Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q2 2014 Earnings Presentation
27 slides from Keycorp's earnings presentation, Jul 17, 2014
Slide 1: KeyCorp Second Quarter 2014 Earnings Review
**** **** **** **** **** Exhibit 99.2 KeyCorp Second Quarter 2014 Earnings Review July 17, 2014 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: Investor Highlights – 2Q14
Investor Highlights – 2Q14 Positive operating leverage year-over-year Positive Total average loans up 6% from prior year, driven by CF&A up 13% Operating CF&A loan growth and investment banking and debt placement fees (up 18% Leverage year-over-year) reaffirms strength of business model Expenses rem
Slide 4: Strategic Acquisition: Leading Technology Platform
Strategic Acquisition: Leading Technology Platform Highlights Expected Benefits Accelerates growth and impact in the market, consistent with Key’s strategy Adds new expertise and clients while driving synergies across the platform Industry-focused firm covering high growth technology sub-verticals P
Slide 5: Financial Review
******************** Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Metrics 2Q14 1Q14 4Q13 3Q13 2Q13 EPS – assuming dilution $ .27 $ .26 $ .26 $ .25 $ .21 Financial Cash efficiency ratio (e) 65.8 % 64.9 % 67.4 % 67.5 % 69.1 % Performance (a) Net interest margin (TE) 2.98 3.00 3.01 3.11 3.13 Return on average total assets 1.14 1.13 1.08 1.12 .95
Slide 7: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 6% from prior year – Driven by 13% increase in CF&A Total commitments continue to grow with utilization relatively stable High quality new loan originations: consistent with moderate risk p
Slide 8: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Overall funding cost continues to improve Transaction deposit balances up 4% from 2Q13 Growth from prior year reflects inflows from commercial clients as well as commercial mortgage servicing Total CD maturities and average cost – 2014 Q3: $1.8 billion a
Slide 9: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income (TE) & Net Interest Margin (TE) Trend $ in millions Net interest income down 1% from prior year due to: Continuing Operations – Competitive environment and asset repricing offsetting loan growth – 2Q14 leveraged lease termination (-$2 MM
Slide 10: Noninterest Income
Noninterest Income Highlights Noninterest Income Continuing Operations Noninterest income up 6% from prior year, due to: $ in millions – Investment banking and debt placement fees up 18% $455 $429 – Gains from leveraged lease termination and principal investing Change from prior quarter (up 5%) refl
Slide 11: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 3% from prior year, benefitting from continuous improvement efforts $711 $689 Increase from prior quarter reflects: Seasonal trends in marketing and personnel Higher level of efficiency charges Focused on improving
Slide 12: 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 % Note: Percentage ranges based upon 2014 expense plans and calculated from 2013
Slide 13: Improving Efficiency
Improving Efficiency Driving progress toward the low end of our targeted range Current Target: 60% - 65% Cash Efficiency Ratio (a) Rising interest rates present an opportunity for additional improvement, with long-term goal of moving below targeted range (a) Non-GAAP measure: see Appendix for reconc
Slide 14: 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 33% from 2Q13 to $30 MM, or 22 bps of average loans Total gross charge-offs down 24% from 2Q13 and down 2% from 1Q14 Commercial loan recoveries exceede
Slide 15: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management Continuing to invest in businesses Increased quarterly common share dividend by 18% Repurchased $108 MM in common shares Book Value per Share Tier 1 Common Equity (a), (b) (a) Non-GAAP measure: see
Slide 16: 2014 Outlook and Expectations
2014 Outlook and Expectations Loans • Mid-single digit average balance growth Net Interest • Relatively stable from 2013, with slight downward pressure from Income competitive environment Noninterest • Low single-digit growth compared to prior year Income Expense • Low to mid-single digit percentage
Slide 17: Appendix
***************************** Appendix 17
Slide 18: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 2Q14 1Q14 Targets Focus areas Improving balance Loan to deposit ratio (b) 87% 88% 90-100% sheet efficiency Maintaining NCOs to average loans .22% .15% moderate risk 40-60 bps profile Provision to average loans .07% .04% Net interest margin 2.98% 3.00% >3.5
Slide 19: Driving Positive Operating Leverage
Driving Positive Operating Leverage Revenue Growth Expense Savings Improving sales productivity with Optimizing branch channel Community existing and new bankers Bank Launched new product: Hassle-Free Driving greater efficiencies through back and middle-office processes Enhancing online and mobile c
Slide 20: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed of Agency-backed CMOs: $17.4 $17.4 Fannie, Freddie & GNMA – No private label MBS or financial paper Currently reinvesting cash flows into GNMA 2.33% securities, for Basel III liquidity (
Slide 21: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings (a) Continuing Operations Continuing Operations 30 – 89 days delinquent 90+ days delinquent Metric (b) 2Q14 1Q14 4Q13 3Q13 2Q13 Delinquencies to EOP total loans: 30-89 days .49 % .48 % .58 % .54
Slide 22: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan Allowance / Allowance / Period- Average Net loan charge-offs (b) / Nonperforming Ending period-end NPLs end loans loans charge-offs average loans loans (c) allowance (d) loans (d) (%) (%) $ in millions (%) 6/30/14 2Q14 2Q14 2Q14 6/30/14 6/30/14 6/3
Slide 23: 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 (14% of t
Slide 24: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 6-30-14 vs. 6-30-14 3-31-14 2Q14 (c) 1Q14 (c) 6-30-14 3-31-14 3-31-14 Residential properties – homebuilder $ 19 $ 20 $ (1) - $ (1) $ 7 $ 7 Marine and RV floor plan 23
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Tangible common equity to tangible assets at period end Key shareholders’equity (GAAP) $ 10,504 $ 10,403 $ 10,303 $ 10,206 $ 10,229 Less: Intangible assets (a) 1,008 1,012 1,014 1,017 1,021 Pref
Slide 26: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Average tangible common equity Average Key shareholders’equity (GAAP) $ 10,459 $ 10,371 $ 10,272 $ 10,237 $ 10,314 Less: Intangible assets (average)(a) 1,010 1,013 1,016 1,019 1,023
Slide 27: 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 June 30, 2014 Tier 1 common equity under current regulatory rules $ 9.5 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and PCCRs