Slide 1: KeyCorp First Quarter 2016 Earnings Review
KeyCorp First Quarter 2016 Earnings Review April 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 – 1Q16
Investor Highlights – 1Q16 Generated positive operating leverage and grew pre-provision net revenue 6% (a) from 1Q15, excluding merger-related expense of $24 MM (b) Revenue up 3% from 1Q15, driven by 6% growth in net interest income Positive Total average loans up 5% from prior year; CF&A loans up 1
Slide 4: First Niagara: Significant Progress Being Made
First Niagara: Significant Progress Being Made Acquisition Attractive Financial Significant Revenue Complementary More Balanced Drives Value Returns Opportunities Business Model Franchise 1Q16 Updates Executing against comprehensive pre-merger Continued confidence in value attainment, integration pl
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Metrics 1Q16 4Q15 3Q15 2Q15 1Q15 EPS – assuming dilution $ .22 $ .27 $ .26 $ .27 $ .26 EPS –excl. merger-related expense (e), (f) .24 .27 Financial Cash efficiency ratio (e) 66.6 % 66.4 % 66.9 % 65.1 % 65.1 % Performance (a) Cash efficiency –excl. merger-related expense (e), (f)
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions Total average loans up 5% Average Loans $60 Average total loans up 5% in 1Q16 from 1Q15, driven by CF&A loans up 12% $40 – Broad-based growth across Key’s commercial lines of business – Consumer loan decline related to paydowns $20 in the home equit
Slide 8: Deposits
Deposits Average Deposits (a) Highlights $ in billions Total average deposits up 4% Deposit cost remains relatively stable, up 2 bps $75 .50% from both 4Q15 and 1Q15 $65 .40% vs. Prior Year $55 .30% Deposit growth of 4% from 1Q15 related to: $45 .20% – Growth in commercial mortgage servicing .17% $3
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 Year $620 $612 4.00% Net interest income up $35 MM, or 6%, from 1Q15, reflecting higher earning asset balances 3.50% and yields $580 $577 3.00% vs. Prior Quar
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 1Q16 vs. 4Q15 vs. 1Q15 vs. Prior Year Trust and investment services income $ 109 $ 4 $ - Noninterest income down 1% from 1Q15 Investment banking and debt 71 (56) 3 placement fees ‒ Principal investing down $29 MM Service char
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights vs. Prior Year $ in millions Up / (Down) 1Q16 vs. 4Q15 vs. 1Q15 1Q16 noninterest expense up 5% from 1Q15 Personnel $ 404 $ (25) $ 15 Net occupancy 61 (3) (4) – Increase primarily driven by merger-related expense Computer processing 43 - 5 – Excl. me
Slide 12: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Credit quality measures impacted by migration in $120 .60% the oil and gas portfolio, reflecting market $89 conditions $90 .40% .31% Net loan charge-offs remain below targeted range, $60 at 31 basis points of avera
Slide 13: Capital
Capital Common Equity Tier 1 (a), (b) Highlights 12.00% 11.11% Maintained strong capital position 10.64% 10.00% Common Equity Tier 1 ratio of 11.11% at 3/31/16 Planned common share dividend increase of 8.00% 13% in 2Q16 (subject to Board approval) 6.00% Common share repurchases and an increased 1Q15
Slide 14: Outlook and Expectations
Outlook and Expectations FY 2016: Key Stand-alone Average Loans • Mid-single digit growth vs. FY 2015 • Up low to mid-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 • Lo
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) Targets 1Q16 4Q15 Balance Sheet Loan to deposit ratio (b) 90% -100% 86% 88% Efficiency NCOs to average loans .31% .25% Moderate Risk Profile 40 - 60 bps Provision for credit losses .60% .30% to average loans Net interest margin 3.00% -3.25
Slide 17: FNFG Merger-related Expense
FNFG Merger-related Expense Expenses related to the acquisition and integration of First Niagara Financial Group $ in millions Increase / (Decrease) 1Q16 4Q15 Personnel expense (a) $ 16 - Business services and professional fees $ 7 $ 5 Marketing 1 - Other - 1 Total nonpersonnel expense $ 8 $ 6 Total
Slide 18: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.0 5.00% Portfolio composed primarily of GNMA and GSE- $18.0 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for regulatory 3.00% $10.0 liquidity requirements: 2.00% 2.10% 2.09% – Reinvesting ca
Slide 19: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~2-3% (b) Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short and intermediate- 1Q16 1Q16 term rates over a 12-month period CDs: • U
Slide 20: 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% 6.0% .50% 4.0% 3.6% .39% .37% 2.6% .25% .19% 2.0% .12% .00% .0% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4
Slide 21: Credit Quality by Portfolio
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 (%) 3/31/16 1Q16 1Q16 1Q16 3/31/16 3/31/16 3/
Slide 22: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Total commitments of $3.1 B, including upstream Credit migration reflects recent regulatory guidance, commitments of $1.6 B which was applied to the entire portfolio Upstream portfolio is primarily secured by proven, Reserve coverage: 8% of
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: 98% of total portfolio; branch- principal and interest payments; $6.1 billion are lines originated $1.0 billion in lines outstanding (10% 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 3-31-16 vs. 3-31-16 12-31-15 1Q16 4Q15 3-31-16 12-31-15 12-31-15 Residential properties – homebuilder - $ 6 $ (6) - - $ 3 $ 8 Marine and RV floor plan - 1 (1) - - - -
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three m onths ended $ in millions 3-31-16 12-31-15 9-30-15 6-30-15 3-31-15 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 11,066 $ 10,746 $ 10,705 $ 10,590 $ 10,603 Less: Intangible assets (a) 1,077 1,080 1,084 1,085 1,088
Slide 26: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 3-31-16 12-31-15 9-30-15 6-30-15 3-31-15 Pre-provision net revenue excluding m erger-related expense Net interest income (GAAP) $ 604 $ 602 $ 591 $ 584 $ 571 Plus: Taxable-equivalent adjustment 8 8 7 6 6 Noninterest income
Slide 27: Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions March 31, 2016 Common Equity Tier 1 under current RCR $ 10.0 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b) -