Slide 1: Fourth Quarter 2019 Earnings Review
KeyCorp Fourth Quarter 2019 Earnings Review January 23, 2020 Beth E. Mooney Chris Gorman Chairman and President and Chief Executive Officer Chief Operating Officer Don Kimble Vice Chairman and Chief Financial 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: 2019: Delivering Results
2019: Delivering Results 7th consecutive year of positive operating leverage Broad-based balance sheet growth reflects execution of relationship-based business model − Average loans +4%: continued strength in commercial and consumer Laurel Road: $1.8 B of originations since April 2019; exceedi
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 4Q19 3Q19 4Q18 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .45 $ .38 $ .45 18 % - EPS – excl. notable items(a), (b) .48 .48 .48 - - Cash efficiency ratio(a) 58.7 % 56.0 % 59.9 % 266 bps 122 bps Cash efficiency – excl. notable items(a), (b)
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $95 $94 6.00% Average loans up 5% from 4Q18 $89 $90 5.50% − Commercial balances reflect strong C&I growth (+7%) driven by broad-based growth with $85 5.00% middle-market clients, partially offset by a decline in commercial real esta
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $120 $113 1.40% Interest-bearing deposit costs down 13 bps from $108 3Q19, reflecting impact of lower interest rates $100 1.20% .96% Strong and stable deposit base .89% 1.00% $80 − 26% noninterest-bearing(a) 34% 0.80% $60 − ~65% stable retail an
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations Excluding PAA, 4Q19 net interest income was $23 $1,008 $15 $987 $1,000 4.0% $972 MM and net interest margin was 2.93% $800 vs. Prior Year 3.5% $600 Net interest inc
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 4Q19 vs. 4Q18 vs. 3Q19 Trust and investment services income $ 120 $ (1) $ 2 Noninterest income up $6 MM (+1%) from 4Q18, reflecting continued momentum across fee-based Investment banking and debt 181 (5) 5 pl
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 4Q19 vs. 4Q18 vs. 3Q19 vs. Prior Year Personnel $ 551 $ (25) $ 4 Noninterest expense down $32 MM, or 3% Net occupancy 76 1 4 Computer processing 51 (4) (2) − Excluding notable items down $13 MM, or 1%(a) Business services
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions $ in millions 4Q19 allowance for loan losses to $200 1.00% period-end loans of 1.02% 4Q19 and 3Q19 reflect $16 MM and $123 MM from previously disclosed $900 fraud loss, respectively .80% $9
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 11.00% Strong capital position: CET1 ratio of 9.43%(a) at 12/31/2019 9.93% 10.00% Continued meaningful shareholder return: 9.43% − Quarterly common share dividend of $.185 9.00% − Completed $241 MM(c) of common share repurchases in 4Q19 8.00% 7.00% 1Q18
Slide 13: FY2020 Outlook & Long-term Targets
FY2020 Outlook & Long-term Targets FY 2020 (vs. FY 2019) Average Balance • Loans: up mid-single digit Sheet • Deposits: up low-single digit Net Interest Income • Net interest income: up low-single digit (TE) • Net interest margin: relatively stable with 4Q19 Noninterest Income • Noninterest income:
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 12/31/19
Loan Portfolio Detail, at 12/31/19 Total Loans Commercial Loans $ in billions 12/31/19 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 48.3 51 Business Products Transportation Commercial real estate 15.0 16 Busin
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.5 Portfolio used for funding and liquidity management: $32.0 $30.3 2.75% ‒ Portfolio composed primarily of Fixed Rate GNMA and GSE- 2.47% backed MBS and CMOs $24.0 2.39% 2.50% ‒ GNMA 45% of 4Q19 average balance $
Slide 17: Asset & Liability Management Positioning
Asset & Liability Management Positioning Hedging activities moderate interest rate risk: reduce current and future exposure to declining interest rates 4Q19 Balance Sheet Highlights(a) Balanced Interest Rate Risk Position Loan Composition Deposit Mix NII impact of ~1% for a ramped 100 bps parallel
Slide 18: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations .80% 6.0% .60% 4.0% .41% .40% .35% 2.8% 2.6% 2.0% .20% .13% .11% .00% .0% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q18 2Q18 3Q18 4Q18 1Q19 2Q
Slide 19: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan Net loan Allowance / Allowance / Period- Average charge-offs(c) / Nonperforming Ending charge- period-end NPLs end loans loans average loans loans(d) allowance(e) offs loans(e) (%) (%) $ in millions (%) 12/31/19 4Q19 4Q19 4Q19 12/31/19 12/31/19 12/
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended Twelve months ended $ in millions 12/31/2019 9/30/2019 12/31/2018 12/31/2019 12/31/2018 Notable Items Provision for credit losses $ (16) $ (123) - $ (139) - Professional fees related to fraud loss (4) - (4) - Efficiency initiative expenses - - $ (24
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation PAGE TWO: Three months ended Twelve months ended $ in millions 12/31/2019 9/30/2019 12/31/2018 12/31/2019 12/31/2018 Net loan charge-offs to average total loans excluding notable items Net loan charge-offs (GAAP) $ 99 $ 196 $ 60 $ 424 $ 234 Less: Notable items 16 123