Slide 1: KeyCorp Second Quarter 2020 Earnings Review
KeyCorp Second Quarter 2020 Earnings Review July 22, 2020 Chris Gorman Don Kimble Chairman and Vice Chairman and Chief Executive Officer Chief Financial 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: 2Q20 Investor Themes
2Q20 Investor Themes Positive operating leverage versus the year-ago quarter with record PPNR − Revenue up 17% from prior quarter: reflects strength in NII and fee income (investment banking & debt placement fees, cards and payments income, consumer mortgage income) − Expenses reflect higher produ
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 2Q20 1Q20 2Q19 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .16 $ .12 $ .40 33.3 % (60.0) % Cash efficiency ratio(a) 57.9 % 62.3 % 61.9 % (440) bps (394) bps Return on average tangible common equity(a) 5.0 3.8 13.7 114 (873) Profitability Re
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $110 $108 6.00% PPP $6 Average loans up 19% from 2Q19 $100 $102 $91 − Commercial balances reflect >$6 B of PPP 5.00% $90 production, broad-based core C&I growth and 4.81% increased utilization $80 3.67% 4.00% − Consumer loan growth
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $140 $128 1.40% Interest-bearing deposit costs down 39 bps from 1Q20, reflecting impact of lower interest rates $120 $110 1.20% Strong and stable deposit base $100 1.10% 1.00% − 32% noninterest-bearing(a) $80 34% 0.80% .82% − ~60% stable retail
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 vs. Prior Year $1,100 4.0% $1,025 $989 Net interest income up $36 MM (+4%) from 2Q19 $1,000 3.5% − Largely driven by higher earning asset $900 3.06% balances $800 2.7
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 2Q20 vs. 2Q19 vs. 1Q20 Noninterest income up $70 MM (+11%) from 2Q19 Trust and investment services income $ 123 $ 1 $ (10) Investment banking and debt 156 (7) 40 − Primarily driven by record quarter in consum
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions favorable / (unfavorable) 2Q20 vs. 2Q19 vs. 1Q20 vs. Prior Year Personnel $ 572 $ 17 $ (57) Noninterest expense down $6 MM (-<1%) from Net occupancy 71 2 5 2Q19 Computer processing 56 - (1) − Excluding notable items up $46 MM (+5%)(a
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses $ in millions CECL Implementation $500 $482 1.00% $400 4Q19 and 3Q19 reflect $16 MM and .80% $123 MM, respectively, from $300 previously disclosed fraud loss .60% .36% $200 .40% .29% $96 $100 $65 $74 .20% $0 .00% 3Q18 4Q18 1Q19 2Q19 3Q19 4
Slide 12: Select Commercial Portfolio Focus Areas
Select Commercial Portfolio Focus Areas Active Portfolio Surveillance Portfolios in Focus Ongoing portfolio reviews 3/31/20 6/30/20 % of Total Outstandings Outstandings Loans as of 6/30 $ in millions Monitoring ratings migration Consumer behavior(a) $ 5,276 $ 5,206 4.9% Central reporting on Ed
Slide 13: Capital
Capital Common Equity Tier 1(a) Highlights 11.0% Strong capital position: CET1 ratio of 9.1%(a) at 6/30/2020 10.0% 9.6% 9.1% Well-positioned to weather adverse operating 9.0% environments: − Announced 3Q20 quarterly common share 8.0% dividend of $.185 (consistent with 2Q20 level) 7.0% − Announce
Slide 14: Third Quarter 2020 Trends & Long-term Targets
Third Quarter 2020 Trends & Long-term Targets Third Quarter 2020 Trend (vs. Second Quarter 2020) Average Loans: relatively stable, reflecting consumer loan growth and lower commercial line utilization Deposits: relatively stable Net interest income: up low-single digit reflecting modest NIM im
Slide 15: Appendix
Appendix 15
Slide 16: Loan Portfolio Detail, at 6/30/2020
Loan Portfolio Detail, at 6/30/2020 Total Loans Commercial Loans $ in billions 6/30/20 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 58.3 55 Business Products Transportation Business Services Commercial real es
Slide 17: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.1 Portfolio used for funding and liquidity management $32.0 $30.1 2.75% ‒ Portfolio composed primarily of fixed-rate GNMA and 2.49% GSE-backed MBS and CMOs 2.43% $24.0 2.50% ‒ GNMA 45% of 2Q20 average balance $16
Slide 18: Asset & Liability Management Positioning
Asset & Liability Management Positioning Active hedging moderates interest rate risk, protecting and enhancing net interest income 2Q20 Balance Sheet Highlights(a) Actively Managing Interest Rate Risk Position Loan Composition Deposit Mix Declining rate exposure lower relative to 1Q20 driven by no
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 .80% 6.0% .60% 4.0% 3.3% .39% .40% .33% 2.7% 2.0% .20% .08% .08% .00% .0% 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q18 4Q18 1Q19 2Q19 3Q19 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 allowance offs loans (%) (%) $ in millions (%) 6/30/20 2Q20 2Q20 2Q20 6/30/20 6/30/20 6/30/20 6/30/20
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6/30/2020 3/31/2020 6/30/2019 Notable Items Efficiency initiative expenses - - $ (50) Laurel Road acquisition expenses - - (2) Total notable items - - $ (52) Income taxes - - (12) Total notable items after tax - - $ (40) Tangible commo
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6/30/2020 3/31/2020 6/30/2019 Cash efficiency ratio Noninterest expense (GAAP) $ 1,013 $ 931 $ 1,019 Less: Intangible asset amortization 18 17 22 Adjusted noninterest expense (non-GAAP) $ 995 $ 914 $ 997 Less: Notable items - - 52 Adju