Keycorp · NYSE:KEY
Keycorp — Goldman Sachs US Financial Services Conference 2017
30 slides from Keycorp's conference presentation, Dec 5, 2017
Slide 1: Goldman Sachs US Financial Services Conference
Goldman Sachs US Financial Services Conference December 5, 2017 KeyCorp Focused Forward 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: Delivering Results
Delivering Results Differentiated value proposition for consumer and middle market clients, while continuing to improve efficiency, manage risk and increase returns Why KEY Executing on LT Targets Transformed company, with distinctive business model and offering Positive operating leverage − Success
Slide 4: Strong Franchise with Distinctive Capabilities
Strong Franchise with Distinctive Capabilities Market Presence Western Markets Eastern Markets strong market share top 5 in >20 MSAs(a) Leading market presence across the I-90 corridor Strong growth and presence in attractive markets from Toledo, OH to Albany, NY First Niagara acquisition strengthen
Slide 5: Commercial Capabilities and Expertise
Commercial Capabilities and Expertise Competitive advantage with targeted clients Traditional Bank Products Capital Markets Capabilities Commercial mortgage Derivatives & foreign Loans Deposits & payments Equity capital markets Equity research banking exchange 12% Y-o-Y average loan $103 B deposits
Slide 6: Retail Transformation
Retail Transformation Delivering ease, value and expertise with a balanced multi-channel presence Balanced Multi-channel Presence Investing in Talent & Tools to Deliver Advice & Expertise Physical Presence Shift in workforce skills and expectations from transactional roles to advice roles Branch Cou
Slide 7: Levers to Improve Efficiency and Returns
Levers to Improve Efficiency and Returns Delivering positive operating leverage with opportunities across our businesses Executing Strategic Priorities Growing Relationships Taking Share Accelerating Revenue Momentum Continuing Expense Discipline Continued momentum with core relationship strategy Ac
Slide 8: Strategic Investments Differentiate & Enable Growth
Strategic Investments Differentiate & Enable Growth Investments accelerate growth, supported by technology enhancements Commercial Payments Financial Wellness Highly ranked core treasury capabilities Core component of retail relationship strategy Investments in people, technology and Acquisition of
Slide 9: First Niagara Opportunity
First Niagara Opportunity Incremental opportunity from cost savings and revenue synergies Cost Savings Revenue Synergies Targeting $300 million in annual revenue synergies in 2-3 years Achieved $400 MM in annualized savings 1. Residential Mortgage 2. Commercial Payments Executing incremental $50 MM
Slide 10: Risk Management
Risk Management Maintaining a strong risk culture and moderate risk profile Business Discipline Strong Asset Quality(a) Enterprise-wide approach to managing risks and Net Charge-offs to Average Loans concentrations 1.50% Maintaining enhanced underwriting standards Key Peer median(b) 1.25% Focus on s
Slide 11: Capital Management
Capital Management Disciplined in how we manage, invest, deploy and return our strong capital position Strong Capital Position Focus on Dividends Common Equity Tier 1 Cash Dividends Per Common Share $0.38 10.26% 25% CAGR 9.91% 9.91% 9.54% $0.10 4Q16 1Q17 2Q17 3Q17 2011 2012 2013 2014 2015 2016 2017
Slide 12: Appendix
Appendix 12
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2017(a) Average Balance • Loans: 4Q17 average balances in the range of $87.0 B - $87.5 B Sheet • Deposits: FY17 average balances in the range of $102.5 B - $103.0 B • Net interest income expected to be in the range of $3.8 B - $3.9 B Net Interest Income • Outlook includes
Slide 14: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q17 2Q17 3Q16 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .32 $ .36 $ .16 (11) % 100 % EPS – excl. notable items(a), (b) .35 .34 .30 3 17 Cash efficiency ratio(a) 62.2 % 59.3 % 80.0 % 290 bps (1,773) bps Profitability Cash efficiency –excl
Slide 15: Loans
Loans Total Average Loans Highlights $ in billions $90 $87 vs. Prior Year $78 Average loans up 12% from 3Q16 $60 – Growth reflects a full-quarter impact of FNFG (vs. 2 months in 3Q16) $30 – Broad-based C&I growth vs. Prior Quarter $0 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Average loans up .4% from
Slide 16: Loan Portfolio Detail, at 9/30/17
Loan Portfolio Detail, at 9/30/17 Total Loans Commercial Loans $ in billions 9/30/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Commercial and industrial $ 41.1 48 Automotive Transportation Business Products Technology Utilities Commercial real estate 16.9
Slide 17: Deposits
Deposits Average Deposits(a) Highlights $ in billions $103 Deposit cost up 2 bps from 2Q17 $105 .70% $95 – Largely driven by contractual commercial .60% $85 rate increases and deposit mix .50% 3Q17 beta of 17% (total interest-bearing deposits) .40% $65 .30% .28% vs. Prior Year $45 .20% .21% .10% Ave
Slide 18: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29 $30.0 5.00% backed MBS and CMOs; primarily fixed rate $24.2 4.00% Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 1.96% 2.02% 2.00% –
Slide 19: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations $1,000 $962 4.0% Excluding impact of PAA, 3Q17 net interest income $100 $48 was $914 MM and net interest margin was 2.99% $788 $800 $19 3.5% 3.15% vs. Prior Year $600 2
Slide 20: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Utilize Swaps to Achieve and with Relatively Short Duration(a) Adjust Modest Asset Sensitivity Loans Deposits Investment • A/LM hedges aligned to floating rate LIBOR-based loans $88 B $103 B Portfolio • Short weighted average matu
Slide 21: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 vs. Prior Year Trust and investment services income $ 135 $ 13 $ 1 Investment banking and debt 141 (15) 6 Noninterest income up $36 MM from 3Q16, excl. placement fees notable items(a),(b) Service charge
Slide 22: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 Notable items: Personnel $ 558 $ (36) $ 7 $ in millions 3Q17 3Q16 2Q17 Net occupancy 74 1 (4) Merger-related charges $36 $189 $44 Computer processing 56 (14) 1 Charitable contribution(b) - - 20 Busine
Slide 23: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 3Q17 NCOs reflect continued portfolio 3Q17 allowance for loan losses $100 strength and large C&I recovery 1.00% to period-end loans of 1.02% $900 $865 $880 250% .80% $75 200% $59 $51 .60% $
Slide 24: 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% .37% .38% 4.0% 3.3% 3.3% .25% 2.0% .10% .06% .00% .0% 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q
Slide 25: 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 (%) 9/30/17 3Q17 3Q17 3Q17 9/30/17 9/30/17 9/30/17 9/30
Slide 26: Capital
Capital Common Equity Tier 1 Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 10.26% at 9/30/17 10.26% 10.00% 9.56% − Increase in 9/30/17 capital measures primarily reflects a change in methodology for multipurpose facilities(b) 8.00% Repurchased $277 MM(c) in common shar
Slide 27: Corporate Governance and Responsibility
Corporate Governance and Responsibility Strong Corporate Governance Strong Corporate Citizen Committed to high standards of corporate governance, ethical Invest in underserved & low-to-moderate income behavior, and business conduct, with shareholder interests at the Responsible communities center of
Slide 28: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - - - $ (6) - - - Operating lease income and other - - - $ (2) - - - leasing gains Other income - - $ 9 (10) - - - Noninterest income - - $ 9 $ (12) - - - Personnel expense $ 2
Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/17 6/30/17 9/30/16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $15,249 $15,253 $ 14,996 Less: Intangible assets (a) 2,870 2,866 2,855 Preferred Stock (b) 1,009 1,009 1,150 Tangible commo
Slide 30: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,241 $ 15,200 $ 15,184 $ 14,901 $ 13,552 Less: Intangible assets (average) (a) 2,878 2,756 2,772 2,874 2,25
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