Keycorp · NYSE:KEY
Keycorp — Deutsche Bank Global Financial Services Investor Conference 2015
37 slides from Keycorp's conference presentation, June 2015
Slide 1: Deutsche Bank Global Financial Services Investor Conference
Deutsche Bank Global Financial Services Investor Conference June 2015 KeyCorp Don Kimble E.J. Burke Dennis Devine Chief Financial Officer Co-President, Co-President, Key Community Bank Key Community 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: Key – Who We Are
Key – Who We Are A relationship-focused bank with scale and adaptability Top 20 U.S. bank-based financial services company Loans Deposits 1% - Assets: $92B 4% - Deposits: $69B 27% - Market capitalization: $12B 43% 53% 72% - Strong footprint with approximately 1,000 branches and 1,300 ATMs - Approx
Slide 4: Leveraging our Geographic Diversity
Leveraging our Geographic Diversity Delivering a consistent strategy across our franchise while also leveraging market- specific opportunities Western Markets Eastern Markets • Deposits: $17 B • Deposits: $31 B • Branches: 380 • Branches: 612 • Demographic: younger with high growth potential • Demog
Slide 5: Key Community Bank
Key Community Bank A local relationship bank serving retail, private banking and business clients Key’s Community Bank Franchise Key 2014 Revenue Business Description Clients Provides deposit, investment, • Individuals and Retail and and loan products to clients families Business through our ~1,000
Slide 6: Retail and Business Banking Priorities
Retail and Business Banking Priorities I Driving positive operating leverage II Acquiring and expanding relationships with a compelling value proposition III Optimizing channels and investing in our digital future 6
Slide 7: Driving Positive Operating Leverage
I Driving Positive Operating Leverage Improving productivity and efficiency Delivering a Consistent, Productive and Efficient Model Across the Franchise Enhanced playbooks New coaching Investment in and Reorganization and Channel optimization Active performance and relationship structure and alignme
Slide 8: Acquiring and Expanding Relationships
II Acquiring and Expanding Relationships Well-designed and delivered products build engaged client relationships What We Provide Recent Investments and New Products Hassle-Free Checking Ease • Drives client acquisition, opportunity for expansion 1.8x • Early results: solid demand and sales volume wi
Slide 9: Optimizing Channels
III Optimizing Channels Multi-channel delivery, with investment in digital channels and redefined support of branches, aligns with changing client preferences Changing Client Behavior Multi-channel Offering Online and mobile transactions now Branches remain exceed branch transactions by 2x important
Slide 10: Key Community Bank
Key Community Bank A local relationship bank serving retail, private banking and business clients Key’s Community Bank Franchise Key 2014 Revenue Business Description Clients Provides deposit, investment, • Individuals and Retail and and loan products to clients families Business through our ~1,000
Slide 11: Commercial and Private Banking Priorities
Commercial and Private Banking Priorities I Driving positive operating leverage II Acquiring and expanding relationships III Strengthening and leveraging cross-business partnerships 11
Slide 12: Driving Positive Operating Leverage
I Driving Positive Operating Leverage Improving productivity and efficiency Delivering Client-focused Solutions Market-specific Improving banker Investing in new client- Active performance Aligning client coverage growth plans productivity facing talent management Focused on Optimizing cost to serve
Slide 13: Acquiring and Expanding Relationships
II Acquiring and Expanding Relationships A full suite of products and tailored service builds valuable client relationships Targeting Full Client Relationships Commercial Private Banking Banking Clients Clients average client revenue Credit / Treasury / 5x higher Banking Investing with a Deposit Pay
Slide 14: Cross-Business Partnerships
III Cross-Business Partnerships Uniquely Positioned to Serve Commercial Businesses with an Integrated Model Local delivery of broad product set and industry expertise Key Community Bank Key Corporate Bank Local presence Industry expertise • Community presence, • 7 targeted industry partnerships and
Slide 15: Key Community Bank: Focused Forward
Key Community Bank Focused Forward with distinctive capabilities Driving positive operating leverage Acquiring and expanding relationships Optimizing channels and investing in our digital future Strengthening and leveraging cross-business partnerships 15
Slide 16: Appendix
Appendix 16
Slide 17: 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 18: 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 19: 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 20: Financial Highlights
Financial Highlights Metrics 1Q15 4Q14 3Q14 2Q14 1Q14 EPS – assuming dilution $ .26 $ .28 $ .23 $ .27 $ .26 Cash efficiency ratio (d) 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 21: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 5% in 1Q15 from 1Q14, driven by CF&A up 12% $29.0 $28.3 – Average total loans up for 14 consecutive quarters; CF&A up for 17 $27.0 Loan growth from 4Q14 driven primarily by $25.4 $25.0
Slide 22: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve compared .80% to 1Q14 .54% 1Q15 transaction deposit balances up 8% from .60% .52% 1Q14, partially offset by lower CD balances .40% Deposit growth from 1Q14 reflects strength in .20% noninterest-bearing balances and
Slide 23: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed primarily of GNMA and GSE- $20.0 $18.0 5.00% $17.1 backed MBS and CMOs $15.0 4.00% Continue to position portfolio for upcoming 3.00% $10.0 regulatory liquidity requirements: 2.00% 2.
Slide 24: 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 1Q14, reflecting higher loan balances offset by lower earning asset yields $620 4.00% NII down $11 MM from 4Q14 primarily due to f
Slide 25: 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% benefit Loan Portfolio Deposits (a) to net interest income 1Q15 1Q15 - Assumes 200 basi
Slide 26: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income up slightly from 1Q14, driven by: $ in millions; continuing operations – Trust and investment services 11% higher $525 – Cards and payments up 11% $435 $437 $450 – Higher principal investing gains and corporate-owned life insuranc
Slide 27: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Noninterest expense up 1% in 1Q15 from 1Q14 – Growth related to the 3Q14 Pacific Crest $800 acquisition and higher employee benefits cost more than offset savings from continuous $700 $664 $669 improvement efforts $600 1Q15
Slide 28: 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 20 basis points of average loans $40 $35 Total gross charge-offs down 18% from 1Q14 .40% $30 $28 Higher provision for credit losses exceeded
Slide 29: 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 (%) 3/31/15 1Q15 1Q15 1Q15 3/31/15 3/31/15 3/31/15 3/
Slide 30: 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% 3.0% 2.8% .50% .48% 2.6% .37% 2.0% .25% .19% .16% 1.0% .00% 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 0.0% 30 – 89 days delinquent 90+
Slide 31: 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 (
Slide 32: 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 midd
Slide 33: 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 Residential properties – homebuilder $ 6 $ 10 $ (4) $ 1 - $ 8 $ 9 Marine and RV floor plan 6
Slide 34: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management 11.00% – Repurchased $208 MM of common shares in 1Q15 10.14% 9.92% 10.00% No objection from Federal Reserve on 2015 capital plan, including: 9.00% – Share repurchase program of up to $725 MM 8.
Slide 35: 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 36: 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 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 March 31, 2015 Common Equity Tier 1 under current regulatory rules $ 9.6 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and other
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