Keycorp · NYSE:KEY
Keycorp — Barclays Global Financial Services Conference 2016
36 slides from Keycorp's conference presentation, Sep 12, 2016
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference September 12, 2016 KeyCorp Focused Forward
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: Key: Who We Are
Key: Who We Are A Relationship-focused Bank Business Broad Product Set and Targeted Diversity Industry Expertise Clients Key Community Consumers Bank Deposits Payments Wealth Mgmt. Advice & Expertise Small businesses Middle market Key Corporate Lending Investments Capital Markets Large corporate Ban
Slide 4: Leveraging our Geographic Diversity
Leveraging our Geographic Diversity FNFG acquisition strengthens Key’s brand and presence in shared markets while adding complementary new markets Leading market share in Albany, Buffalo, Rochester, and Syracuse (b) Top 5 market New markets share MSA within of Pittsburgh, Key’s footprint Philadelphi
Slide 5: Focused Forward
Focused Forward Driving Positive Operating Leverage Investing in and Growing our Businesses Integrating First Niagara Maintaining Moderate Risk Profile Remaining Disciplined with Capital 5
Slide 6: Driving Positive Operating Leverage
Driving Positive Operating Leverage Core business momentum generating results Community Bank Corporate Bank Net Income Attributable to Key Net Income Attributable to Key $81 MM $135 MM +17% 8% Positive Operating +3% Leverage 1H16 vs. 1H15 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 Acquiring a
Slide 7: Driving Positive Operating Leverage
Driving Positive Operating Leverage Executing action plans across our organization to improve efficiency Core Business Momentum • Remixing and right-sizing Sales/ FTE/ day: Total FTE: (11)% Commercial & Corporate People • Improving productivity 9% Bank RMs (a): +31% • Adding new bankers 1H16 vs. 1H1
Slide 8: Investing in and Growing our Businesses
Investing in and Growing our Businesses Investments in talent and capabilities accelerate growth and drive expanded relationships Talent: Client-facing FTE Products: Payments • Strategic hiring initiatives: remixing sales, service • Adding capabilities and expertise and support • Ongoing technology/
Slide 9: First Niagara Acquisition
First Niagara Acquisition Significant progress made since merger announcement Designed cross functional integration plan Completed assessment and design of combined organization Completed talent assessment process Announced $16.5 billion National Community Benefits Plan Announced branch divestiture
Slide 10: First Niagara Acquisition
First Niagara Acquisition Integration efforts on track; conversion expected in 4Q16 Objectives • Completed robust talent selection and retention process Onboard FNFG • Retained client-facing employees >300 teammates Training events • Cultural and leadership integration sessions and training in-fligh
Slide 11: First Niagara Acquisition
First Niagara Acquisition Building On Continued Momentum Accelerating FNFG Average Loans our Growth $ in billions $24.2 FNFG avg. loan $24.1 Upstate NY Deposits / Branch (a) growth of 4% $23.8 $23.4 2Q16 vs. 2Q15 $23.2 KEY growth: 5% 1.5 – 2 x 2Q15 3Q15 4Q15 1Q16 2Q16 FNFG Average Deposits ~50% $ in
Slide 12: First Niagara Acquisition
First Niagara Acquisition Acquisition Attractive Financial Significant Revenue Complementary More Balanced Drives Value Returns Opportunities Business Model Franchise Continued Confidence in Value Attainment and Financial Targets Executing on Cost Savings of $400 MM Cost savings of $400 MM Other: ~1
Slide 13: Fee Income Opportunity
First Niagara Acquisition Acquisition Attractive Financial Significant Revenue Complementary More Balanced Drives Value Returns Opportunities Business Model Franchise Revenue Synergies Present Incremental Opportunity Confidence in ability to achieve revenue synergies (not included in financial targe
Slide 14: Maintaining a Moderate Risk Profile
Maintaining a Moderate Risk Profile Enterprise-wide risk management approach Targeted, Relationship-based Approach • Target specific segments and sectors where we • Clearly defined and well understood risk appetite have expertise and tolerances • Execute rigorous and disciplined sales approach • Ris
Slide 15: Disciplined Capital Management
Disciplined Capital Management Strong Capital Position Consistent Dividend Growth Quarterly Common Share Dividend 11.1% 3-year CAGR: +16% Common Equity Tier 1 $.085 Ratio, 6/30/16 $.075 $.065 $.055 9.5%+ Estimated Pro Forma CET1 Ratio, Following Acquisition of First Niagara 2Q13 2Q14 2Q15 2Q16 Disci
Slide 16: Focused Forward
Focused Forward Driving Positive Operating Leverage Investing in and Growing our Businesses Integrating First Niagara Maintaining Moderate Risk Profile Remaining Disciplined with Capital 16
Slide 17: Appendix
Appendix 17
Slide 18: Outlook and Expectations
Outlook and Expectations FY 2016: Key Stand-alone (a) 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
Slide 19: Financial Highlights
Financial Highlights Metrics 2Q16 1Q16 4Q15 3Q15 2Q15 EPS – assuming dilution $ .23 $ .22 $ .27 $ .26 $ .27 EPS –excl. merger-related expense (d), (e) .27 .24 .27 Financial Cash efficiency ratio (d) 69.0 % 66.6 % 66.4 % 66.9 % 65.1 % Performance (a) Cash efficiency –excl. merger-related expense (d),
Slide 20: Loans
Loans Total Average Loans Highlights $ in billions Total average loans up 5% Average Loans $60 Average total loans up 5% in 2Q16 from 2Q15, driven by CF&A loans up 12% $40 – Broad-based growth across Key’s commercial lines of business $20 – Consumer loan decline related to paydowns in the home equit
Slide 21: Deposits
Deposits Average Deposits (a) Highlights $ in billions Total average deposits up 5% vs. Prior Year $75 .50% Deposit growth of 5% from 2Q15 related to: $65 .40% – Core deposit growth in retail banking $55 .30% – Growth in escrow deposits from the commercial mortgage servicing business $45 .20% .19% –
Slide 22: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.2 5.00% Portfolio composed primarily of GNMA and GSE- $18.3 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for regulatory 3.00% $10.0 liquidity requirements: 2.00% 2.10% 2.06% – Reinvesting ca
Slide 23: 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 Net interest income up $14 MM, or 2%, from 2Q15 $620 4.00% $605 – Higher earning asset balances and yields $591 3.50% – Lower reinvestment yields in the
Slide 24: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~2% Loan Portfolio Deposits - Assumes 200 basis point increase in short-term rates over a 2Q16 2Q16 12-month period CDs: • Utilize swaps for debt hedgin
Slide 25: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 2Q16 vs. 2Q15 vs. 1Q16 vs. Prior Year Trust and investment services income $ 110 $ (1) $ 1 Noninterest income down 3% from 2Q15 Investment banking and debt 98 (43) 27 placement fees ‒ Investment banking and debt placement Ser
Slide 26: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights Expense comparisons reflect merger-related expense $ in millions Up / (Down) 2Q16 vs. 2Q15 vs. 1Q16 of $45 MM in 2Q16, compared to $24 MM in 1Q16 (no Personnel $ 427 $ 19 $ 23 merger-related expense in 2Q15) Net occupancy 59 (7) (2) vs. Prior Year C
Slide 27: FNFG Merger-related Expense
FNFG Merger-related Expense Expenses related to the acquisition and integration of First Niagara Financial Group $ in millions Increase / (Decrease) 2Q16 1Q16 4Q15 Personnel expense (a) $ 35 $ 16 - Business services and professional fees $ 5 $ 7 $ 5 Marketing 3 1 - All other nonpersonnel 2 - 1 Total
Slide 28: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Net loan charge-offs remain below targeted range, $120 .60% at 28 basis points of average loans $90 Nonperforming loans decreased $57 MM .40% from 1Q16 and represented 1.00% of period-end .28% $60 .25% $52 loans $4
Slide 29: 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 (%) 6/30/16 2Q16 2Q16 2Q16 6/30/16 6/30/16 6/30/16 6/
Slide 30: 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% 3.0% .33% .25% .31% 2.0% .11% .11% .00% .0% 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1
Slide 31: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Total commitments of $3.1 B, including upstream Portfolio performing in-line with expectations commitments of $1.6 B Reserve coverage: 8% of outstanding oil and gas loans Upstream portfolio is primarily secured by proven, at period-end deve
Slide 32: 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 $0.9 billion in lines outstanding (9% of th
Slide 33: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on $ in millions Balance Outstanding Change Net Loan Charge-offs Nonperforming Status 6-30-16 vs. 6-30-16 3-31-16 2Q16 1Q16 6-30-16 3-31-16 3-31-16 Residential properties – homebuilder - - - - - $ 4 $ 3 Commercial lease financing (a) $ 731 $ 743 $ (12)
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three m onths ended $ in millions 6-30-16 3-31-16 12-31-15 9-30-15 6-30-15 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 11,313 $ 11,066 $ 10,746 $ 10,705 $ 10,590 Less: Intangible assets (a) 1,074 1,077 1,080 1,084 1,085
Slide 35: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 6-30-16 3-31-16 12-31-15 9-30-15 6-30-15 Pre-provision net revenue excluding m erger-related expense Net interest income (GAAP) $ 597 $ 604 $ 602 $ 591 $ 584 Plus: Taxable-equivalent adjustment 8 8 8 7 6 Noninterest income
Slide 36: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions June 30, 2016 Common Equity Tier 1 under current RCR $ 10.1 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b) -
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