Keycorp · NYSE:KEY
Keycorp — Goldman Sachs U.S. Financial Services Conference 2016
27 slides from Keycorp's conference presentation, Dec 6, 2016
Slide 1: Goldman Sachs U.S. Financial Services Conference
Goldman Sachs U.S. Financial Services Conference December 6, 2016 KeyCorp Beth E. Mooney Don Kimble Chairman and Chief Financial Officer Chief Executive 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: 2016: Significant Accomplishments and Momentum
2016: Significant Accomplishments and Momentum Core Business Growth (a) Positive operating leverage: 9 of the past 11 quarters (YoY) Strong loan growth, within moderate risk profile: double-digit CF&A growth 18 of past 20 quarters (YoY) Positive trends in fee-based businesses: double-digit YoY growt
Slide 4: Core Business Growth
Core Business Growth Pre-provision Net Revenue (a), (b), (c) Investments Efforts to drive positive operating leverage and improve efficiency have resulted in growth of Recent investments in talent and capabilities maturing and pre-provision net revenue contributing to growth +5% +3% +4% (1)% +5% 201
Slide 5: Key & First Niagara: Better Together
Key & First Niagara: Better Together Accelerating Momentum Loans Deposits Branches New to Key $60 B 9/30/15 $71 B 9/30/15 Residential mortgage 9/30/15 1/1/2015 1/1/2015 3Q15 972 Auto lending 1/1/2016 9/30/16 $86 B 9/30/16 1/1/2016 $104 B 9/30/16 3Q16 1,322 Insurance Noninterest Income, Comparative R
Slide 6: Acquisition Drives Value
Acquisition Drives Value Continued Confidence in Value Attainment and Financial Targets Executing on cost savings of $400 MM Cost savings of $400 MM Other: ~15% Cash efficiency improves ~300 bps Technology & Third Party Vendors: ~40% ROTCE ~200 0 bps higher Branch Consolidation: ~15% IRR of ~15%; RO
Slide 7: Financial Review
Financial Review 7
Slide 8: Financial Highlights
Financial Highlights 3Q16 results reflect the impact of the FNFG acquisition, which became effective on 8/1/2016 Metrics 3Q16 2Q16 1Q16 4Q15 3Q15 EPS – assuming dilution $ .16 $ .23 $ .22 $ .27 $ .26 EPS –excl. merger-related charges (d), (e) .30 .27 .24 .27 Financial Cash efficiency ratio (d) 80.0
Slide 9: Loans
Loans Total Average Loans Highlights $ in billions $80 $78 Loan growth showed continued momentum $62 $59 3Q16 impact to average loans from the FNFG $60 portfolio: $15 B (increase of $23 B on a period-end basis) $40 Estimated fair value adjustment on acquired FNFG $20 Total average loans loan portfol
Slide 10: Deposits
Deposits Average Deposits (a) Highlights $ in billions Relationship deposits continue to grow $105 0.70% $95 $95 0.60% 3Q16 impact to average deposits from the FNFG $85 FNFG 0.50% portfolio: $19 B (increase of $27 B on a period-end $75 $70 basis) 0.40% $65 Up 9% excl. FNFG 0.30% $55 Branch divestitu
Slide 11: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $30.0 5.00% backed MBS and CMOs $24.2 4.00% $19.2 Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 2.00% – Reinvesting cash flows into High
Slide 12: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations $788 $19 MM from PAA 6.00% FNFG contributed $175 MM to 3Q16 net interest $750 $156 income, including $19 MM from purchase $598 5.00% accounting accretion $550 4.00% Rep
Slide 13: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 3Q16 vs. 3Q15 vs. 2Q16 Record quarter for investment banking and debt Trust and investment services income $ 122 $ 14 $ 12 placement fees Investment banking and debt 156 47 58 – Reflects relationship revenue; strength in plac
Slide 14: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights 3Q16 noninterest expense of $1.1 B included $140 MM $ in millions Up / (Down) 3Q16 vs. 3Q15 vs. 2Q16 from FNFG as well as $189 MM of merger-related Personnel $ 594 $ 168 $ 167 charges Net occupancy 73 13 14 Intangible asset amortization expense of $
Slide 15: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions 3Q16 FNFG impact to provision: $18 MM, Net loan charge-offs of $44 MM (including $2 MM $120 1.00% which includes $12 MM related to the from FNFG) purchased credit card portfolio $90 .80% – 23 basis points of averag
Slide 16: Capital
Capital Common Equity Tier 1 (a) Highlights 12.00% Strong capital position with Common Equity 10.47% Tier 1 ratio of 9.56% at 9/30/16 10.00% 9.56% Resumed share repurchases following completion of the First Niagara acquisition 8.00% ‒ Repurchased $65 MM in common shares during 3Q16 6.00% Common Equi
Slide 17: Outlook and Expectations
Outlook and Expectations 4Q16 KEY Outlook (a) Average Earning • Average loans reflect one additional month of First Niagara and continued core portfolio growth Assets • Investment portfolio relatively stable from 3Q16 period-end • One additional month of impact from First Niagara Net Interest Income
Slide 18: Appendix
Appendix 18
Slide 19: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income $ (6) - - - Operating lease income and other $ (2) - - - leasing gains Other income (10) - - - Noninterest income $ (12) - - - Personnel expense (a) $ 97 $ 35 $ 16 - Business services and professi
Slide 20: First Niagara: Additional Transaction Detail
First Niagara: Additional Transaction Detail Impacts reflected within Key’s 3Q16 results $ in millions Consideration Cash consideration paid for First Niagara common shares $ 811 Key common shares issued, in dollars, and cash paid in-lieu of fractional shares (a) 2,831 Exchange of First Niagara pref
Slide 21: Interest Rate Risk Management
Interest Rate Risk Management Reflects the impact of the First Niagara acquisition, which became effective on 8/1/2016 Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~2% Loan Portfolio Deposits - Assumes 200 basis point increase
Slide 22: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings (a) to Period-end Total Loans Continuing operations Continuing operations .50% 6.0% .45% .37% 4.0% 3.4% 3.0% .25% 2.0% .09% .06% .00% .0% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3
Slide 23: 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 (%) 9/30/16 3Q16 3Q16 3Q16 9/30/16 9/30/16 9/30/16 9/
Slide 24: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $5.3 billion of the total portfolio are fixed rate loans that require principal and interest payments; $7.4 billion are lines 54% first lien position $1.4 billion in lines outstanding (11% of the total portfolio) Average FICO score of 768 come
Slide 25: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Total commitments of $3.1 B, including upstream Portfolio performing in-line with expectations commitments of $1.7 B Reserve coverage: 8% of outstanding oil and gas loans Upstream portfolio is primarily secured by proven, at period-end deve
Slide 26: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three m onths ended $ in millions 9-30-16 6-30-16 3-31-16 12-31-15 9-30-15 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 14,996 $ 11,313 $ 11,066 $ 10,746 $ 10,705 Less: Intangible assets (a) 2,855 1,074 1,077 1,080 1,084
Slide 27: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three m onths ended $ in millions 9-30-16 6-30-16 3-31-16 12-31-15 9-30-15 Pre-provision net revenue excluding m erger-related charges Net interest income (GAAP) $ 780 $ 597 $ 604 $ 602 $ 591 Plus: Taxable-equivalent adjustment 8 8 8 8 7 Noninterest income
KeyCorp — Goldman Sachs U.S. Financial Services Conference 2016 on 6ix