Slide 1: KeyCorp First Quarter 2020 Earnings Review
KeyCorp First Quarter 2020 Earnings Review April 16, 2020 Beth E. Mooney Chris Gorman Chairman and President and Chief Executive Officer Chief Operating Officer Don Kimble Vice Chairman and 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: Key's Strong Response
Key’s Strong Response Business Resiliency Executed business resiliency plans: operational effectiveness across the franchise Dedicated team: highly engaged workforce − >11,000 team members working from home − ~85% of branches remain open for drive-thru service and appointments Client outreach
Slide 4: Investor Themes
Investor Themes 1Q20 earnings: reflects the impact of the COVID-19 pandemic on reserves and market-based revenue Financial Balanced interest rate positioning: hedging strategies began in 3Q18 to reduce exposure to declining rates Strong balance sheet: relationship-oriented lending franchise co
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 1Q20 4Q19 1Q19 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .12 $ .45 $ .38 (73) % (68) % Cash efficiency ratio(a) 62.3 % 58.7 % 61.9 % 368 bps 48 bps Return on average tangible common equity(a) 3.8 14.1 13.7 N/A (987) Profitability Return o
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $100 6.00% $96 Average loans up 7% from 1Q19 $95 5.50% − Commercial balances reflect strong C&I growth $90 $90 (+8%) driven by broad-based growth with 5.00% middle-market clients, partially offset by a $85 decline in commercial real
Slide 8: Deposits
Deposits Average Deposits Highlights $ in billions $120 $110 1.40% Interest-bearing deposit costs down 14 bps from $108 4Q19, reflecting impact of lower interest rates $100 1.20% Strong and stable deposit base 1.00% $80 .82% 1.03% 34% − 25% noninterest-bearing(a) 0.80% $60 − ~65% stable retail a
Slide 9: 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 $985 $989 $1,000 4.0% Net interest income up $4 MM (+.4%) from 1Q19 $900 − Largely driven by higher earning asset 3.5% balances $800 3.13% − Partially
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 1Q20 vs. 1Q19 vs. 4Q19 Noninterest income down $59 MM (-11%) from Trust and investment services income $ 133 $ 18 $ 13 1Q19 Investment banking and debt 116 6 (65) placement fees − Other income down (-$98 MM),
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions favorable / (unfavorable) 1Q20 vs. 1Q19 vs. 4Q19 vs. Prior Year Personnel $ 515 $ 48 $ 36 Noninterest expense down $32 MM (-3%) from Net occupancy 76 (4) - 1Q19 Computer processing 55 (1) (4) − Excluding notable items down $6 MM (-.6
Slide 12: Current Expected Credit Loss (CECL)
Current Expected Credit Loss (CECL) Day 1 Implementation Day 2 January 1, 2020 impact (a): Provision exceeded net charge-offs by $275 MM − $204 MM (23%) increase of Allowance for Loan Reasonable and supportable period: 2 years and Lease Losses (ALLL) from continuing operations Qualitative Adju
Slide 13: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses $ in millions CECL Implementation $400 1.00% $359 4Q19 and 3Q19 reflect $16 MM and .80% $300 $123 MM, respectively, from previously disclosed fraud loss .60% $200 .35% .40% .29% $100 $84 $64 $62 .20% $0 .00% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4
Slide 14: Select Commercial Portfolio Focus Areas
Select Commercial Portfolio Focus Areas Active Portfolio Surveillance Portfolios in Focus Ongoing portfolio reviews Outstandings % Total Loans • Restaurants ($480 MM), sports, Monitoring ratings Consumer entertainment/ leisure, services, migration Behavior education, etc. $5.3 B 5.1% Central r
Slide 15: Capital
Capital Common Equity Tier 1(a) Highlights 11.00% Strong capital position: CET1 ratio of 8.95%(a) at 9.81% 3/31/2020 10.00% Capital positioned to weather adverse operating 8.95% 9.00% environments Disciplined capital management, including 8.00% meaningful shareholder return in 1Q20: 7.00% − Qu
Slide 16: Second Quarter 2020 Trends & Long-term Targets
Second Quarter 2020 Trends & Long-term Targets Second Quarter 2020 Trend (vs. First Quarter 2020) Average Loans: continued strong growth reflecting starting point (EOP balance) and PPP Deposits: up linked-quarter, supporting loan growth Net interest income: higher NII reflecting loan growth an
Slide 17: Appendix
Appendix 17
Slide 18: Loan Portfolio Detail, at 3/31/2020
Loan Portfolio Detail, at 3/31/2020 Total Loans Commercial Loans $ in billions 3/31/20 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 56.0 54 Business Products Transportation Business Services Commercial real es
Slide 19: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $31.6 $31.0 Portfolio used for funding and liquidity $32.0 2.75% management: 2.47% 2.51% ‒ Portfolio composed primarily of Fixed Rate GNMA and $24.0 2.50% GSE-backed MBS and CMOs ‒ GNMA 45% of 1Q20 average balance $1
Slide 20: Asset & Liability Management Positioning
Asset & Liability Management Positioning Active hedging moderates interest rate risk, protecting and enhancing net interest income 1Q20 Balance Sheet Highlights(a) Actively Managing Interest Rate Risk Position Exposure to declining rates increased in 1Q20, driven Loan Composition Deposit Mix by ma
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% 4.0% .38% 2.9% .40% .32% 2.7% 2.0% .20% .13% .12% .00% .0% 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q18 3Q18 4Q18 1Q19 2Q19 3Q
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 (%) 3/31/20 1Q20 1Q20 1Q20 3/31/20 3/31/20 3/31/20 3/31/20
Slide 23: CECL Implementation
CECL Implementation 1Q20 CECL ALLL Impact by Portfolio Pre-ASC 326 Impact of As Reported Ending ALLL Adoption ASC 326 Under ASC 326 Provision Charge-offs Recoveries March 31, 2020 $ in millions ALLL Adoption ALLL 12/31/19 1/1/20 1/1/20 3/31/20 3/31/20 3/31/20 3/31/20 Commercial Commercial and indust
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 3/31/2020 12/31/2019 3/31/2019 Notable Items Provision for credit losses - $ (16) - - Professional fees related to fraud loss - (4) - Efficiency initiative expenses - - $ (26) Pension settlement charge - (18) - Total notable items - $
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation PAGE TWO: Three months ended $ in millions 3/31/2020 12/31/2019 3/31/2019 Net loan charge-offs to average total loans excluding notable items Net loan charge-offs (GAAP) $ 84 $ 99 $ 64 Less: Notable items - 16 - Net loan charge-offs excluding notable items (non-GAAP)