Keycorp · NYSE:KEY
Keycorp — Goldman Sachs US Financial Services Conference 2014
29 slides from Keycorp's conference presentation, Dec 9, 2014
Slide 1: KeyCorp
Goldman Sachs US Financial Services Conference 2014 KeyCorp 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, including statements about our financial condition, results of operations, asset quality trends, capital levels and profitability. Forward-looking statements can often be identifie
Slide 3: Progress Made on 2014 Key Focus Areas
Progress Made on 2014 Key Focus Areas Our relationship strategy has translated into measurable results Average Loans ($) Acquired and expanded relationships Total up 5% CF&A up 11% Positive Total average loans up 5% from prior year Operating Leverage Positive trends in several fee-based busine
Slide 4: 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 5: Driving Positive Operating Leverage
Driving Positive Operating Leverage Executing action plans across our organization to improve the efficiency ratio to 60% and below Revenue Growth Expense Savings Acquiring and expanding relationships to grow revenue in our Continuous improvement efforts enable identification and businesses executio
Slide 6: Investing in our Businesses
Investing in our Businesses Reinvesting cost savings in our businesses to drive growth Adding senior bankers: existing Community Bank industry expertise and relationships Corporate 3Q14 vs. 3Q13 Bank RMs Client facing FTE: 5% Bankers Remixing: increasing client-facing 18% (a) Total FTE: 16% roles 3Q
Slide 7: Disciplined Capital Management
Disciplined Capital Management Disciplined in how we manage, invest, deploy and return our strong capital position Capital Organic Share Opportunistic Priorities Dividends Growth Repurchases Growth Strong Capital Position Peer-leading Return Tier 1 Common Equity (a) Total Shareholder Payout (b) 11.3
Slide 8: Focused Forward
Focused Forward Key is well-positioned to grow and improve returns Focused on executing our strategy and making progress on our commitments Positive Operating Leverage Risk Management Disciplined Capital Management 8
Slide 9: Appendix
Appendix 9
Slide 10: 2014 Outlook and Expectations
2014 Outlook and Expectations 4Q14 FY 2014 • LQA: mid-single digit growth, driven by Average Loans • Mid-single digit growth vs. FY 2013 commercial loans • Relatively stable from 2013, with slight Net Interest Income • Relatively stable with 3Q14 downward pressure from competitive environment • Low
Slide 11: Progress on Financial Goals
Progress on Financial Goals Metrics (a) 3Q14 YTD 3Q13 YTD Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 87% 84% Efficiency NCOs to average loans .20% .33% Moderate Risk 40 - 60 bps Profile Provision to average loans .09% .28% High Quality, Net interest margin 2.98% 3.16% LT: >3.50% Diver
Slide 12: Financial Highlights
Financial Highlights Metrics 3Q14 2Q14 1Q14 4Q13 3Q13 EPS – assuming dilution $ .23 $ .27 $ .26 $ .26 $ .25 Cash efficiency ratio (e) 69.5 % 65.8 % 64.9 % 67.4 % 67.5 % Financial Performance (a) excl. efficiency and pension charges 66.0 63.4 63.9 65.1 63.6 Net interest margin (TE) 2.96 2.98 3.00 3.0
Slide 13: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 5% from prior year, driven by CF&A up 11% $28.0 $26.5 Linked quarter average balances impacted by $23.9 seasonality, capital markets and strategic exits $21.0 Total commitments contin
Slide 14: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve .80% Transaction deposit balances up 6% from 3Q13 .56% .60% .52% Growth from prior year reflects inflows from commercial clients as well as commercial .40% mortgage servicing .22% .16% .20% Total CD maturities an
Slide 15: 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 down 1% from prior year, primarily due to lower asset yields $620 4.00% Modest growth from prior quarter reflects asset growth, higher loan fees
Slide 16: 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% Loans Deposits - Assumes 200 basis point increase in short-term rates over a 12-month p
Slide 17: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income down $42 MM from prior year: $ in millions; continuing operations – Gains from leveraged lease termination and $525 principal investing $31 MM higher in 3Q13 $459 $450 $417 – Special servicing fees $6 MM lower – Posting order chan
Slide 18: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 2% from prior year, benefitting from continuous improvement efforts $800 $716 $704 Increase from prior quarter reflects: $700 – Pension settlement charge and expenses related to Pacific Crest Securities $600
Slide 19: Focused Expense Management
Focused Expense Management Continued cost savings enable investments and offset normal expense growth Low to mid- single digit $2.82 B $117 MM decline year- over-year 1 % - 2% $2.70 B (4) % – (6) % 1 % – 2.5 % 2 % – 2.5 % 2013 reported 2013 efficiency 2013 NIE excl. Expense savings Operating cost In
Slide 20: 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 70% 65% 2-3 year outlook: 60% 60% 55% 50% (b) 3Q14 YTD Business growth, Expense savings Rising rate benefit Long-term target: <60% ne
Slide 21: Continued Improvement in Asset Quality
Continued Improvement in Asset Quality Highlights Net Charge-offs & Provision for Loan and Lease Losses $ in millions Net loan charge-offs decreased 16% from 3Q13 to $60 .60% $31 MM, or 22 bps of average loans Total gross charge-offs down 37% from 3Q13 and $40 .40% $37 down 13% from 2Q14 $31 $28
Slide 22: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings (a) Continuing operations Continuing operations 1.00% 0% 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 (2)% .75% (2)% .61% .54% (4)% .50% (6)% .25% .17% (7)% .13% (8)% .00% (10)% 4Q12 1Q13 2Q13 3Q13 4Q
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 (%) 9/30/14 3Q14 3Q14 3Q14 9/30/14 9/30/14 9/30/14 9/
Slide 24: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions • Portfolio composed primarily of GNMA and GSE- $20.0 5.00% $17.7 $17.0 backed MBS and CMOs 4.00% $15.0 – No private label MBS or financial paper 3.00% $10.0 • Currently reinvesting cash flows into GNMA 2.
Slide 25: 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: 97% of total portfolio; branch- principal and interest payments; $6.7 billion are lines originated • $1.5 billion in lines outstanding (
Slide 26: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 9-30-14 vs. 9-30-14 6-30-14 3Q14 (c) 2Q14 (c) 9-30-14 6-30-14 6-30-14 Residential properties – homebuilder $ 11 $ 19 $ (8) $ 1 - $ 10 $ 7 Marine and RV floor plan 7 2
Slide 27: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 9-30-14 6-30-14 3-31-14 12-31-13 9-30-13 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,486 $ 10,504 $ 10,403 $ 10,303 $ 10,206 Less: Intangible assets (a) 1,105 1,008 1,012 1,014 1,017 Pre
Slide 28: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 9-30-14 6-30-14 3-31-14 12-31-13 9-30-13 Average tangible common equity Average Key shareholders’ equity (GAAP) $ 10,473 $ 10,459 $ 10,371 $ 10,272 $ 10,237 Less: Intangible assets (average) (a) 1,037 1,010 1,013 1,016 1,01
Slide 29: 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 September 30, 2014 Tier 1 common equity under current regulatory rules $ 9.4 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and P
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