Keycorp · NYSE:KEY
Keycorp — Investor Presentation (November 2019)
31 slides from Keycorp's investor presentation, November 2019
Slide 1: Investor Meetings: November 2019
Investor Meetings: November 2019 KeyCorp
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: Key Overview
Key Overview Serving targeted clients by leveraging broad capabilities, insights and expertise Lending Commercial Mortgage Banking Deposits Investment Banking Financial Wellness Wealth & Investment Management Key Consumer Bank branches & Key Commercial Bank offices Payments Additional Key Commercial
Slide 4: Well Positioned to Compete and Win
Well Positioned to Compete and Win Clear Strategy Providing differentiated solutions to targeted clients Distinctive & Proven Business Model Relationship-based strategy aligned around client needs Leveraging our distinctive business model and strong talent base Talented & Diverse Team Garnering and
Slide 5: Winning with Targeted Scale at Key
Winning with Targeted Scale at Key Executing on targeted scale to provide solutions to serve our clients’ needs Scale at Key Description Key Takeaways I Largest players in a given market as Traditional defined by resources within the Scale in a client segment remains highly Scale franchise: most i
Slide 6: Focused Execution
Focused Execution Points of differentiation create value for clients across the franchise Consumer Commercial Breadth of capabilities, delivering unique solutions to our clients strong market share Creating targeted scale through strategic acquisitions Top 5 in 25 MSAs(a) Proven industry exper
Slide 7: Enhanced Digital Capabilities
Enhanced Digital Capabilities Creating a seamless experience for our clients on the front end while… Digitizing client portals Ongoing modernization of core systems Building differentiated capabilities Simplification of end-to-end processes Enhancing digital offerings Expansion of cloud usage Contin
Slide 8: Investment Prioritization
Investment Prioritization Driving sound, profitable growth through the cycle Investment Criteria 1 2 3 4 5 Strategic Value Resources Impact to Financial Return Timing Impact to Key Required Risk Profile Strategic Values Filter Organic Growth / Strong Risk Talented & Diverse Team Targeted Scale Manag
Slide 9: Laurel Road
Laurel Road Optimizing our investment across the platform Phase I Phase II Growing the Existing Business Integrating the Digital Platform Originations: >$500 million in 3Q19 Leverage Laurel Road’s mortgage platform with Key’s existing home lending business High-quality client: FICO 770+ Full
Slide 10: Strong Risk Management
Strong Risk Management Maintaining a strong risk culture and moderate risk profile Positioned to Outperform Through the Cycle Relationship-focused strategy Strong distribution capabilities Maintaining strong underwriting standards Enhanced framework, governance, and controls Strategic exit
Slide 11: Disciplined Capital Management
Disciplined Capital Management Disciplined in how we manage, invest, deploy, and return our capital Capital Priorities Supporting Share Organic Dividends Repurchases Growth Continuing to Drive Returns Dividend Growth Cumulative Common Share Repurchases $ in billions Dividend yield: 3.9% $0.71 $4.0 O
Slide 12: Delivering Results
Delivering Results Executing on commitments, while driving shareholder returns Continued Momentum Across the Franchise Improved Profitability & Returns Achieved 6 consecutive years of positive operating leverage – poised for the 7th consecutive year Cash Efficiency Ratio(a) 67% Reached targeted
Slide 13: Positioned to Outperform
Positioned to Outperform Improving efficiency, managing risk, and increasing returns Strategic Priorities Targets Leveraging differentiated business model to grow the franchise Positive Operating Leverage Executing on targeted scale to provide solutions to serve our clients’ needs Cash Efficiency Ra
Slide 14: Appendix
Appendix
Slide 15: 4Q Outlook and Long-term Targets
4Q Outlook and Long-term Targets 4Q19 (vs. 3Q19) Long-term Targets Average Loans: Up low single digit Positive operating leverage Average Deposits: Relatively stable Net Interest Income (TE): Relatively stable Cash efficiency ratio: 54% - 56% Noninterest Income: Up low single digit Moderate risk pro
Slide 16: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q19 2Q19 3Q18 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .38 $ .40 $ .45 (5) % (16) % EPS – excl. fraud loss & notable items(a), (b) .48 .44 .45 9 7 Cash efficiency ratio(a) 56.0 % 61.9 % 58.7 % (588) bps (269) bps Cash efficiency – excl.
Slide 17: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $95 6.00% $92 Average loans up 4% from 3Q18 $90 $88 5.50% − Commercial balances reflect strong C&I growth (+8%) driven by broad-based growth with $85 5.00% middle-market clients, partially offset by a 4.67% decline in commercial rea
Slide 18: Loan Portfolio Detail, at 9/30/19
Loan Portfolio Detail, at 9/30/19 Total Loans Commercial Loans $ in billions 9/30/19 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 48.4 52 Business Products Transportation Commercial real estate 14.6 16 Busines
Slide 19: Deposits
Deposits Average Deposits Highlights $ in billions $120 $110 1.40% Deposit costs flat from 2Q19, reflecting: $106 $100 1.09% 1.20% − Impact of lower interest rates and deposit pricing lag 1.00% $80 Strong and stable deposit base .74% 34% 0.80% $60 .82% − 26% noninterest-bearing(a) 0.60% − ~65% s
Slide 20: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.6 Portfolio used for funding and liquidity $32.0 $29.7 2.75% management: 2.49% − Composed primarily of Fixed Rate GNMA and GSE- $24.0 2.50% backed MBS and CMOs 2.30% − GNMA 43% of 3Q19 average balances $16.0 2.25
Slide 21: Moderate Risk Profile Guides Balance Sheet Positioning
Moderate Risk Profile Guides Balance Sheet Positioning Active asset/liability management positions Key to succeed in various economic environments A/LM Philosophy 3Q19 Core Balance Sheet Highlights Key maintains a Moderate Risk Profile Loan Composition Deposit Mix − Operating with moderate exposur
Slide 22: Asset & Liability Management: Tools and Positioning
Asset & Liability Management: Tools and Positioning Hedging activities moderate interest rate risk: reduce current and future exposure to changes in interest rates Discretionary Tools A/LM Positioning Total hedges of $33.2 B at 9/30/2019 Market Implied -100bps Parallel Forwards (9/30) Shift (12 mo
Slide 23: 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, 3Q19 net interest income was $26 $993 $17 $980 $1,000 4.0% $963 MM and net interest margin was 2.95% $800 vs. Prior Year 3.5% $600 Net interest incom
Slide 24: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 3Q19 vs. 3Q18 vs. 2Q19 Trust and investment services income $ 118 $ 1 $ (4) Noninterest income up $41 MM (+7%) from 3Q18, reflecting continued momentum across fee-based Investment banking and debt 176 10 13 p
Slide 25: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 3Q19 vs. 3Q18 vs. 2Q19 vs. Prior Year Personnel $ 547 $ (6) $ (42) Noninterest expense down $25 MM, or 3% Net occupancy 72 (4) (1) Computer processing 53 1 (3) − Reflects the successful implementation of expense initiativ
Slide 26: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions $ in millions 3Q19 allowance for loan losses to $200 $200 $196 1.00% period-end loans of .96% 3Q19 reflects $123 MM impact from previously disclosed fraud loss $887 $893 .85% $900 250% .80%
Slide 27: 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% 3.3% .39% .40% 2.7% 2.0% .20% .10% .06% .00% .0% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q17 1Q18 2Q18 3Q18 4Q18 1Q
Slide 28: 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 offs loans (%) (%) $ in millions (%) 9/30/19 3Q19 3Q19 3Q19 9/30/19 9/30/19 9/30/19 9/30
Slide 29: Capital
Capital Common Equity Tier 1 Highlights 11.00% Strong capital position: CET1 ratio of 9.48% at 9/30/2019 9.95% 10.00% 9.48% Increased common share dividend 9% ($.17 to 9.00% $.185 per share) Completed $248 MM(b) of common share 8.00% repurchases in 3Q19 7.00% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2019 6/30/2019 9/30/2018 Notable Items Provision for credit losses $ (123) - - Efficiency initiative expenses - $ (50) - Laurel Road acquisition expenses - (2) - Total notable items $ (123) $ (52) - Income taxes (29) (12) - Total
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2019 6/30/2019 9/30/2018 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 383 $ 403 $ 468 Plus: Notable items, after