Slide 1: First Quarter 2017 Earnings Review
KeyCorp First Quarter 2017 Earnings Review April 20, 2017 Beth E. 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: Investor Highlights – 1Q17
Investor Highlights – 1Q17 EPS of $.32, excluding merger-related charges: up 33% from prior year and up 3% from prior quarter Generated positive operating leverage (vs. prior year and prior quarter) – Pre-provision net revenue up 58% from 1Q16; up 6% from 4Q16 Positive Operating Revenue reflects str
Slide 4: First Niagara: Significant Progress, Achieving Targets
First Niagara: Significant Progress, Achieving Targets Broad-based Progress Achieving Targets Execution of detailed merger plans Delivering value through cost savings - Completed 106 planned branch consolidations - Achieved 85% of $400 million initial target - Reduced nonbranch space by 225k sq. ft.
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Results in 3Q16 and after reflect the impact of the FNFG acquisition, which became effective on 8/1/2016 Continuing operations, Metrics 1Q17 4Q16 3Q16 2Q16 1Q16 unless otherwise noted EPS – assuming dilution $ .27 $ .20 $ .16 $ .23 $ .22 EPS –excl. merger-related charges(d), (e)
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions $90 $86 vs. Prior Year Average loans up 43% from 1Q16 $60 $60 – Growth primarily reflects impact of FNFG – C&I continues to be a driver $30 vs. Prior Quarter $0 Average loans up 1% from 4Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 – Commercial loan
Slide 8: Deposits
Deposits Average Deposits(a) Highlights $ in billions Relatively stable deposit costs in 1Q17 and beta $105 $102 .70% below 10%(c) .60% $85 .50% $72 vs. Prior Year .40% $65 Average deposit growth of 43% from 1Q16 .30% .20% – Growth primarily reflects impact of FNFG $45 .23% .17% .10% – Continued mom
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 1Q17 net interest income includes $53 MM, or 18 bps, $34 MM of $92 MM $929 from PAA $950 related to 3Q refinement 4.0% $92 $53 Excluding impact of PAA, 1Q17 net interes
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 1Q17 vs. 1Q16 vs. 4Q16 Solid first quarter results, with strength in trust Trust and investment services income $ 135 $ 26 $ 12 and investments services, and investment banking and debt placement (IBDP) Investment banking and
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 1Q17 vs. 1Q16 vs. 4Q16 1Q17 noninterest expense of $1,013 MM included $81 MM of merger-related charges (compared to $24 MM of merger- Personnel $ 556 $ 152 $ 92 related charges in 1Q16 and $207 MM in 4Q16) Net occupancy 87
Slide 12: 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 $58 MM $89 .80% $90 – 27 basis points of average loans, below $63 .60% targeted range $60 $58 $46 .40% Nonperforming loans down 8% from 4Q16 an
Slide 13: Capital
Capital Common Equity Tier 1(a), (b) Highlights 12.00% 11.07% Strong capital position with Common Equity Tier 1 ratio of 9.87%(b) at 3/31/17 9.87% 10.00% Repurchased $160 MM(c) in common shares during 1Q17 8.00% Redeemed Preferred Stock Series C ($350 MM) in February 6.00% Converted all shares of 7.
Slide 14: Outlook and Expectations
Outlook and Expectations FY 2017 (a) • Loans: mid-single digit growth from 4Q16, which translates to $87 B - $88 B for FY17 average balances Average Earning – Loan growth (%) to exceed deposit growth, with FY17 average deposits expected to be in the range of Assets $104 B - $105 B • Outlook includes
Slide 15: Appendix
Appendix 15
Slide 16: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 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 $ 30 $ 80 $ 97 $ 35 $
Slide 17: Loan Portfolio Detail, at 3/31/17
Loan Portfolio Detail, at 3/31/17 Total Loans Commercial Loans $ in billions 3/31/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Automotive Commercial and industrial $ 40.1 47 Agriculture Transportation Business Commercial real estate 17.5 20 Technology Produ
Slide 18: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.2 $30.0 5.00% backed MBS and CMOs; primarily fixed rate 4.00% $19.0 Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 1.98% 2.00% – Rein
Slide 19: 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 • Short weighted average maturity of A/LM swaps $86 B $104 B Portfolio - Provides flexibility to reprice and
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 .50% 6.0% 0.39% 0.36% 4.0% 3.6% 3.0% .25% 0.12% 2.0% 0.09% .00% .0% 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q1
Slide 21: 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(d) offs loans(d) (%) (%) $ in millions (%) 3/31/17 1Q17 1Q17 1Q17 3/31/17 3/31/17 3/31/1
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three m onths ended $ in millions 3-31-17 12-31-16 9-30-16 6-30-16 3-31-16 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $14,976 $ 15,240 $ 14,996 $ 11,313 $ 11,066 Less: Intangible assets (a) 2,751 2,788 2,855 1,074 1,077 P
Slide 23: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three m onths ended $ in millions 3-31-17 12-31-16 9-30-16 6-30-16 3-31-16 Average tangible com m on equity Average Key shareholders' equity (GAAP) $ 15,184 $ 14,901 $ 13,552 $ 11,147 $ 10,953 (a) Less: Intangible assets (average) (a) 2,772 2,874 2,255 1,0