Slide 1: Investor Meetings: April / May 2015 – Focused Forward
Investor Meetings: April / May 2015 KeyCorp Focused Forward
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 - Approxim
Slide 4: Key – Delivering Shareholder Value
Key – Delivering Shareholder Value Driving growth with focused execution, discipline, and accountability Strong, diverse, and independent Board of Directors – 38% of Board members new since 2011 New leadership team – Beth Mooney became Chairman and CEO in May 2011 – 8 of 10 CEO direct reports new si
Slide 5: Community Bank
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 bran
Slide 6: Corporate Bank
Corporate Bank A full-service corporate and investment bank serving middle market clients in targeted industry verticals Key’s Corporate Bank Key 2014 Revenue Business Description Provides leading commercial real estate finance services, Real Estate including construction and interim finance, perman
Slide 7: 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 8: 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 9: Business Model: Growing and Taking Share
Business Model: Growing and Taking Share Key’s business model creates a competitive advantage with targeted clients and has enabled us to take market share Winning with Clients 2014 2014 2014 Commercial and Investment Banking and Industrial Loans(a): Debt Placement Fees(b): % change vs. 2Q11 LTM; $
Slide 10: Driving Positive Operating Leverage
Driving Positive Operating Leverage Executing action plans across our organization to improve efficiency Revenue Growth Expense Savings Acquiring and expanding relationships to grow revenue in our Continuous improvement efforts enable identification and businesses execution of expense savings Improv
Slide 11: 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) 70% 65% 2-3 year outlook: 60% 60% 55% 50% 2012 FY 2013 FY 2014 FY 1Q15 Business Expense Rising Rate Long-term Growth, Savings Benefit (b) Tar
Slide 12: Investing in our Businesses
Investing in our Businesses Reinvesting cost savings in our businesses to drive growth Adding senior bankers: existing Community Bank: Retail industry expertise and relationships Corporate Dec. ’12 vs. Dec’14 Bank RMs Client-facing FTE: 16% Bankers Remixing: increasing client-facing 25% (a) Total FT
Slide 13: Maintaining a Moderate Risk Profile
Maintaining a Moderate Risk Profile Enterprise-wide risk management approach drives quality Targeted, Relationship-based Approach • Target specific segments and sectors where we • Clearly defined and well understood risk appetite have expertise and tolerances • Execute rigorous and disciplined sales
Slide 14: Disciplined Capital Management
Disciplined Capital Management Allows Key to execute on its strategic priorities and maximize shareholder value Capital Priorities Franchise investments to drive execution of relationship strategy: product 1. Organic Growth capabilities, client-facing personnel mix 18% increase in common share divid
Slide 15: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 2012 2013 2014 1Q15 Targets Balance Sheet Loan to deposit ratio (b) 86% 84% 85% 87% 90% -100% Efficiency NCOs to average loans .69% .32% .20% .20% Moderate Risk 40 - 60 bps Profile Provision for credit losses .42% .26% .10% .25% to average loans High Quali
Slide 16: Outlook and Expectations
Outlook and Expectations FY 2014 FY 2015 Mid-single digit growth vs. FY 2013 Average Loans (+5%) • Mid-single digit growth vs. FY 2014 Relatively stable from 2013, with • Up low-to-mid single digit percentage vs. FY 2014 Net Interest Income slight downward pressure from (low single-digits without th
Slide 17: Why KEY?
Why KEY? Key is focused forward with distinctive capabilities Differentiated business model with broad capabilities Uniquely positioned to serve middle market clients Driving positive operating leverage while continuing to invest for growth Moderate risk profile Strong capital with disciplined appro
Slide 18: Financial Review
Financial Review 18
Slide 19: 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 20: 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% $29.0 $28.3 – Average total loans up for 14 consecutive quarters; CF&A up for 17 $27.0 Loan growth from prior quarter driven primarily $25.
Slide 21: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve compared to .80% prior year .60% .54% .52% 1Q15 transaction deposit balances up 8% from 1Q14, partially offset by lower CD balances .40% Deposit growth from prior year reflects strength in .20% noninterest-bearing balanc
Slide 22: 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% 2.19%
Slide 23: 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 $620 4.00% NII down $11 MM from the prior quarter
Slide 24: 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) benefit to net interest income 1Q15 1Q15 - Assumes 200
Slide 25: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income up slightly from prior year, $ in millions; continuing operations driven by: $525 – Trust and investment services 11% higher $435 $437 $450 – Cards and payments up 11% – Higher principal investing gains and $375 corporate-owned life
Slide 26: 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 $800 acquisition and higher employee benefits cost more than offset savings from continuous $700 $664 $669 improvement efforts $600 1Q1
Slide 27: 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 the .40% prior year $30 $28 $20 Higher provision for credit losses
Slide 28: 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 (d) offs loans (d) (%) (%) $ in millions (%) 3/31/15 1Q15 1Q15 1Q15 3/31/15 3/31/15 3/
Slide 29: 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 30: 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 31: 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 middle marke
Slide 32: 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 33: 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 8.00%
Slide 34: 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 35: 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 36: 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