Slide 1: KeyCorp Third Quarter 2014 Earnings Review
Exhibit 99.2 KeyCorp Third Quarter 2014 Earnings Review October 15, 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 – 3Q14
Investor Highlights – 3Q14 Core revenue trends stable - Lower gains from principal investing and leveraged lease terminations Positive Total average loans up 5% from prior year Operating - Linked quarter average impacted by seasonality, capital markets and strategic exits Leverage Positive trends in
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights EPS – assuming dilution $ .23 $ .27 $ .26 $ .26 $ .25 Cash efficiency ratio (e) 69.5 % 65.8 % 64.9 % 67.4 % 67.5 % Financial Performance (a) excl. efficiency and pension charges 66.0 63.4 63.9 65.1 63.6 Net interest margin (TE) 2.96 2.98 3.00 3.01 3.11 Return on average total as
Slide 6: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 5% from prior year, driven by CF&A up 11% Linked quarter average balances impacted by seasonality, capital markets and strategic exits Total commitments continue to grow with utilization re
Slide 7: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve Transaction deposit balances up 6% from 3Q13 Growth from prior year reflects inflows from commercial clients as well as commercial mortgage servicing Total CD maturities and average cost – 2014 Q4: $1.5 billion at .46% –
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income & Net Interest Margin Trend (TE) $ in millions; continuing operations Net interest income down 1% from prior year, primarily due to lower asset yields Modest growth from prior quarter reflects asset growth, higher loan fees, improved fund
Slide 9: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income down $42 MM from prior year: $ in millions; continuing operations – Gains from leveraged lease termination and principal investing $31 MM higher in 3Q13 $459 $417 – Special servicing fees $6 MM lower – Posting order change in 4Q13 r
Slide 10: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 2% from prior year, benefitting from continuous improvement efforts $716 $704 Increase from prior quarter reflects: – Pension settlement charge and expenses related to Pacific Crest Securities FY 2014 expenses expe
Slide 11: Efficiency Ratio: Driving to 60% and Below
Efficiency Ratio: Driving to 60% and Below Business plans and macroeconomic environment provide path to an efficiency ratio below 60% Cash Efficiency Ratio (a) Outlook 2-3 year outlook: 60% (b) Long-term, committed to moving below 60% (a) Non-GAAP measure: see Appendix for reconciliation 11 (b) Assu
Slide 12: 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 16% from 3Q13 to $31 MM, or 22 bps of average loans Total gross charge-offs down 37% from 3Q13 and down 13% from 2Q14 Nonperforming assets down 28% fro
Slide 13: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management – Continuing to invest in and grow businesses – Repurchased $119 MM in common shares Ratios reflect the acquisition of Pacific Crest Securities and the sale of residual interests in education loan
Slide 14: 2014 Outlook and Expectations
2014 Outlook and Expectations 4Q14 FY 2014 • LQA: mid-single digit growth, driven by Average Loans commercial loans • Mid-single digit growth vs. FY 2013 • Relatively stable from 2013, with slight Net Interest Income • Relatively stable with 3Q14 downward pressure from competitive environment • Low
Slide 15: Appendix
Appendix 15
Slide 16: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 3Q14 2Q14 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 87% 87% Efficiency NCOs to average loans .22% .22% Moderate Risk 40 - 60 bps Profile Provision to average loans .15% .07% High Quality, Net interest margin 2.96% 2.98% LT: >3.50% Diverse R
Slide 17: Focused on Driving Positive Operating Leverage
Focused on Driving Positive Operating Leverage Executing action plans across our organization Revenue Growth Expense Savings • Improving sales productivity Driving consumer sales • Optimizing branch channel Community • Strengthening product offering: per FTE per day: up >30% from prior year • Drivin
Slide 18: 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 % (a) Note: Percentage ranges based upon 2014 expense plans and calculated from
Slide 19: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed primarily of GNMA and GSE- $17.7 $17.0 backed MBS and CMOs – No private label MBS or financial paper Currently reinvesting cash flows into GNMA 2.23% securities in preparation for upcomi
Slide 20: Interest Rate Risk Management
Interest Rate Risk Management Actively managing a naturally asset sensitive balance sheet Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintaining moderate asset sensitive position of ~3% (a) Loan Portfolio Deposits - Assumes 200 basis point increase in short-term rates over
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) 3Q14 2Q14 1Q14 4Q13 3Q13 Delinquencies to EOP total loans: 30-89 days .61 % .49 % .48 % .58
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 (%) 9/30/14 3Q14 3Q14 3Q14 9/30/14 9/30/14 9/3
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 9-30-14 vs. 9-30-14 6-30-14 3Q14 (c) 2Q14 (c) 9-30-14 6-30-14 6-30-14 Residential properties –homebuilder $ 11 $ 19 $ (8) $ 1 - $ 10 $ 7 Marine and RV floor plan 7 23
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 9-30-14 6-30-14 3-31-14 12-31-13 9-30-13 Tangible common equity to tangible assets at period end Key shareholders’equity (GAAP) $ 10,509 $ 10,504 $ 10,403 $ 10,303 $ 10,206 Less: Intangible assets (a) 1,105 1,008 1,012 1,014 1,017 Pref
Slide 26: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 9-30-14 6-30-14 3-31-14 12-31-13 9-30-13 Average tangible common equity Average Key shareholders’equity (GAAP) $ 10,473 $ 10,459 $ 10,371 $ 10,272 $ 10,237 Less: Intangible assets (average)(a) 1,037 1,010 1,013 1,016 1,019
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 September 30, 2014 Tier 1 common equity under current regulatory rules $ 9.4 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and P