Slide 1: KeyCorp First Quarter 2018 Earnings Review
KeyCorp First Quarter 2018 Earnings Review April 19, 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: 1Q18 Investor Highlights
1Q18 Investor Highlights Revenue growth of 3% from prior year − Reflects higher net interest income, solid loan growth and stronger fee income Average loan growth of 1% (vs. PY and PQ) driven by commercial relationships Fee momentum, reflecting ongoing investments Driving − Record first quarter for
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 1Q18 4Q17 1Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution .38 .17 .27 124 % 41 % EPS – excl. notable items(a), (b) .38 .36 .32 6 19 Cash efficiency ratio(a) 62.9 % 66.7 % 65.8 % (376) bps (289) bps Profitability Cash efficiency –excl. notabl
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions $90 $86 $87 vs. Prior Year Average loans up 1% from 1Q17 $60 – Broad-based C&I growth with middle-market clients $30 – Expansion of auto lending into existing geographies and dealer relationships $0 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 vs. Prior
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $102 $103 Deposit cost up 5 bps from 4Q17, reflecting: $105 .70% – Higher interest rates .60% $85 – Continued migration of portfolio into higher- .50% yielding products .40% $65 Strong and stable deposit base .30% .36% .20% – 30% 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, 1Q18 net interest income was $919 MM $33 $1,000 $929 $952 4.0% and net interest margin was 3.04% $53 – NII up 5% from prior year and up 1% from prior qua
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 vs. Prior Year Trust and investment services income $ 133 $ (2) $ 2 Noninterest income up $24 MM from 1Q17 Investment banking and debt 143 16 (57) placement fees Continued momentum in many fee-based Ser
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Linked Quarter Change $ in millions; excludes notable items(a) $ in millions Up / (Down) 1Q18 vs. 1Q17 vs. 4Q17 Personnel $ 594 $ 38 $ (14) $11 Net occupancy 78 (9) (14) $(24) Computer processing 52 (8) (2) $10 $31 $(35) Business services, professional fees 41
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 1Q18 allowance for loan losses to $100 1.00% period-end loans of 1.00% $900 $870 $881 250% .80% $75 $63 $61 200% $58 $54 .60% $800 $50 150% 163% .40% 152% 100% $700 $25 .27% .25% .20% 50% $
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 10.03%(a) at 3/31/18 9.91% 10.03% 10.00% Repurchased $199 MM(c) in common shares during 1Q18 8.00% 6.00% 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Tangible Common Equity to Tangible Assets(b) 1
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2018 Average Balance • Loans: average balances in the range of $88.5 B - $89.5 B Sheet • Deposits: average balances in the range of $104.5 B - $105.5 B Net Interest • Net interest income expected to be in the range of $3.95 B - $4.05 B Income (TE) • Outlook includes rate
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 3/31/18
Loan Portfolio Detail, at 3/31/18 Total Loans Commercial Loans $ in billions 3/31/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 44.3 50 Transportation Automotive Business Products Commercial real estate 15.9 18 Technol
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.2 $29.9 $30.0 2.50% backed MBS and CMOs 2.16% 2.25% ‒ Primarily fixed rate $20.0 1.98% ‒ GNMA 47% of 1Q18 average balances 2.00% Portfolio used for funding and liquidit
Slide 17: Interest Rate Risk Management
Interest Rate Risk Management The strength and diversity of our franchise positions Key to benefit from economic growth and a rising rate environment Business and Balance Sheet Highlights Net Interest Income Sensitivities (FY18) ($MM) • Strong, low-cost deposit base March Rate Hike embedded – $72 B
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% .35% 4.0% 3.6% .36% 3.0% .25% 2.0% .09% .09% .00% .0% 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q
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 (%) 3/31/18 1Q18 1Q18 1Q18 3/31/18 3/31/18 3/31/1
Slide 20: 2017 FNFG Merger-related Charges
2017 FNFG Merger-related Charges $ in millions Increase / (Decrease) 4Q17 3Q17 2Q17 1Q17 Net interest income - - - - Operating lease income and other leasing gains - - - - Other income - - - - Noninterest income - - - - Personnel expense $ 26 $ 25 $ 31 $ 30 Net Occupancy $ 12 $ (2) $ (1) $ 5 Busines
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 3/31/2018 12/31/2017 3/31/2017 Notable Items Merger-related charges - $ (56) $ (81) Impacts of tax reform and related actions - $ (30) - Total notable items - $ (86) $ (81) Income taxes - (26) (30) Revaluation of certain tax related as
Slide 22: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 3/31/2018 12/31/17 9/30/17 6/30/17 3/31/17 Average tangible common equity Average Key shareholders' equity (GAAP) $ 14,889 $ 15,268 $ 15,241 $ 15,200 $ 15,184 Less: Intangible assets (average) (a) 2,916 2,939 2,878 2,756 2,