Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q1 2018 Earnings Presentation
22 slides from Keycorp's earnings presentation, Apr 19, 2018
Slide 1: KeyCorp First Quarter 2018 Earnings Review
KeyCorp First Quarter 2018 Earnings Review April 19, 2018 Beth E. Mooney Chairman and Chief Executive Officer Don Kimble Chief Financial Officer
Slide 2: Forward-Looking Statements and Additional Information
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION 2 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 o
Slide 3: 1Q18 Investor Highlights
3 1Q18 Investor Highlights Driving Returns Strong Risk Management Disciplined Capital Management Strong capital position − CET1 ratio of 10%(c) $199 MM(d) of common share repurchases in 1Q18 Planned common share dividend increase of 14% in 2Q18 (subject to Board approval) Maintained credit d
Slide 4: Financial Review
4 Financial Review
Slide 5: Financial Highlights
60.4% 59.4% 59.7% 61.3% 62.9% 1Q17 2Q17 3Q17 4Q17 1Q18 5 Financial Highlights EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliation (b) Notable items include: merger-related charges (in all periods except 1Q18 - see Appendix for detail); impact of tax reform and related actions i
Slide 6: Average Loans
$0 $30 $60 $90 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 6 Loans $ in billions ConsumerCommercial vs. Prior Year Total Average Loans Highlights Average loans up 1% from 1Q17 – Broad-based C&I growth with middle-market clients – Expansion of auto lending into existing geographies and dealer relations
Slide 7: Average Deposits
Deposit cost up 5 bps from 4Q17, reflecting: – Higher interest rates – Continued migration of portfolio into higher- yielding products Strong and stable deposit base – 30% noninterest-bearing – >85% from markets where Key maintains top-5 deposit or branch share Average deposit balances down 1%
Slide 8: Net Interest Income and Net Interest Margin
3.13% 3.15% 2.95% 3.04% 2.0% 2.5% 3.0% 3.5% 4.0% $0 $200 $400 $600 $800 $1,000 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 NIM Change vs. Prior Quarter 4Q17: 3.09% Higher interest rates .07 Lower short-term earning assets .03 PAA (1Q vs. 4Q) (.01) Other (.03) Total change .06 1Q18: 3.15% Net interest
Slide 9: Noninterest Income
9 Noninterest Income Noninterest Income $ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 Trust and investment services income $ 133 $ (2) $ 2 Investment banking and debt placement fees 143 16 (57) Service charges on deposit accounts 89 2 - Operating lease income and other leasing gains 32 9 5 Corpor
Slide 10: Noninterest Expense
$ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 Personnel $ 594 $ 38 $ (14) Net occupancy 78 (9) (14) Computer processing 52 (8) (2) Business services, professional fees 41 (5) (11) Equipment 26 (1) (5) Operating lease expense 27 8 (1) Marketing 25 4 (10) FDIC assessment 21 1 1 Intangible asset amo
Slide 11: Credit Quality
11 $ in millions Credit Quality $ in millions $58 $54 $63 $61 .27% .25% .00% .20% .40% .60% .80% 1.00% $0 $25 $50 $75 $100 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 NCOs Provision for credit losses NCOs to average loans $573 $541 .67% .61% .00% .40% .80% 1.20% 1.60% 2.00% $0 $200 $400 $600 $800 2Q16 3
Slide 12: Capital Highlights
Common Equity Tier 1(a) 12 Strong capital position with Common Equity Tier 1 ratio of 10.03%(a) at 3/31/18 Repurchased $199 MM(c) in common shares during 1Q18 Tangible Common Equity to Tangible Assets(b) (a) 3/31/18 ratios are estimated (b) Non-GAAP measure: see Appendix for reconciliation (c) C
Slide 13: Outlook and Expectations
Outlook and Expectations Average Balance Sheet • Loans: average balances in the range of $88.5 B - $89.5 B • Deposits: average balances in the range of $104.5 B - $105.5 B Net Interest Income (TE) • Net interest income expected to be in the range of $3.95 B - $4.05 B • Outlook includes rate increase
Slide 14: Appendix
14 Appendix
Slide 15: Loan Portfolio Detail, at 3/31/18
Total Loans Commercial Loans Agriculture Automotive Business Products Business Services Construction Consumer Discretionary Consumer Services Equipment Finance HealthcareMaterials/ ExtractionMedia Oil & Gas Other Public Sector Real Estate Technology Transportation Utilities 15 Loan Portfolio Detail,
Slide 16: Investment Portfolio
Average Total Investment Securities 16 Average AFS securities Investment Portfolio (a) Yield is calculated on the basis of amortized cost (b) Includes end-of-period held-to-maturity and available-for-sale securities Average yield(a) Average HTM securities 1.98% 1.50% 1.75% 2.00% 2.25% 2.50% $0.0 $10
Slide 17: Interest Rate Risk Management
17 Interest Rate Risk Management The strength and diversity of our franchise positions Key to benefit from economic growth and a rising rate environment Business and Balance Sheet Highlights Net Interest Income Sensitivities (FY18) ($MM) • Strong, low-cost deposit base – $72 B interest-bearing depos
Slide 18: Credit Quality Trends
Criticized Outstandings(a) to Period-end Total LoansDelinquencies to Period-end Total Loans 18 Credit Quality Trends (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $690
Slide 19: Loan Credit Quality Detail
Period- end loans Average loans Net loan charge- offs Net loan charge-offs(b) / average loans (%) Nonperforming loans(c) Ending allowance(d) Allowance / period-end loans(d) (%) Allowance / NPLs (%) 3/31/18 1Q18 1Q18 1Q18 3/31/18 3/31/18 3/31/18 3/31/18 Commercial and industrial(a) $ 44,313 $ 42,733
Slide 20: 2017 FNFG Merger-related Charges
4Q17 3Q17 2Q17 1Q17 Net interest income - - - - Operating lease income and other leasing gains - - - - Other income - - - - Noninterest income - - - - Personnel expense $ 26 $ 25 $ 31 $ 30 Net Occupancy $ 12 $ (2) $ (1) $ 5 Business services and professional fees 3 2 6 5 Computer processing 1 4 2 5
Slide 21: Non-GAAP Reconciliations: Notable Items and TCE
3/31/2018 12/31/2017 3/31/2017 Notable Items Merger-related charges - (56)$ (81)$ Impacts of tax reform and related actions - (30)$ - Total notable items - (86)$ (81)$ Income taxes - (26) (30) Revaluation of certain tax related assets - 147 - Total notable items after tax - (207)$ (51)$ Earnings per
Slide 22: Return on Average Tangible Common Equity Reconciliation
3/31/2018 12/31/17 9/30/17 6/30/17 3/31/17 Average tangible common equity Average Key shareholders' equity (GAAP) 14,889$ 15,268$ 15,241$ 15,200$ 15,184$ Less: Intangible assets (average) (a) 2,916 2,939 2,878 2,756 2,772 Preferred Stock (average) 1,025 1,025 1,025 1,025 1,480 Average tangible commo