Keycorp · NYSE:KEY
Keycorp — Barclays Global Financial Services Conference 2017
33 slides from Keycorp's conference presentation, Sep 12, 2017
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference September 12, 2017 KeyCorp Focused Forward Beth 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: Significant Transformation to a New Key
Significant Transformation to a New Key Results of our Transformation Created a distinctive, balanced relationship-based business model 3 million clients and growing Completed largest acquisition in the company’s history strong market share top 5 in 24 MSAs(a) Strengthened core franchise (market pre
Slide 4: Strengthened Franchise with Distinctive Capabilities
Strengthened Franchise with Distinctive Capabilities Strong Market Presence Western Markets Eastern Markets First Niagara Acquisition: • Created leading market share(a) in Upstate NY markets • Added complementary new markets Top 5 market share (MSAs with >$3B in market deposits)(a) Top 5 market shar
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 41% 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 Universal bankers: shift in workforce skills and expectations from transactional roles to advi
Slide 7: Balanced, Diverse Revenue
Balanced, Diverse Revenue Strong Contribution from Fees Diverse Client Segmentation Noninterest income(a) Revenue 2Q17 7% CAGR % of Revenue 2Q17 Other 40% 37% Commercial Consumer(c) 2012 2013 2014 2015 2016 1H17 KEY2Q17 Peer Annl. median(b) More Balance and Stable Fees Pre-provision Net Revenue 2Q17
Slide 8: Improved Financial Performance
Improved Financial Performance Step change in performance from core business momentum and the acquisition of First Niagara Cash Efficiency Ratio(a) Return on Avg. Tangible Common Equity(a) FY13-FY15 Avg. 1H17 FY13-FY15 Avg. 1H17 Top Top Quartile Quartile 59.9% 12.9% Peer Peer Peer Peer 64.6% 62.6% 1
Slide 9: Strong Investment Thesis
Strong Investment Thesis Differentiated value proposition for consumer and middle market clients, while continuing to improve efficiency, manage risk and increase returns Distinctive relationship-based business model Positioned to continue to grow and deliver positive operating leverage Strong risk
Slide 10: 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 11: 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 12: 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 13: 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 14: 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(a) Cash Dividends Per Common Share $0.38 25% CAGR 9.91% 9.91% 9.56% 9.54% $0.10 (c) 3Q16 4Q16 1Q17 2Q17 2011 2012 2013 2014 2015 2016
Slide 15: Why KEY
Why KEY 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 − Balanced and diver
Slide 16: Appendix
Appendix 16
Slide 17: Outlook and Expectations
Outlook and Expectations FY 2017(a) Average Balance • Loans: low-end of $87.0 B - $88.0 B range for FY17 average balances 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 – Reflects co
Slide 18: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 2Q17 1Q17 2Q16 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .36 $ .27 $ .23 33 % 57 % Impact of notable items(a),(b) on EPS .02 (.05) (.04) Cash efficiency ratio(a) 59.3 % 65.8 % 69.0 % (650) bps (970) bps Profitability Cash efficiency –excl
Slide 19: Loans
Loans Total Average Loans Highlights $ in billions $90 $87 vs. Prior Year Average loans up 41% from 2Q16 $61 $60 – Growth primarily reflects impact of FNFG – C&I continues to be a driver $30 vs. Prior Quarter $0 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Average loans up .4% from 1Q17 Commercial Consum
Slide 20: Loan Portfolio Detail, at 6/30/17
Loan Portfolio Detail, at 6/30/17 Total Loans Commercial Loans $ in billions 6/30/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Commercial and industrial $ 40.9 47 Automotive Transportation Business Products Technology Utilities Commercial real estate 17.0
Slide 21: Deposits
Deposits Average Deposits(a) Highlights $ in billions $103 Deposit cost up 3 bps from 1Q17 $105 .70% – Contractual commercial rate increases .60% $85 .50% – Growth in higher-yielding deposit products $74 .40% $65 vs. Prior Year .30% $45 .20% Average deposit growth of 39% from 2Q16 .26% .19% .10% – G
Slide 22: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $28.5 $30.0 5.00% backed MBS and CMOs; primarily fixed rate 4.00% $19.2 Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 2.06% 2.02% 2.00%
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 $1,000 $987 4.0% 2Q17 net interest income includes $42 MM, or 14 bps, $100 related to purchase accounting finalization $92 $53 $800 $19 3.30% 3.5% Excluding impact of P
Slide 24: 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 $87 B $103 B Portfolio • Short weighted average matu
Slide 25: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 2Q17 notable items of $61 MM include: $64 MM Trust and investment services income $ 134 $ 24 $ (1) one-time gain in merchant services and $(3) MM associated with purchase accounting finalization Investm
Slide 26: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 Notable items: Personnel $ 551 $ 124 $ (5) $ in millions 2Q17 2Q16 1Q17 Net occupancy 78 19 (9) Merger-related charges $44 $45 $81 Computer processing 55 10 (5) Charitable contribution(b) 20 Business
Slide 27: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Portfolios continue to perform well $120 1.00% Net loan charge-offs of $66 MM .80% $90 – 31 basis points of average loans, below $66 $66 .60% targeted range $60 $52 $43 .40% Nonperforming loans down 12% from 1Q17 a
Slide 28: 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% .33% .39% 4.0% 3.6% 3.1% .25% 2.0% .11% .10% .00% .0% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q
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 (%) 6/30/17 2Q17 2Q17 2Q17 6/30/17 6/30/17 6/30/17 6/30
Slide 30: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% 11.10% Strong capital position with Common Equity Tier 1 ratio of 9.91% at 6/30/17 9.91% 10.00% Increased common dividend 12% in 2Q17 Repurchased $94 MM(b) in common shares during 8.00% 2Q17 No objection from the Federal Reserve on 2017 6.00% capital
Slide 31: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - - - $ (6) - - - Operating lease income and other leasing - - - $ (2) - - - gains Other income - - $ 9 (10) - - - Noninterest income - - $ 9 $ (12) - - - Personnel expense $ 31 $ 3
Slide 32: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6-30-17 3-31-17 12-31-16 9-30-16 6-30-16 Common Equity Tier 1 at period end Key shareholders' equity (GAAP) $15,253 $14,976 $15,240 $ 14,996 $ 11,313 Less: Preferred Stock (a) 1,009 1,009 1,640 1,150 281 Common Equity Tier 1 capital be
Slide 33: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 6-31-17 3-31-17 12-31-16 9-30-16 6-30-16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $15,253 $14,976 $ 15,240 $ 14,996 $ 11,313 Less: Intangible assets (a) 2,866 2,751 2,788 2,855
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