Slide 1: KeyCorp Fourth Quarter 2016 Earnings Review
KeyCorp Fourth Quarter 2016 Earnings Review January 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: 2016: A Successful and Transformational Year
2016: A Successful and Transformational Year Generated positive operating leverage for 3rd consecutive year – Pre-provision net revenue up 23% from 2015 – Results reflect momentum in core franchise, acquisition and investments Solid loan growth in 2016 Positive Operating – Reflecting First Niagara a
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights 4Q16 & 3Q16 reflect the impact of the FNFG acquisition, which became effective on 8/1/2016 Continuing operations, Metrics 4Q16 3Q16 2Q16 1Q16 4Q15 unless otherwise noted EPS – assuming dilution $ .20 $ .16 $ .23 $ .22 $ .27 EPS –excl. merger-related charges(d), (e) .31 .30 .27 .
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions $90 $85 Loan growth reflects acquisition and core business performance $60 Period-end loans up 1% from 9/30/16 $60 Fair value mark on acquired FNFG loan portfolio adjusted from $686 MM to $548 MM during 4Q16 $30 vs. Prior Year Average loans up 43% f
Slide 7: Deposits
Deposits Average Deposits(a) Highlights $ in billions $105 Deposit growth reflects continued momentum in $105 .70% core businesses as well as the FNFG acquisition .60% $85 Retail deposit growth in all First Niagara markets .50% $71 since conversion .40% $65 4Q16: 31% noninterest bearing; 47% retail
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 $948 $950 6.00% 4Q16 net interest income includes $92 MM from $92 MM from PAA in 4Q; $19 MM in 3Q purchase accounting accretion ($19 MM in 3Q16) 5.00% $750 – $34 MM of
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 4Q16 vs. 4Q15 vs. 3Q16 Growth reflects continued momentum in core Trust and investment services income $ 123 $ 18 $ 1 businesses as well as the FNFG acquisition Investment banking and debt 157 30 1 Record quarter and year for
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 4Q16 vs. 4Q15 vs. 3Q16 4Q16 noninterest expense of $1.2 B included $207 MM of merger-related charges, a full quarter impact of First Personnel $ 648 $ 219 $ 54 Niagara (~$70 MM/month(c)) and an $18 MM pension Net occupancy
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Net loan charge-offs of $72 MM $120 1.00% – Reflects regulatory guidance on consumer $90 .80% bankruptcies and conforming FNFG $72 charge-off policies to Key’s policies $66 .60% $60 – 34 basis points of average loa
Slide 12: Capital
Capital Common Equity Tier 1(a), (b) Highlights 12.00% Strong capital position with Common Equity 10.94% Tier 1 ratio of 9.59%(b) at 12/31/16 10.00% 9.59% Repurchased $68 MM in common shares during 4Q16 8.00% Common Equity Tier 1 ratio under fully phased-in Regulatory Capital Rules(c): 9.47% at 12/3
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2017 (a) Average Earning • Loans and deposit growth: mid-single digit percentage compared to FY 2016 (with 2016 adjusted for full year Assets impact of First Niagara) • Outlook includes one additional rate increase in mid-2017 Net Interest Income • Net interest income exp
Slide 14: Appendix
Appendix 14
Slide 15: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - $ (6) - - - Operating lease income and other leasing gains - $ (2) - - - Other income $ 9 (10) - - - Noninterest income $ 9 $ (12) - - - Personnel expense(a) $ 80 $ 97 $ 35 $ 16 - Net Occup
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.3 $30.0 5.00% backed MBS and CMOs; primarily fixed rate 4.00% $19.1 Growth in portfolio primarily related to: $20.0 3.00% – Full quarter impact of First Niagara 1.87% 2
Slide 17: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Modest asset sensitive position of 1% - 3%(a) Loans Deposits - Assumes 200 basis point increase over a 12-month period 12/31/16 12/31/16 • Utilize swaps for debt hedging and asset liability management
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% .47% 6.0% .39% 4.0% 3.1% 3.2% .25% .12% 2.0% .10% .00% .0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q
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 (%) 12/31/16 4Q16 4Q16 4Q16 12/31/16 12/31/16 12/
Slide 20: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $5.3 billion of the total portfolio are fixed rate loans that require principal and interest payments; $7.4 billion are lines 57% first lien position $1.3 billion in lines outstanding (10% of the total portfolio) Average FICO score of 772 come
Slide 21: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Total commitments of $3.2 B, including upstream Portfolio performing in-line with expectations commitments of $1.7 B Nonperforming loans down 19% from 3Q16 Upstream portfolio is primarily secured by proven, Reserve coverage: 6% of outstandi
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three m onths e nded $ in millions 12-31-16 9-30-16 6-30-16 3-31-16 12-31-15 Tangible com m on e quity to tangible as se ts at pe riod end Key shareholders' equity (GAAP) $ 15,240 $ 14,996 $ 11,313 $ 11,066 $ 10,746 Less: Intangible assets (a) 2,788 2,855 1,074 1,077
Slide 23: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three m onths ended $ in millions 12-31-16 9-30-16 6-30-16 3-31-16 12-31-15 Average tangible com m on equity Average Key shareholders' equity (GAAP) $ 14,901 $ 13,552 $ 11,147 $ 10,953 $ 10,731 Less: Intangible assets (average) (a) 2,874 2,255 1,076 1,079