Slide 1: Investor Meetings: 2Q14 Results
Investor Meetings: 2Q14 Results KeyCorp Focused Forward
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: Key – Who We Are
Key – Who We Are Key is relationship-focused with distinctive capabilities 15th largest U.S. bank-based financial services Loans Deposits 1% company 6% - Assets: $91B 24% - Deposits: $67B 40% 54% 75% - Market capitalization: $13B - Strong footprint with 1,009 branches and over 1,300 ATMs - Approxima
Slide 4: Distinctive Business Model
Distinctive Business Model Key Community Bank Key Corporate Bank Local leadership & Strategic advice & community presence insights Brand awareness Targeted Industry expertise Client Relationships Convenience Seamless delivery Local capabilities Financial market expertise 4
Slide 5: Business Model: Aligned and Targeted
Business Model: Aligned and Targeted Local delivery of broad product set and industry expertise Traditional Bank Products Capital Markets Capabilities Commercial mortgage Derivatives & foreign Loans Deposits & payments Equity capital markets Equity research banking exchange M&A / Equipment Wealth ma
Slide 6: Actively Managing Businesses
Actively Managing Businesses Key evaluates all of its businesses to maximize long-term value, aligning core businesses with core competencies Consumer and commercial Pacific Crest Securities (a) payments CRE servicing Invest Acquire Credit card Digital: online and mobile Western NY branch channels a
Slide 7: Strategic Acquisition: Leading Technology Platform
Strategic Acquisition: Leading Technology Platform Highlights Expected Benefits Accelerates growth and impact in the market, consistent with Key’s strategy Adds new expertise and clients while driving synergies across the platform Industry-focused firm covering high growth technology sub-verticals P
Slide 8: 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 % 2013 Reported 2013 Efficiency 2013 NIE Excl. Expense Operating Cost Investment
Slide 9: Improving Efficiency
Improving Efficiency Driving progress toward the low end of our targeted range 70% 65% Current Target: 60% - 65% 60% 55% 50% 2Q14 Business Growth, Expense Savings 2-3 Year Outlook Net of Investments Cash Efficiency Ratio (a) Rising interest rates present an opportunity for additional improvement, wi
Slide 10: Driving Positive Operating Leverage
Driving Positive Operating Leverage Revenue Growth Expense Savings Improving sales productivity with Optimizing branch channel Community existing and new bankers Bank Launched new product: Hassle-Free Driving greater efficiencies through back and middle-office processes Enhancing online and mobile c
Slide 11: Disciplined Capital Management
Disciplined Capital Management Disciplined capital management allows Key to execute on its strategic priorities and maximize shareholder value Capital Priorities Franchise investments to drive execution of relationship 1. Organic Growth strategy: product capabilities, client-facing personnel mix 2.
Slide 12: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 2Q14 1Q14 Targets Focus areas Improving balance Loan to deposit ratio (b) 87% 88% 90-100% sheet efficiency Maintaining NCOs to average loans .22% .15% moderate risk 40-60 bps profile Provision to average loans .07% .04% Net interest margin 2.98% 3.00% >3.5
Slide 13: Financial Review
Financial Review 13
Slide 14: Investor Highlights – 2Q14
Investor Highlights – 2Q14 Positive operating leverage year-over-year Positive Total average loans up 6% from prior year, driven by CF&A up 13% Operating CF&A loan growth and investment banking and debt placement fees (up 18% Leverage year-over-year) reaffirms strength of business model Expenses rem
Slide 15: Financial Highlights
Financial Highlights Metrics 2Q14 1Q14 4Q13 3Q13 2Q13 EPS – assuming dilution $ .27 $ .26 $ .26 $ .25 $ .21 Financial Cash efficiency ratio (d) 65.8 % 64.9 % 67.4 % 67.5 % 69.1 % Performance (a) Net interest margin (TE) 2.98 3.00 3.01 3.11 3.13 Return on average total assets 1.14 1.13 1.08 1.12 .95
Slide 16: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 6% from prior year – Driven by 13% increase in CF&A $26.4 $28.0 $23.5 Total commitments continue to grow with utilization relatively stable $21.0 High quality new loan originations: consist
Slide 17: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Overall funding cost continues to improve 1.25% Transaction deposit balances up 4% from 2Q13 1.00% Growth from prior year reflects inflows from .75% .62% commercial clients as well as commercial .52% mortgage servicing .50% .26% .18% Total CD maturities
Slide 18: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income (TE) & Net Interest Margin (TE) Trend $ in millions Net interest income down 1% from prior year due to: Continuing Operations – Competitive environment and asset repricing $620 4.00% offsetting loan growth – 2Q14 leveraged lease terminati
Slide 19: Noninterest Income
Noninterest Income Highlights Noninterest Income Continuing Operations Noninterest income up 6% from prior year, due to: $ in millions – Investment banking and debt placement fees $525 up 18% $455 $450 $429 – Gains from leveraged lease termination and principal investing $375 $300 Change from prior
Slide 20: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 3% from prior year, benefitting $800 from continuous improvement efforts $711 $689 $700 Increase from prior quarter reflects: − Seasonal trends in marketing and personnel $600 − Higher level of efficiency charges $
Slide 21: 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 33% from 2Q13 to $120 3.00% $30 MM, or 22 bps of average loans 2.00% Total gross charge-offs down 24% from 2Q13 and $80 down 2% from 1Q14 1.00% $45.34%
Slide 22: Strong Capital
Strong Capital Highlights Tangible Common Equity to Tangible Assets (a) Disciplined capital management 11.00% 10.15% − Continuing to invest in businesses 9.96% 10.00% − Increased quarterly common share dividend 9.00% by 18% − Repurchased $108 MM in common shares 8.00% 7.00% 6.00% 3Q12 4Q12 1Q13 2Q13
Slide 23: 2014 Outlook and Expectations
2014 Outlook and Expectations Loans Mid-single digit average balance growth Net Interest Relatively stable from 2013, with slight downward pressure from Income competitive environment Noninterest Low single-digit growth compared to prior year Income Expense Low to mid-single digit percentage decline
Slide 24: Appendix
Appendix 24
Slide 25: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed of Agency-backed CMOs: $20.0 5.00% $17.4 $17.4 Fannie, Freddie & GNMA $15.0 4.00% – No private label MBS or financial paper 3.00% $10.0 Currently reinvesting cash flows into GNMA 2.33% 2
Slide 26: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings (a) Continuing Operations Continuing Operations 0% 1.00% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 (2)% .75% (3)% (4)% .49% (4)% .50% .47% (6)% .25% .15% .15% (8)% .00% (10)% 3Q12 4Q12 1Q13 2Q13 3Q
Slide 27: 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 (%) 6/30/14 2Q14 2Q14 2Q14 6/30/14 6/30/14 6/
Slide 28: 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 29: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 6-30-14 vs. 6-30-14 3-31-14 2Q14 (c) 1Q14 (c) 6-30-14 3-31-14 3-31-14 Residential properties – homebuilder $ 19 $ 20 $ (1) - $ (1) $ 7 $ 7 Marine and RV floor plan 23
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,504 $ 10,403 $ 10,303 $ 10,206 $ 10,229 Less: Intangible assets (a) 1,008 1,012 1,014 1,017 1,021 Pre
Slide 31: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 6-30-14 3-31-14 12-31-13 9-30-13 6-30-13 Average tangible common equity Average Key shareholders’ equity (GAAP) $ 10,459 $ 10,371 $ 10,272 $ 10,237 $ 10,314 Less: Intangible assets (average) (a) 1,010 1,013 1,016 1,019 1,02
Slide 32: 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 June 30, 2014 Tier 1 common equity under current regulatory rules $ 9.5 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and PCCRs