Slide 1: KeyCorp Third Quarter 2017 Earnings Review
KeyCorp Third Quarter 2017 Earnings Review October 19, 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 – 3Q17
Investor Highlights – 3Q17 YoY positive operating leverage (7th consecutive qtr.)(a) Adjusted / Reported Non-GAAP(e) Momentum in fee-based businesses − Record cards and payments income YoY EPS Positive − Continued strength in investment banking & debt Operating placement fees +100% +17% Leverage Exp
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q17 2Q17 3Q16 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .32 $ .36 $ .16 (11) % 100 % EPS – excl. notable items(a), (b) .35 .34 .30 3 17 Cash efficiency ratio(a) 62.2 % 59.3 % 80.0 % 290 bps (1,773) bps Profitability Cash efficiency –excl
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions $90 $87 vs. Prior Year $78 Average loans up 12% from 3Q16 $60 – Growth reflects a full-quarter impact of FNFG (vs. 2 months in 3Q16) $30 – Broad-based C&I growth vs. Prior Quarter $0 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Average loans up .4% from
Slide 7: Deposits
Deposits Average Deposits(a) Highlights $ in billions $103 Deposit cost up 2 bps from 2Q17 $105 .70% $95 – Largely driven by contractual commercial .60% $85 rate increases and deposit mix .50% 3Q17 beta of 17% (total interest-bearing deposits) .40% $65 .30% .28% vs. Prior Year $45 .20% .21% .10% Ave
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 $1,000 $962 4.0% Excluding impact of PAA, 3Q17 net interest income $100 $48 was $914 MM and net interest margin was 2.99% $788 $800 $19 3.5% 3.15% vs. Prior Year $600 2
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 vs. Prior Year Trust and investment services income $ 135 $ 13 $ 1 Investment banking and debt 141 (15) 6 Noninterest income up $36 MM from 3Q16, excl. placement fees notable items(a),(b) Service charge
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 3Q17 vs. 3Q16 vs. 2Q17 Notable items: Personnel $ 558 $ (36) $ 7 $ in millions 3Q17 3Q16 2Q17 Net occupancy 74 1 (4) Merger-related charges $36 $189 $44 Computer processing 56 (14) 1 Charitable contribution(b) - - 20 Busine
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 3Q17 NCOs reflect continued portfolio 3Q17 allowance for loan losses $100 strength and large C&I recovery 1.00% to period-end loans of 1.02% $900 $865 $880 250% .80% $75 200% $59 $51 .60% $
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 10.26%(a) at 9/30/17 10.26% 10.00% 9.56% − Increase in 9/30/17 capital measures primarily reflects a change in methodology for multipurpose facilities(c) 8.00% Repurchased $277 MM(d) in commo
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2017(a) Average Balance • Loans: 4Q17 average balances in the range of $87.0 B - $87.5 B 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 • Outlook includes
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 9/30/17
Loan Portfolio Detail, at 9/30/17 Total Loans Commercial Loans $ in billions 9/30/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Commercial and industrial $ 41.1 48 Automotive Transportation Business Products Technology Utilities Commercial real estate 16.9
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29 $30.0 5.00% backed MBS and CMOs; primarily fixed rate $24.2 4.00% Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 1.96% 2.02% 2.00% –
Slide 17: 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 $88 B $103 B Portfolio • Short weighted average matu
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 .50% 6.0% .37% .38% 4.0% 3.3% 3.3% .25% 2.0% .10% .06% .00% .0% 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q
Slide 19: 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 (%) 9/30/17 3Q17 3Q17 3Q17 9/30/17 9/30/17 9/30/1
Slide 20: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - - - $ (6) - - - Operating lease income and other - - - $ (2) - - - leasing gains Other income - - $ 9 (10) - - - Noninterest income - - $ 9 $ (12) - - - Personnel expense $ 2
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/17 6/30/17 9/30/16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $15,249 $15,253 $ 14,996 Less: Intangible assets (a) 2,870 2,866 2,855 Preferred Stock (b) 1,009 1,009 1,150 Tangible commo
Slide 22: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,241 $ 15,200 $ 15,184 $ 14,901 $ 13,552 Less: Intangible assets (average) (a) 2,878 2,756 2,772 2,874 2,25