Slide 1: Fourth Quarter 2017 Earnings Review
KeyCorp Fourth Quarter 2017 Earnings Review January 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: 2017 – A Step Change in Performance
2017 – A Step Change in Performance Achieved significant milestones with Key and First Niagara value attainment objectives − Annual run-rate cost savings of over $400 million − Cash efficiency ratio declined by 410 bps, to 60.2%(a) FY2017 − Revenue synergies generated through new and expanded relati
Slide 4: Long-term Targets
Long-term Targets FY 2015 FY 2017 Previous LT Targets New LT Targets Drive YoY Drive YoY Positive operating positive positive leverage (YoY) operating operating leverage leverage Cash efficiency ratio(a) 65.9% 60.2%(b) < 60% 54% - 56% Net charge-offs Net charge-offs Maintain moderate to avg. loans t
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 4Q17 3Q17 4Q16 LQ ∆ Y/Y ∆ EPS – assuming dilution .17 $ .32 .20 (47) % (15) % EPS – excl. notable items(a), (b) .36 .35 .31 3 16 Cash efficiency ratio(a) 66.7 % 62.2 % 76.2 % 450 bps (950) bps Profitability Cash efficiency –excl. not
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions $90 $85 $86 vs. Prior Year Average loans up 1% from 4Q16 $60 – Broad-based C&I growth – Strength in indirect auto lending $30 – Partially offset by higher levels of paydowns, primarily in CRE, and continued decline in home equity $0 1Q16 2Q16 3Q16 4
Slide 8: Deposits
Deposits Average Deposits Highlights $ in billions $105 $104 Deposit cost up 3 bps from 3Q17 $105 .70% – Cumulative beta of 21% since December 2015 .60% (contractual commercial rates and relationship rates) $85 .50% – Continued migration of portfolio into time deposits .40% $65 Deposit mix: 31% noni
Slide 9: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations Excluding impact of PAA, 4Q17 net interest income $38 $1,000 $948 $952 4.0% was $914 MM and net interest margin was 2.97% $92 $800 vs. Prior Year 3.5% $600 3.12% 3.09%
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 4Q17 vs. 4Q16 vs. 3Q17 vs. Prior Year Trust and investment services income $ 131 $ 8 $ (4) Noninterest income up $47 MM from 4Q16, excl. Investment banking and debt 200 43 59 placement fees notable items(a),(b) Service charge
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 4Q17 vs. 4Q16 vs. 3Q17 Notable items: Personnel $ 608 $ (40) $ 50 $ in millions 4Q17 4Q16 3Q17 Net occupancy 92 (20) 18 Merger-related charges $56 $207 $36 Computer processing 54 (43) (2) Impact of tax reform and related ac
Slide 12: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 4Q17 allowance for loan losses to $100 1.00% period-end loans of 1.01% $900 $877 250% .80% $858 $75 $72 $66 200% $52 $49 .60% $800 $50 174% 150% .40% 137% 100% $700 $25 .34% .20% 50% .24% $
Slide 13: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 10.08%(a) at 12/31/17 10.08% 10.00% 9.54% Repurchased $199 MM(c) in common shares during 4Q17 8.00% Increased common share dividend to $.105 per common share in 4Q17; 11% increase from PQ and
Slide 14: 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 income expected to be in the range of $3.9 B - $4.0 B Net Interest Income • Outlook includes one rate inc
Slide 15: Appendix
Appendix 15
Slide 16: Loan Portfolio Detail, at 12/31/17
Loan Portfolio Detail, at 12/31/17 Total Loans Commercial Loans $ in billions 12/31/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 41.9 48 Transportation Automotive Business Products Commercial real estate 16.0 19 Techn
Slide 17: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $29.3 $29.6 $30.0 3.00% backed MBS and CMOs 2.50% ‒ Primarily fixed rate $20.0 2.06% ‒ GNMA 45% of 4Q17 average balances 1.87% 2.00% Portfolio used for funding and liquidit
Slide 18: Interest Rate Risk Management
Interest Rate Risk Management The strength and diversity of our franchise positions Key to benefit from economic growth and a rising rate environment Business and Balance Sheet Highlights Net Interest Income Sensitivities (FY18) ($MM) • Strong, low-cost deposit base (change vs. FY 2018 outlook)(a) –
Slide 19: 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% .47% 6.0% .42% 4.0% 3.4% 3.2% .25% 2.0% .10% .10% .00% .0% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q
Slide 20: 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 (%) 12/31/17 4Q17 4Q17 4Q17 12/31/17 12/31/17 12/
Slide 21: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - - - - - $ (6) - - - Operating lease income and other - - - - - $ (2) - - - leasing gains Other income - - - - $ 9 (10) - - - Noninterest income - - - - $ 9 $ (12) - - -
Slide 22: Estimated Impact of Tax Reform and Related Actions
Estimated Impact of Tax Reform and Related Actions Estimated Federal Tax Reform Total Estimated Tax Reform Impact Related Actions Tax Reform Impact $ in millions Net interest income (TE) - - - (a) Noninterest income $ (1) - $ (1) Noninterest expense 29 (c) Personnel expense - $ 16 16 (a) Nonpersonne
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended Twelve months ended $ in millions 12/31/2017 9/30/2017 12/31/2016 12/31/2017 12/31/2016 Notable Items Merger-related charges $ (56) $ (36) $ (198) $ (217) $ (474) Impacts of tax reform and related actions (30) - - (30) - Merchant services gain - (5)
Slide 24: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended Twelve months ended $ in millions 12/31/2017 9/30/17 6/30/17 3/31/17 12/31/16 12/31/2017 12/31/2016 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,268 $ 15,241 $ 15,200 $ 15,184 $ 14,901 $ 15,224 $ 12,647 Les