Slide 1: KeyCorp Third Quarter 2023 Earnings Review
KeyCorp Third Quarter 2023 Earnings Review October 19, 2023 Chris Gorman Clark Khayat 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: 3Q23 Highlights
3Q23 Highlights 3Q23 Financial Results Strategic Highlights & Outlook $.29 $7Bn 9.8% 24 bps ▪ Strengthening and optimizing our balance sheet Earnings per diluted Reduction in CET1(2) NCO to Average ‒ Strengthening our balance sheet by continuing to grow core deposits common share RWAs (1) vs. prior
Slide 4: Financial Review
Financial Review
Slide 5: Financial Highlights
Financial Highlights 3Q23 2Q23 3Q22 LQ Δ Y/Y Δ Continuing operations, unless otherwise noted EPS – assuming dilution $.29 $.27 $ .55 7.4 % (47.3) % Cash efficiency ratio(1) 70.3 % 66.8 % 58.0 % 350 bps 1,230 bps Return on average tangible common equity(1) 12.4 11.0 21.2 140 (880) Profitability Retur
Slide 6: Loans
Loans Results reflect our balance sheet optimization efforts as we deemphasize non-relationship business Total Average Loans Highlights $ in billions vs. Prior Year ▪ Average loans up 3% from 3Q22 $120.7 $114.4 $117.7 $119.8 $117.6 − Growth in C&I loans driven by relationship clients $36.6 Average C
Slide 7: Deposits
Deposits Continue to focus on relationship banking and primacy; average deposits increased compared to the prior quarter and year-ago period Deposits Highlights $ in billions ▪ Cumulative total interest-bearing deposit beta: 46%(2) vs. Prior Year $144.2 $145.7 $143.4 $142.9 $144.8 $1.7 $3.9 $6.6 $9.
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Net interest income in the quarter reflected the continued higher interest rate environment and our balance sheet positioning Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions, continuing operations vs. Prior Year $1,203 $1,227 4.0% $1,106 $
Slide 9: Net Interest Income Opportunities
Net Interest Income Opportunities Expecting significant benefit from swap and Treasury maturities Net Interest Income Pickup from Short-dated Maturities(1) Illustrative, $ in millions $252 $202 $102 Treasuries $152 $71 Swaps $119 $41 ~$1Bn $22 annualized Net Interest $80 Income benefit by 1Q25 $13 $
Slide 10: Noninterest Income
Noninterest Income Stronger investment banking and debt placement fees drove the increase in fee income compared to the prior quarter Noninterest Income Highlights vs. Prior Year $ in millions - up / (down) 3Q23 vs. 3Q22 vs. 2Q23 ▪ Noninterest income down $40MM (-6%) from 3Q22 Trust and investment s
Slide 11: Noninterest Expense
Noninterest Expense Continue to simplify and streamline businesses to create expense efficiencies while continuing to make targeted investments for the future Noninterest Expense Highlights vs. Prior Year $ in millions - favorable / (unfavorable) 3Q23 vs. 3Q22 vs. 2Q23 ▪ Noninterest expense up $4MM
Slide 12: Credit Quality
Credit Quality Disciplined underwriting with net charge-offs remaining near low levels Net Charge-offs & Provision for Credit Losses Delinquencies to Period-end Total Loans $ in millions Continuing Operations $265 0.16% 0.15% 0.15% 0.14% $167 0.12% 0.24% 0.15% 0.14% $139 $109 0.17% 0.06% 0.15% 71 81
Slide 13: Capital
Capital Strong capital position, up 50 basis points from last quarter and well above targeted range Common Equity Tier 1(1) Projected AOCI Impacts(2) Illustrative, $ in billions Target operating range: 9% - 9.5% 9.8% 9/30/2023 A 12/31/2023 E 12/31/2024 E 12/31/2025 E 9.3% 9.1% 9.1% 9.1% $(4.1) $(4.8
Slide 14: Outlook
Outlook Guidance as of 10/19/2023 4Q23 (vs. 3Q23) FY2023 (vs. FY2022) • Loans: down 1% - 3% • Loans: up 6% - 9% Average Balance Sheet • Deposits: relatively stable • Deposits: flat to down 2% Net Interest Income (TE) • Net interest income: relatively stable (Prior guidance flat to down 2%) • Net int
Slide 15: Appendix
Appendix
Slide 16: Deposits: A Diverse Core Base
Deposits: A Diverse Core Base Key’s deposit base is made up of over three and a half million retail, small business, private banking, and commercial clients, with two-thirds of balances covered by FDIC insurance or collateralized 3Q23 Mix by Client Highlights As of 9/30/2023 ▪ $8Bn of deposits are f
Slide 17: Commercial Business Detail
Commercial Business Detail Total Commercial Loans Targeted Industry Verticals $ in millions 9/30/23 % of total loans Consumer Healthcare Technology Energy Commercial and industrial $ 57,606 50% Commercial real estate 18,531 16 Industrial Real Estate Public Sector Commercial lease financing 3,681 3 T
Slide 18: Commercial Real Estate Loan Portfolio Detail
Commercial Real Estate Loan Portfolio Detail Key has limited exposure to riskier asset classes like office, lodging, and retail Portfolio by Asset Class Office Loan Detail Office Loans as a Portion of Total Loans $ in millions, non-owner occupied 9/30/23 % of total loans 3.1% Multifamily $ 9,025 7.8
Slide 19: Consumer Business Detail
Consumer Business Detail Total Consumer Loans Wealth Management $ in billions 9/30/23 % of total loans WA FICO at origination ▪ Assets under management of $52.5Bn, up $4.5Bn from the year-ago period Consumer mortgage $ 21,309 18% 754 ▪ Collaborating with businesses across Key, representing strong cr
Slide 20: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan charge- Allowance / Period-end Average Net loan Nonperforming Ending Allowance / offs(3) / average period-end $ in millions loans loans charge-offs loans allowance NPLs (%)(4) loans (%)(4) loans (%)(4) 9/30/23 3Q23 3Q23 3Q23 9/30/23 9/30/23 9/30/23
Slide 21: Balance Sheet Management Detail
Balance Sheet Management Detail 3Q23 Balance Sheet Highlights Highlights Loan Composition(1) Deposit Mix(2) ▪ Attractive business model with relationship-oriented lending franchise Other 4% Noninterest- − Distinctive commercial capabilities drive C&I growth and ~64% bearing 23% floating-rate loan mi
Slide 22: Hedging Strategy
Hedging Strategy Opportunistically locking in future benefit while managing downside risk ALM Hedge Actions(1) Hedge Portfolio YTD • Added $3Bn of forward-starting receive fixed swaps - WA receive rate: 3.4% through • Executed $3.3Bn of forward-starting floor spreads - WA buy strike: 3.4%, WA sold s
Slide 23: Investment Portfolio
Investment Portfolio Existing Portfolio Repricing Characteristics Highlights $ in billions ▪ Portfolio used for funding and liquidity management $21.7 ‒ Portfolio composed primarily of fixed-rate GNMA and GSE-backed MBS and CMOs $13.7 $11.5 ‒ Portfolio yield excluding short-term Treasury/Agency secu
Slide 24: Securities Maturity Schedule
Securities Maturity Schedule Available for Sale (AFS) Held-to-Maturity (HTM) Agency Agency Agency Agency Agency Agency U.S. Treasury, Residential Residential Commercial Remaining maturity, Residential Residential Commercial Asset- Remaining maturity, Agencies, and Collateralized Mortgage- Mortgage-
Slide 25: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 9/30/2023 6/30/2023 9/30/2022 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 13,356 $ 13,844 $ 13,290 Less: Intangible assets (1) $ 2,816 2,826 2,856 Preferred Stock (2) $ 2,446 2,446 2,446
Slide 26: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 9/30/2023 6/30/2023 9/30/2022 Return on average tangible com m on equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 266 $ 250 $ 513 Average tangible common