Keycorp · NYSE:KEY
Keycorp — Goldman Sachs U.S. Financial Services Conference 2015
31 slides from Keycorp's conference presentation, Dec 8, 2015
Slide 1: Goldman Sachs U.S. Financial Services Conference
Goldman Sachs U.S. Financial Services Conference December 8, 2015 KeyCorp Beth E. Mooney Don Kimble Chairman and Chief Financial Officer Chief Executive Officer
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: Progress Made in 2015
Progress Made in 2015 Our relationship strategy has translated into measurable results Acquired and expanded relationships Pre-Provision Net Revenue (a) Total average loans up 5% from prior year PPNR up 8% Positive Positive trends in several fee-based businesses Operating Investment banking and debt
Slide 4: Driving Positive Operating Leverage
Driving Positive Operating Leverage Executing action plans across our organization to improve efficiency Revenue Growth Expense Savings Acquiring and expanding relationships to grow revenue in our Continuous improvement efforts enable identification and businesses execution of expense savings Improv
Slide 5: Investing in our Businesses
Investing in our Businesses Reinvesting cost savings in our businesses to drive growth Adding senior bankers: existing industry expertise and relationships Community Bank Corporate 3Q12 vs. 3Q15 Bankers Remixing: increasing client-facing Bank RMs Client-facing FTE: 17% roles 23% 3Q14 3Q15 Total FTE:
Slide 6: First Niagara Acquisition
First Niagara Acquisition 6
Slide 7: Why First Niagara?
Why First Niagara? Compelling Strategic Rationale Accelerates Key’s transformation into a high-performing regional bank − Increases ROTCE by ~200 bps − Meaningful cost savings that drive significant value - cash efficiency ratio improves by ~300 bps Generates attractive financial returns − EPS accre
Slide 8: 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 9: Focused Forward
Focused Forward Key is well-positioned to grow and improve returns Maintain momentum in Key’s franchise and continue to generate positive operating leverage Successfully integrate First Niagara acquisition Remain focused on risk management Maintain our strong capital position, with efficient deploym
Slide 10: Appendix – First Niagara Acquisition
Appendix – First Niagara Acquisition 10
Slide 11: 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 12: 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 13: 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 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: 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 16: Appendix - Key Financial Review
Appendix - Key Financial Review 16
Slide 17: 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 18: 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 19: 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 20: 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 21: 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 22: 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 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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
KeyCorp — Goldman Sachs U.S. Financial Services Conference 2015 on 6ix