Keycorp · NYSE:KEY
Keycorp — BancAnalysts Association of Boston Conference 2015
35 slides from Keycorp's conference presentation, Nov 5, 2015
Slide 1: BancAnalysts Association of Boston Conference
BancAnalysts Association of Boston Conference November 5, 2015 KeyCorp Don Kimble Dennis Devine Chief Financial Officer Co-President, Key Community Bank
Slide 2: Forward-Looking Statements and Additional Information Disclosure
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION DISCLOSURE 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 and First Niagara’s expectations or predictions of future financ
Slide 3: Key – Who We Are
Key – Who We Are A Relationship-Focused Bank with Scale and Adaptability Top 20 U.S. bank-based financial services company Loans Deposits - Assets: $95B 3% - Deposits: $70B 27% - Market capitalization: $11B 45% 52% 73% - Strong footprint with approximately 1,000 branches and 1,300 ATMs - Approximate
Slide 4: Strength Through Geographic Diversity
Strength Through Geographic Diversity Western Markets Eastern Markets • Deposits: $17 B • Deposits: $32 B • Branches: 374 • Branches: 598 • Demographic: younger with high growth potential • Demographic: mature population with established wealth • Strong consumer lending • Strong wealth management pr
Slide 5: Key Community Bank
Key Community Bank A local relationship bank serving retail, private banking and business clients Key’s Community Bank Franchise Key YTD 2015 Revenue Business Description Clients Provides deposit, investment, • Individuals and Retail and and loan products to clients families Business through our ~1,
Slide 6: Retail and Business Banking Priorities
Retail and Business Banking Priorities I Drive positive operating leverage II Grow with a compelling value proposition III Optimize channels and invest in our digital future 6
Slide 7: Driving Positive Operating Leverage
I Driving Positive Operating Leverage Improving productivity and efficiency Delivering a Consistent, Productive and Efficient Model Across the Franchise Investment in and Enhanced playbooks New coaching Reorganization and Channel optimization alignment of Active performance and relationship structur
Slide 8: Acquiring and Expanding Relationships
II Acquiring and Expanding Relationships Well-designed and delivered products build engaged client relationships What We Provide Recent Investments and New Products Hassle-Free Checking Ease • Drives client acquisition, opportunity for expansion 1.5x • Solid demand and sales volume with new, high- N
Slide 9: Optimizing Branch Network
III Optimizing Branch Network Changing Client Behavior Consolidating Branches Branches remain important to Fewer branches driven by changing clients for advice and service client behavior Direct, positive impact -11% 1,088 972 • #1 sales generator • Deepen personal and commercial client relationship
Slide 10: Investing in Our Digital Future
III Investing in Our Digital Future Digital Investment Highlights Investments have shifted to digital Growth in online and mobile channels originations Online and mobile originations: up 98% from 2012 Digital personalized offers and sales • Mobile payments • Financial analytics • Digital personalize
Slide 11: Growing Commercial Relationships in Key Community Bank
Growing Commercial Relationships in Key Community Bank A full suite of products and tailored service builds valuable client relationships Targeting Full Client Relationships Commercial Private Banking Banking Clients Clients Average Commercial client revenue 4x higher Credit / Treasury / Banking Inv
Slide 12: First Niagara Financial Group Acquisition
First Niagara Financial Group Acquisition 12
Slide 13: A Compelling Strategic Opportunity
A Compelling Strategic Opportunity Shelby_Sales-Presentation_150928_v5.pptx\28 SEP 2015\6:59 PM\11 Powerful combination creates high-performing regional bank with compelling shareholder returns 13th Largest U.S. Commercial Bank $135 billion assets $100 billion deposits Strengthens core operating and
Slide 14: Strengthens Position in Attractive Northeast Markets
Strengthens Position in Attractive Northeast Markets Leading Position from Leading Market Share Shared Market Presence Accelerates Toledo to Albany Banks Outperform Value Realization Pro Forma Branch Footprint Leading Retail Presence in Upstate NY (a) $ in billions Buffalo, NY Albany, NY 8.0 4.7 3.9
Slide 15: Significant Value Created from Cost Savings
Significant Value Created from Cost Savings Unlocked value from cost synergies provides strong upside for shareholders • High degree of market overlap accelerates benefit realization − > 30% of FNFG branches within two miles of a Key branch • FNFG’s technology infrastructure largely outsourced Key h
Slide 16: Combined Company Uniquely Positioned to Unlock Value
Combined Company Uniquely Positioned to Unlock Value Three Million Clients Attractive Geographic Footprint Complementary Product Offering High Density Markets Broad, Complementary Product Capabilities Retail banking (branch; card; auto; etc.) Private banking Residential mortgage Indirect auto lendin
Slide 17: Attractive Financial Impact
Attractive Financial Impact The First Niagara acquisition generates compelling financial returns for Key • IRR approximates 15% and ROIC exceeds 10% • Meaningful improvement in efficiency and profitability metrics FY18 Financial Performance Metrics Efficiency Key Cash > 300 bps Pro Forma Key ROTCE >
Slide 18: Appendix
Appendix 18
Slide 19: Attractive Transaction Economics
Attractive Transaction Economics • $4.1 billion in aggregate consideration – First Niagara shareholders receive 0.68 Key shares and $2.30 in cash for each FNFG common share Key Transaction – Implied value of $11.40 per FNFG common share, based on Key’s closing share price as of October 29 Terms • Tr
Slide 20: Disciplined Diligence and Integration Approach
Disciplined Diligence and Integration Approach • Comprehensive, executive-led due diligence process involving more than 300 employees of both Key and First Niagara • Organized teams across focus diligence areas led by senior leaders with support from functional experts and external advisors • Extens
Slide 21: Financial Highlights
Financial Highlights Metrics 3Q15 2Q15 1Q15 4Q14 3Q14 EPS – assuming dilution $ .26 $ .27 $ .26 $ .28 $ .23 Financial Cash efficiency ratio (d) 66.9 % 65.1 % 65.1 % 64.4 % 69.7 % Performance (a) Net interest margin (TE) 2.87 2.88 2.91 2.94 2.96 Return on average total assets .95 1.03 1.03 1.12 .92 T
Slide 22: Strong Balance Sheet
Strong Balance Sheet Average Total Loan and Deposit Growth Highlights $ in billions Loan growth continues to be driven primarily by Deposits up 3% Y-o-Y CF&A loans $70.0 Average total loans up in both the Community Bank and the Corporate Bank $55.0 Deposit growth of 3% from 3Q14 due to strength Loan
Slide 23: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.2 5.00% Portfolio composed primarily of GNMA and GSE- $17.0 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for upcoming 3.00% $10.0 regulatory liquidity requirements: 2.00% 2.15% 2.07% – 2015
Slide 24: Interest Rate Risk Management
Interest Rate Risk Management Actively managing a naturally asset sensitive balance sheet Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintaining moderate asset sensitive position of ~2 to 3% Loan Portfolio Deposits - Assumes 200 basis point increase in short-term rates ove
Slide 25: High Quality and Diverse Revenue
High Quality and Diverse Revenue Noninterest Income Highlights $ in millions; continuing operations Diverse noninterest income contributes over 40% $525 $470 of total revenue $450 $417 3Q15 noninterest income up 13% from 3Q14 reflecting strength in core businesses: $375 Corporate services $300 Inves
Slide 26: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions 3Q15 vs. 2Q15 vs. 3Q14 vs. Prior Quarter Personnel (a) $ 426 $ 18 $ 21 Net occupancy 60 (6) (6) Expense growth of 2% from 2Q15 Computer processing 41 (1) 2 – Pension settlement charge of $19 MM in 3Q15 Business services, professional f
Slide 27: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions $ in millions $50 .60% $1,000 201% 210% $45 198% $41 $40 $900 185% $31 .40% $30 $804 .22% $800 $790 160% $20 $19 .27% .20% $700 135% $10 $0 .00% $600 110% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
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 (%) 9/30/15 3Q15 3Q15 3Q15 9/30/15 9/30/15 9/30/15 9/
Slide 29: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Strong Portfolio Characteristics >10 years of experience in energy lending with >20 >40% of clients’ 2015 production is hedged specialists dedicated to oil & gas Relationships contribute to noninterest income; ~5% of Focused on middle marke
Slide 30: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $3.9 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 98% of total portfolio; branch- principal and interest payments; $6.3 billion are lines originated $1.2 billion in lines outstanding (12% of t
Slide 31: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 9-30-15 vs. 9-30-15 6-30-15 3Q15 (c) 2Q15 9-30-15 6-30-15 6-30-15 Residential properties – homebuilder $ 6 $ 6 - - - $ 5 $ 8 Marine and RV floor plan 1 2 $ (1) - - -
Slide 32: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9-30-15 6-30-15 3-31-15 12-31-14 9-30-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,705 $ 10,590 $ 10,603 $ 10,530 $ 10,486 Less: Intangible assets (a) 1,084 1,085 1,088 1,090 1,105 Pre
Slide 33: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 9-30-15 6-30-15 3-31-15 12-31-14 9-30-14 Pre-provision net revenue Net interest income (GAAP) $ 591 $ 584 $ 571 $ 582 $ 575 Plus: Taxable-equivalent adjustment 7 7 6 6 6 Noninterest income (GAAP) 470 488 437 490 417 Less: N
Slide 34: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions September 30, 2015 Common Equity Tier 1 under current RCR $ 9.7 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b
Slide 35: Important Additional Information and Where to Find It
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT In connection with the proposed merger, KeyCorp will file with the SEC a Registration Statement on Form S-4 that will include the Joint Proxy Statement of KeyCorp and First Niagara and a Prospectus of KeyCorp, as well as other relevant documents
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