Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q1 2015 Earnings Presentation
26 slides from Keycorp's earnings presentation, Apr 16, 2015
Slide 1: KeyCorp First Quarter 2015 Earnings Review
Exhibit 99.2 KeyCorp First Quarter 2015 Earnings Review April 16, 2015 Beth E. 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 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: Investor Highlights – 1Q15
Investor Highlights – 1Q15 Revenue benefitted from growth in loans and certain core businesses Positive - Total average loans up 5% from prior year; CF&A balances up 12% Operating Expenses well-managed, reflecting focus on continuous improvement Leverage Reaffirming full-year guidance Asset quality
Slide 4: Financial Review
* * * * * * * * * * Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Metrics 1Q15 4Q14 3Q14 2Q14 1Q14 EPS – assuming dilution $ .26 $ .28 $ .23 $ .27 $ .26 Cash efficiency ratio (e) 65.1 % 64.4 % 69.7 % 65.6 % 65.1 % Financial excl. continuous improvement and 64.4 63.4 66.2 63.2 64.1 Performance (a) efficiency costs Net interest margin (TE) 2.91
Slide 6: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 5% in 1Q15 from prior year, driven by CF&A up 12% – Average total loans up for 14 consecutive quarters; CF&A up for 17 Loan growth from prior quarter driven primarily by CF&A loans Total co
Slide 7: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve compared to prior year Transaction deposit balances up 8% from 1Q14, partially offset by lower CD balances Deposit growth from prior year reflects strength in noninterest-bearing balances and inflows from commercial mort
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income & Net Interest Margin Trend (TE) $ in millions; continuing operations Net interest income up $8 MM from the prior year, reflecting higher loan balances offset by lower earning asset yields NII down $11 MM from the prior quarter, primarily
Slide 9: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income up slightly from prior year, $ in millions; continuing operations driven by: – Trust and investment services 11% higher $435 $437 – Cards and payments up 11% – Higher principal investing gains and corporate-owned life insurance Grow
Slide 10: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Noninterest expense up 1% in 1Q15 from prior year – Growth related to the 3Q14 Pacific Crest acquisition and higher employee benefits cost more than offset savings from continuous $664 $669 improvement efforts 1Q15 included $7 M
Slide 11: Strong Asset Quality
Strong Asset Quality Highlights Net Charge-offs & Provision for Credit Losses $ in millions Net loan charge-offs remain below targeted range, at 20 basis points of average loans Total gross charge-offs down 18% from the prior year Higher provision for credit losses exceeded net charge-offs Nonperfor
Slide 12: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management – Repurchased $208 MM of common shares in 1Q15 No objection from Federal Reserve on 2015 capital plan, including: – Share repurchase program of up to $725 MM – 15% increase in quarterly common shar
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2015 Average Loans • Mid-single digit growth vs. FY 2014 • Up low-to-mid single digit percentage vs. FY 2014 (low single-digits without the Net Interest Income benefit of higher rates) • NIM stable-to-slightly higher later in the year Noninterest Income • Mid-single digit
Slide 14: Appendix
Appendix 14
Slide 15: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 1Q15 4Q14 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 87% 85% Efficiency NCOs to average loans .20% .22% Moderate Risk 40 - 60 bps Profile Provision for credit losses .25% .15% to average loans High Quality, Net interest margin 2.91% 2.94% LT
Slide 16: 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 2-3 year outlook: 60% (b) Long-term, committed to moving below 60% (a) Non-GAAP measure: see Appendix for reconciliation 16 (b) Assu
Slide 17: 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 FY14 Focused on middle
Slide 18: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed primarily of GNMA and GSE- $18.0 $17.1 backed MBS and CMOs Continue to position portfolio for upcoming regulatory liquidity requirements: 2.19% – 1Q15 average balance growth reflects act
Slide 19: 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% (b) Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short-term rates
Slide 20: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations 30 – 89 days delinquent 90+ days delinquent Metric (b) 1Q15 4Q14 3Q14 2Q14 1Q14 Delinquencies to EOP total loans: 30-89 days .37 % .41 % .61 %
Slide 21: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan Allowance / Allowance / Period- Average Net loan charge-offs (b) / Nonperforming Ending period-end NPLs end loans loans charge-offs average loans loans (c) allowance (d) loans (d) (%) (%) $ in millions (%) 3/31/15 1Q15 1Q15 1Q15 3/31/15 3/31/15 3/3
Slide 22: 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: 98% of total portfolio; branch- principal and interest payments; $6.5 billion are lines originated $1.4 billion in lines outstanding (13% of t
Slide 23: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 3-31-15 vs. 3-31-15 12-31-14 1Q15 (b) 4Q14 (b) 3-31-15 12-31-14 12-31-14 Residentialproperties – homebuilder $ 6 $ 10 $ (4) $ 1 - $ 8 $ 9 Marine and RV floor plan 6 7
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 3-31-15 12-31-14 9-30-14 6-30-14 3-31-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,603 $ 10,530 $ 10,486 $ 10,504 $ 10,403 Less: Intangible assets (a) 1,088 1,090 1,105 1,008 1,012 Pre
Slide 25: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 3-31-15 12-31-14 9-30-14 6-30-14 3-31-14 Pre-provision net revenue Net interest income (GAAP) $ 571 $ 582 $ 575 $ 573 $ 563 Plus: Taxable-equivalent adjustment 6 6 6 6 6 Noninterest income (GAAP) 437 490 417 455 435 Less: N
Slide 26: 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 March 31, 2015 Common Equity Tier 1 under current regulatory rules $ 9.5 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and other