Slide 1: KeyCorp Fourth Quarter 2015 Earnings Review
KeyCorp Fourth Quarter 2015 Earnings Review January 21, 2016 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 communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s and First Niagara’s expectations or predictions of future financ
Slide 3: Investor Highlights – 2015
Investor Highlights – 2015 Pre-Provision Net Generated positive operating leverage from prior year Revenue (a) Total average loans up 5% from prior year +5% Positive Positive trends in fee-based businesses Operating - Investment banking and debt placement (record year, Leverage +12%), corporate serv
Slide 4: First Niagara: A Compelling Opportunity
First Niagara: A Compelling Opportunity Continued progress and momentum on announced acquisition; anticipated closing in 3Q16 Acquisition Drives Value 4Q15 Updates Accelerates Key’s transformation into a high- Executing against comprehensive pre-merger performing regional bank integration plan Gener
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Metrics 4Q15 3Q15 2Q15 1Q15 4Q14 EPS – assuming dilution $ .27 $ .26 $ .27 $ .26 $ .28 Financial Cash efficiency ratio (e) 66.4 % 66.9 % 65.1 % 65.1 % 64.4 % Performance (a) Net interest margin (TE) 2.87 2.87 2.88 2.91 2.94 Return on average total assets .97 .95 1.03 1.03 1.12 T
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions Total average loans up 5% Average Loans $60.0 Average total loans up 5% in 4Q15 from 4Q14, $50.0 driven by CF&A loans up 14% – Broad-based growth across Key’s $40.0 commercial lines of business $30.0 Community Bank and Corporate Bank 4Q15 $20.0 aver
Slide 8: Deposits
Deposits Average Deposits (a) Highlights $ in billions Total average deposits up 3% Deposit cost remains relatively stable $75.0 0.50% $65.0 0.40% vs. Prior Quarter $55.0 0.30% Deposits up 2% from 3Q15 reflecting: $45.0 0.20% – Seasonal and short-term deposit inflows from commercial clients $35.0 .1
Slide 9: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations vs. Prior Quarter $620 $610 4.00% Net interest income up $12 MM, or 2%, from 3Q15, primarily due to higher earning asset $588 yields and loan fees 3.50% $580 3.00% vs.
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions 4Q15 vs. 3Q15 vs. 4Q14 vs. Prior Quarter Trust and investment services income $ 105 $ (3) $ (7) Noninterest income up 3% from 3Q15 Investment banking and debt 127 18 1 placement fees – Investment banking and debt placement Service charge
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions 4Q15 vs. 3Q15 vs. 4Q14 4Q15 noninterest expense includes: Personnel (a) $ 429 $ (3) $ (20) − Efficiency-related costs of $10 MM Net occupancy 64 (4) (1) Computer processing 43 (2) (3) Reflecting branch closures and severance Business s
Slide 12: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Net loan charge-offs remain below targeted range, $50 .60% $45 at 25 basis points of average loans $40 $37 $32 .40% Nonperforming loans represented 65 basis points $30 of period-end loans $22 $20 .25% .20% Nonperfo
Slide 13: Capital
Capital Common Equity Tier 1 Common Equity (a) Tier 1 (a), (b), (c) Highlights 12.00% 11.17% Maintained strong capital position 10.95% 10.00% Common Equity Tier 1 ratio of 10.95% at 12/31/15 8.00% Increased quarterly common share dividend by 15% in 2Q15; planned increase of 13% in 2016 (subject to B
Slide 14: Outlook and Expectations
Outlook and Expectations FY 2016: Key Stand-alone Average Loans • Mid-single digit growth vs. FY 2015 • Up low single-digit percentage without the benefit from higher interest rates Net Interest Income • Mid-single digit growth with the benefit of higher interest rates Noninterest Income • Mid-singl
Slide 15: Appendix
Appendix 15
Slide 16: Progress on Targets for Success: Key Stand-alone
Progress on Targets for Success: Key Stand-alone Metrics (a) 2014 2015 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 85% 88% Efficiency NCOs to average loans .20% .24% Moderate Risk Profile 40 - 60 bps Provision for credit losses .10% .28% to average loans Net interest margin 2.97% 2.88%
Slide 17: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.1 5.00% Portfolio composed primarily of GNMA and GSE- $17.1 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for regulatory 3.00% $10.0 liquidity requirements: 2.00% 2.12% 2.10% – 2015 average b
Slide 18: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~3% Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short and intermediate- 4Q15 4Q15 term rates over a 12-month period CDs: • Utilize
Slide 19: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations .75% 4.0% 3.1% 3.0% .50% 2.5% .41% .35% 2.0% .25% .17% .12% 1.0% .00% 0.0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2
Slide 20: 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 (%) 12/31/15 4Q15 4Q15 4Q15 12/31/15 12/31/15
Slide 21: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Strong Portfolio Characteristics >10 years of experience in energy lending with >20 Primarily secured by proven reserves specialists dedicated to oil & gas Relationships contributed ~2% of FY15 investment Focused on middle market companies,
Slide 22: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $4.1 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; $6.2 billion are lines originated $1.1 billion in lines outstanding (11% 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 12-31-15 vs. 12-31-15 9-30-15 4Q15 3Q15 (b) 12-31-15 9-30-15 9-30-15 Residential properties – homebuilder $ 6 $ 6 - - - $ 8 $ 5 Marine and RV floor plan 1 1 - - - - -
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 12-31-15 9-30-15 6-30-15 3-31-15 12-31-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,746 $ 10,705 $ 10,590 $ 10,603 $ 10,530 Less: Intangible assets (a) 1,080 1,084 1,085 1,088 1,090 Pr
Slide 25: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 12-31-15 9-30-15 6-30-15 3-31-15 12-31-14 Pre-provision net revenue Net interest income (GAAP) $ 602 $ 591 $ 584 $ 571 $ 582 Plus: Taxable-equivalent adjustment 8 7 7 6 6 Noninterest income (GAAP) 485 470 488 437 490 Less:
Slide 26: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions December 31, 2015 Common Equity Tier 1 under current RCR $ 9.8 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b)
Slide 27: Important Additional Information and Where to Find It
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT In connection with the proposed merger, KeyCorp has filed with the SEC a Registration Statement on Form S-4 on November 30, 2015 that includes the preliminary Joint Proxy Statement of KeyCorp and First Niagara and a preliminary Prospectus of KeyC