Slide 1: KeyCorp Third Quarter 2016 Earnings Review
KeyCorp Third Quarter 2016 Earnings Review October 25, 2016 Beth E. Mooney Chairman and Chief Executive Officer Don Kimble 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: 3Q16: Significant Progress, Momentum and Commitment
Successful closing and conversion of First Niagara 3 3Q16: Significant Progress, Momentum and Commitment Strong momentum: Key and First Niagara I II Achieving financial targets III
Slide 4: 3Q16: Strong Momentum Key (excluding First Niagara)
4 3Q16: Strong Momentum Key (excluding First Niagara) Core business momentum drives results Loans and Deposits Revenue and Expense Generated positive operating leverage ‒ 9 of the past 11 quarters Total revenue grew 6% from 3Q15 Net interest income up 4% compared to prior year Noninterest in
Slide 5: First Niagara: Significant Progress
First Niagara: Significant Progress 5 Successful closing and conversion; focused on execution Closed transaction Completed branch divestitures Completed client and systems conversion August 1, 2016 September 9, 2016 October 11, 2016 Received all required approvals Conducted cultural and lead
Slide 6: First Niagara Conversion
6 First Niagara Conversion Highly coordinated efforts drove successful conversion Created leading market share in Upstate New York Transitioned 1 million new clients Converted >300 branches Consolidated 70 former FNFG branches ‒ Additional 36 KEY consolidations planned for 4Q16 Added >400
Slide 7: First Niagara: Executing on Targets
0 7 First Niagara: Executing on Targets Continued Confidence in Value Attainment and Financial Targets Cost savings of $400 MM ROTCE ~20 bps higher Cash efficiency improves ~300 bps EPS accretion of ~5% IRR of ~15%; ROIC >10% Value attainment and financial targets based upon full realization of cost
Slide 8: Financial Review
8 Financial Review
Slide 9: Financial Highlights
9 Financial Highlights TE = Taxable equivalent; EOP = End of Period (a) From continuing operations (b) Year-over-year average balance growth (c) From consolidated operations (d) 9-30-16 ratios are estimated (e) Non-GAAP measure: see Appendix for reconciliation (f) Merger-related charges detail avail
Slide 10: Loans
$0 $20 $40 $60 $80 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 3Q16 $10 $18 $26 $34 $42 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 10 Loans $ in billions Average Commercial, Financial & Agricultural Loans Total Average Loans ConsumerCommercial $ in billions vs. Prior Year Highlights Average loans up
Slide 11: Deposits
Average deposit balances up 28% from 2Q16 (up 3% excl. FNFG), reflecting: – FNFG acquisition – Higher escrow deposits from commercial mortgage servicing – Core retail deposit growth – Inflows from commercial clients $29.9 $51.3 $4.5 $9.2 $70 .15% .20% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70
Slide 12: Investment Portfolio
$19.4 $29.5 19% 22% 0% 25% 50% 75% 100% $- $10 $20 $30 $40 6/30/2016 9/30/2016 12 Average Total Investment Securities Highlights Average AFS securities Investment Portfolio Portfolio composed primarily of GNMA and GSE- backed MBS and CMOs Continue to position portfolio for regulatory liquidity r
Slide 13: Net Interest Income and Net Interest Margin
$156 2.87% 2.85% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% ($50) $150 $350 $550 $750 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 NIM Change vs. Prior Quarter: 2Q16: 2.76% Purchase accounting accretion .06 All other .03 Total change .09 3Q16: 2.85% Net interest income up $183 MM, or 30%, from 2Q16 (up
Slide 14: Noninterest Income
14 Noninterest Income Noninterest Income $ in millions Up / (Down) 3Q16 vs. 3Q15 vs. 2Q16 Trust and investment services income $ 122 $ 14 $ 12 Investment banking and debt placement fees 156 47 58 Service charges on deposit accounts 85 17 17 Operating lease income and other leasing gains 6 (9) (12) C
Slide 15: Noninterest Expense
$ in millions Up / (Down) 3Q16 vs. 3Q15 vs. 2Q16 Personnel $ 594 $ 168 $ 167 Net occupancy 73 13 14 Computer processing 70 29 25 Business services, professional fees 76 36 36 Equipment 26 4 5 Operating lease expense 15 4 1 Marketing 32 15 10 FDIC assessment 21 13 13 Intangible asset amortization 13
Slide 16: Credit Quality
$41 $44 $45 $59 .27% .23% .00% .20% .40% .60% .80% 1.00% $0 $30 $60 $90 $120 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 $400 .67% .85% .00% .40% .80% 1.20% 1.60% 2.00% $0 $200 $400 $600 $800 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 16 Nonperforming Loans Net Charge-offs & Provision for Credit Losses NPL
Slide 17: Capital
17 Strong capital position with Common Equity Tier 1 ratio of 9.55% (b) at 9/30/16 Resumed share repurchases following completion of the First Niagara acquisition ‒ Repurchased $65 MM in common shares during 3Q16 Common Equity Tier 1 ratio under fully phased- in Regulatory Capital Rules (c): 9
Slide 18: Outlook and Expectations
Outlook and Expectations 18(a) Outlook provided as of October 25, 2016, includes the impact of First Niagara Average Earning Assets • Average loans reflect one additional month of First Niagara and continued core portfolio growth • Investment portfolio relatively stable from 3Q16 period-end Net Inte
Slide 19: Appendix
19 Appendix
Slide 20: FNFG Merger-related Charges
3Q16 2Q16 1Q16 4Q15 Net interest income $ (6) - - - Operating lease income and other leasing gains $ (2) - - - Other income (10) - - - Noninterest income $ (12) - - - Personnel expense (a) $ 97 $ 35 $ 16 - Business services and professional fees $ 32 $ 5 $ 7 $ 5 Computer processing 15 - - - Marketin
Slide 21: First Niagara: Additional Transaction Detail
First Niagara: Additional Transaction Detail 21 Impacts reflected within Key’s 3Q16 results Consideration Cash consideration paid for First Niagara common shares $ 811 Key common shares issued, in dollars, and cash paid in-lieu of fractional shares (a) 2,831 Exchange of First Niagara preferred stock
Slide 22: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • High quality • Fixed rate agency MBS and CMOs • Average maturity: 3.7 years • GNMAs total 44% of portfolio • Reinvesting cash flows into HQLAs, including GNMAs $14.3 $20.3$8.5 $8.5 Size of swap portfo
Slide 23: Credit Quality Trends
23 Credit Quality Trends Criticized Outstandings (a) to Period-end Total LoansDelinquencies to Period-end Total Loans (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations 30 – 89 days delinquent 90+ days delinquent
Slide 24: Loan Portfolio Credit Quality by Category
Period- end loans Average loans Net loan charge- offs Net loan charge-offs (b) / average loans (%) Nonperforming loans (c) Ending allowance (d) Allowance / period-end loans (d) (%) Allowance / NPLs (%) 9/30/16 3Q16 3Q16 3Q16 9/30/16 9/30/16 9/30/16 9/30/16 Commercial, financial and agricultural (a)
Slide 25: Home Equity Portfolio
Vintage (% of Loans) Loan Balances Average Loan Size ($) Average FICO Average CLTV (a) % of Loans CLTV>90% 2012 and later 2011 2010 2009 2008 and prior Loans and lines First lien $ 6,909 $ 67,147 771 67 % .5 % 65 % 4 % 3 % 2 % 26 % Second lien 5,848 41,765 764 75 3.2 49 4 3 3 41 Total home equity po
Slide 26: Oil & Gas
Oil & Gas 26 Longstanding history, expertise and relationships Total commitments of $3.1 B, including upstream commitments of $1.7 B Upstream portfolio is primarily secured by proven, developed and producing reserves Total Loans Outstanding, 9/30/16 Portfolio performing in-line with expectatio
Slide 27: GAAP to Non-GAAP Reconciliation
Three months ended 9-30-16 6-30-16 3-31-16 12-31-15 9-30-15 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) 14,996$ 11,313$ 11,066$ 10,746$ 10,705$ Less: Intangible assets (a) 2,855 1,074 1,077 1,080 1,084 Preferred Stock, Series A (b) 1,156 281 281 281 281 Ta
Slide 28: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) 28(a) The months ended 9/30/16, 6/30/16, 3/31/16, 12/31/15, and 9/30/15, exclude $47 million, $38 million, $42 million, $47 million, and $52 million, respectively, of average purchased credit card receivables Three months ended 9-30-16 6-30-16 3-31-16 12-3