driving Positive Operating Leverage Executing action plans across our organization to improve productivity and efficiency Revenue Growth Expense Savings Acquiring and expanding relationships to grow our businesses Continuous improvement efforts enable identification and execution of
Slide 5: Focused Forward: Moderate Risk Profile
Focused Forward: Moderate Risk Profile Enterprise-wide risk management approach 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 •
Slide 6: Focused Forward: Disciplined Capital Management
Focused Forward: Disciplined Capital Management Allows Key to execute on strategic priorities and maximize shareholder value Strong Capital Position Disciplined Management 2. Dividends 10.7% 9.9% 1. Organic growth Common Equity Tier 1 Tangible Common Equity 3. Share repurchases 4. Opportunistic grow
Slide 7: Outlook and Expectations
Outlook and Expectations FY 2015 Average Loans • Mid-single digit growth vs. FY 2014 • Up low single-digits without the benefit of higher rates Net Interest Income • NIM: down from FY 2014, reflecting continued elevated levels of liquidity; relatively stable with 2Q15 reported level Noninterest Inco
Slide 8: Corporate Bank
Corporate Bank A full-service corporate and investment bank serving middle market clients in targeted industry verticals Key’s Corporate Bank Key 2014 Revenue Business Description Provides leading commercial real estate finance services, Real Estate including construction and interim finance, perman
Slide 9: Differentiated Operating Model: Capabilities Comparison
Differentiated Operating Model Our middle market focus, industry-driven operating model and broad corporate & investment banking capability set are unique… and drive results Capability / Model Boutiques Regional Banks Bulge Bracket Capabilities Comparison Operating Model & Investment Banking Commerc
Slide 10: Delivering the Distinctive Platform
Delivering the Distinctive Platform Our ability to lead transactions across markets allows us to match client needs with market conditions and deliver best execution • Key Corporate Bank completed > 1,000 transactions raising nearly $60B in capital for our clients, ~20% of which went to our balance
Slide 11: Consistent Progress
Consistent Progress Solid progress in growing both loans and investment banking & debt placement fees -- demonstrating the power of our model • Since 1Q09, investment banking and debt placement fees have increased substantially as we focused on a more targeted client base • Loan balances up $9B (+53
Slide 12: Strong Relative Performance
Strong Relative Performance Results compare favorably to external benchmarks we are gaining loan share with higher asset productivity Commercial and Industrial Loan Growth Asset Productivity Since our portfolio troughed in 2Q11, Key Corporate Bank has taken …while our broad product capabilities gene
Slide 13: Growing Our Franchise: New Client Impact
Growing Our Franchise: New Client Impact Key Corporate Bank has acquired nearly 200 new client relationships through the first half of 2015, driving significant franchise value while maintaining a moderate risk profile New Client Profile: Product New Client Profile: Revenue Of clients acquired in 20
Slide 14: Commercial Payments: Core Momentum
Commercial Payments: Core Momentum We are focused on expanding our commercial payments franchise, an attractive annuity-based business that allows Key to deepen client relationships Key’s Actions Impact • Leadership changes new players and new roles YTD14 Revenue +17% • New talent ~20% of team new t
Slide 15: Key's Differentiated Model in Action: Metals Case Study
Key’s Differentiated Model in Action: Metals Case Study Key utilizes our complete platform and a solutions-driven approach to help our clients drive growth and achieve their strategic goals Legacy Client Profile (FY13) Key’s Model in Action Client Profile Today • Business profile • Strategic advice
Slide 16: Appendix
Appendix 16
Slide 17: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 2Q15 2014 2013 2012 Targets Balance Sheet Loan to deposit ratio (b) 87% 85% 84% 86% 90% -100% Efficiency NCOs to average loans .25% .20% .32% .69% Moderate Risk .40% - .60% Profile Provision for credit losses .28% .10% .26% .42% to average loans High Quali
Slide 18: Financial Highlights
Financial Highlights Metrics 2Q15 1Q15 4Q14 3Q14 2Q14 EPS – assuming dilution $ .27 $ .26 $ .28 $ .23 $ .27 Financial Cash efficiency ratio (d) 65.1 % 65.1 % 64.4 % 69.7 % 65.6 % Performance (a) Net interest margin (TE) 2.88 2.91 2.94 2.96 2.98 Return on average total assets 1.03 1.03 1.12 .92 1.14
Slide 19: Strong Balance Sheet
Strong Balance Sheet Highlights Average Total Loan and Deposit Growth $ in billions Loan growth continues to be driven primarily by CF&A loans Deposits up 6% Y-o-Y $70.0 Deposit growth of 6% from 2Q14 due to strength in commercial mortgage servicing and commercial and consumer client inflows $55.0 D
Slide 20: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed primarily of GNMA and GSE- $20.0 $18.3 3.00% $17.4 backed MBS and CMOs $15.0 2.00% Continue to position portfolio for upcoming 2.17% 2.10% $10.0 regulatory liquidity requirements: 1.00%
Slide 21: Interest Rate Risk Management
Interest Rate Risk Management Actively managing a naturally asset sensitive balance sheet Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintaining moderate asset sensitive position of ~3% Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short or intermediate
Slide 22: High Quality and Diverse Revenue
High Quality and Diverse Revenue Highlights Noninterest Income $ in millions; continuing operations Diverse noninterest income contributes over 40% of total revenue $525 $488 $455 2Q15: Record quarter for investment $450 banking and debt placement fees $375 Growth in core businesses $300 2Q15 net in
Slide 23: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions 2Q15 noninterest expense up 3% from prior year, primarily attributed to: $800 – Performance-based compensation $711 $687 $700 – Costs associated with the 3Q14 acquisition of Pacific Crest $600 2Q15 included $10 MM of costs assoc
Slide 24: Strong Asset Quality
Strong Asset Quality Highlights Net Charge-offs & Provision for Credit Losses $ in millions Net loan charge-offs remain below targeted range, $50 .60% at 25 basis points of average loans $41 $40 $36 Nonperforming loans represented 72 basis points .40% $30 of period-end loans $30 .22% Allowance for l
Slide 25: 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 (%) 6/30/15 2Q15 2Q15 2Q15 6/30/15 6/30/15 6/30/15 6/
Slide 26: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings (a) to Period-end Total Loans Continuing operations Continuing operations .75% 4.0% 3.1% .49% 3.0% 2.7% .50% .31% 2.0% .25% .15% .11% 1.0% .00% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 0.0% 30 – 89 days delinquent 90
Slide 27: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $3.9 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 98% of total portfolio; branch- principal and interest payments; $6.6 billion are lines originated $1.3 billion in lines outstanding (12% of t
Slide 28: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Strong Portfolio Characteristics >10 years of experience in energy lending with >20 >40% of clients’ 2015 production is hedged specialists dedicated to oil & gas Relationships contribute to noninterest income; ~5% of Focused on middle marke
Slide 29: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 6-30-15 vs. 6-30-15 3-31-15 2Q15 1Q15 (b) 6-30-15 3-31-15 3-31-15 Residential properties – homebuilder $ 6 $ 6 - - $ 1 $ 8 $ 8 Marine and RV floor plan 2 6 $ (4) - -
Slide 30: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management 11.00% – Increased quarterly common share 10.15% 9.86% dividend by 15% 10.00% – Repurchased $129 MM of common shares 9.00% in 2Q15 8.00% 7.00% 6.00% 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Common E
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6-30-15 3-31-15 12-31-14 9-30-14 6-30-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,590 $ 10,603 $ 10,530 $ 10,486 $ 10,504 Less: Intangible assets (a) 1,085 1,088 1,090 1,105 1,008 Pre
Slide 32: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 6-30-15 3-31-15 12-31-14 9-30-14 6-30-14 Pre-provision net revenue Net interest income (GAAP) $ 584 $ 571 $ 582 $ 575 $ 573 Plus: Taxable-equivalent adjustment 7 6 6 6 6 Noninterest income (GAAP) 488 437 490 417 455 Less: N
Slide 33: 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, 2015 Common Equity Tier 1 under current Regulatory Capital Rules $ 9.6 Adjustments from current Regulatory Capital Rules to the fully phased-in Regulatory Capital Rules
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