Slide 1: KeyCorp Third Quarter 2018 Earnings Review
KeyCorp Third Quarter 2018 Earnings Review October 18, 2018 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: 3Q18 Investor Highlights
3Q18 Investor Highlights $.45 58.7% 16.8% earnings per common share cash efficiency ratio(a) return on avg. tangible common equity(a) EPS growth with positive operating leverage Net interest income growth reflects benefit from rising interest rates and higher earning asset balances − Avg. loan balan
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q18 2Q18 3Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .45 $ .44 $ .32 2 % 41 % Cash efficiency ratio(a) 58.7 % 58.8 % 62.2 % (3) bps (349) bps Return on average tangible common equity(a) 16.8 16.7 12.2 8 460 Profitability Return on ave
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $90 $88 $87 Average loans up 2% from 3Q17 – C&I balances up 8% driven by broad-based growth with middle-market clients $80 – Home equity continue to be impacted by market trends vs. Prior Quarter $70 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions Deposit cost up 10 bps from 2Q18, reflecting: $110 1.00% $106 – Higher interest rates and beta $103 – Continued migration of portfolio into higher- .80% $100 yielding products .60% Strong and stable deposit base .53% .40% – 29% noninterest-bearing $
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 Excluding PAA, 3Q18 net interest income was $967 MM $962 $26 $993 $1,000 4.0% and net interest margin was 3.09% $48 $800 vs. Prior Year 3.5% $600 Net interest income up
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions up / (down) 3Q18 vs. 3Q17 vs. 2Q18 vs. Prior Year Trust and investment services income $ 117 $ (18) $ (11) Noninterest income up $17 MM (+3%) from 3Q17 Investment banking and debt 166 25 11 placement fees Strength in investment banking a
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense vs. Prior Year $ in millions up / (down) 3Q18 vs. 3Q17 vs. 2Q18 Personnel $ 553 $ (6) $ (33) Noninterest expense down $28 MM, or (3)% Net occupancy 76 2 (3) Prior year included merger-related charges of Computer processing 52 (4) 1 $36 MM ($25 MM personnel; $1
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 3Q18 allowance for loan losses to period-end loans of .99% $100 1.00% $880 $887 $900 250% .80% $75 $60 $62 200% .60% $800 $51 $50 170% 150% $32 .40% 138% 100% $700 $25 .27% .20% 50% .15% $6
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 9.93%(a) at 9/30/18 10.26% 9.93% 10.00% Increased common share dividend by 42% (from $0.12 to $0.17 per quarter) 8.00% Repurchased $542 MM(c) in common shares during 3Q18 6.00% 4Q16 1Q17 2Q17
Slide 13: 4Q Outlook and Long-term Targets
4Q Outlook and Long-term Targets 4Q18 (vs. 3Q18) Long-term Targets Average Loans: Up low single digit Positive operating leverage Average Deposits: Relatively stable Net Interest Income (TE): Up low single digit Cash efficiency ratio: 54%-56% Noninterest Income: Up mid-single digit Moderate risk pro
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 9/30/18
Loan Portfolio Detail, at 9/30/18 Total Loans Commercial Loans $ in billions 9/30/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 45.0 50 Transportation Automotive Business Products Commercial real estate 16.5 18 Technol
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.0 $29.7 $30.0 2.50% backed MBS and CMOs 2.30% 2.25% ‒ Primarily fixed rate $20.0 2.02% ‒ GNMA 46% of 3Q18 average balances 2.00% Portfolio used for funding and liquidit
Slide 17: Asset & Liability Management Positioning
Asset & Liability Management Positioning Better positioned to benefit from economic growth and rising interest rates Business and Balance Sheet Highlights 3Q18 Positioning • Strong, low-cost deposit base • Target retaining asset sensitive position – $75 B interest-bearing deposits at 74 bps – Higher
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 .80% 6.0% .60% 4.0% 0.41% 3.3% 3.3% 0.38% .40% 2.0% .20% 0.10% 0.10% .00% .0% 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q16 1Q17 2Q17 3Q17 4Q1
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 (%) 9/30/18 3Q18 3Q18 3Q18 9/30/18 9/30/18 9/30/1
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2018 6/30/2018 9/30/2017 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,210 $ 15,032 $ 15,241 Less: Intangible assets (average) (a) 2,848 2,883 2,878 Preferred Stock (average) 1,316 1,025 1,025 Average