Slide 1: Fourth Quarter 2018 Earnings Review
KeyCorp Fourth Quarter 2018 Earnings Review January 17, 2019 Beth E. Mooney 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: 2018 – Delivering on Commitments
2018 – Delivering on Commitments 6th consecutive year of positive operating leverage − Record full-year revenue of $6.4 billion − All-time highs in several fee-based businesses, including investment banking and debt placement fees ($650 MM in FY2018) − Expenses remain well-managed; reflect focus on
Slide 4: Strategic Acquisition: Laurel Road Finance
Strategic Acquisition: Laurel Road Finance Acquisition of online lending platform focused on super prime professionals Transaction Overview Positioned to Outperform Acquisition of leading national, digital-first consumer Revisiting 2018 Investor Day Themes lending platform • Leading digital originat
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 4Q18 3Q18 4Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .45 $ .45 $ .17 - N/M EPS – excl. notable items(a), (b) .48 .45 .36 7 % 33 % Cash efficiency ratio(a) 59.9 % 58.7 % 66.7 % 120 bps (680) bps Cash efficiency –excl. notable items(a),
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $89 $90 $86 Average loans up 4% from 4Q17 – C&I balances up 9% driven by broad-based growth with middle-market clients $80 – Home equity loans continue to be impacted by market trends vs. Prior Quarter $70 1Q17 2Q17 3Q17 4Q17 1Q18 2Q1
Slide 8: Deposits
Deposits Average Deposits Highlights $ in billions Deposit cost up 11 bps from 3Q18, reflecting: $110 $108 1.00% – Higher interest rates and beta $104 – Continued migration of portfolio into higher-yielding .80% products $100 .60% .64% Strong and stable deposit base .40% – 28% noninterest-bearing $9
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 PAA, 4Q18 net interest income was $38 $952 $23 $1,008 $1,000 4.0% $985 MM and net interest margin was 3.09% $800 vs. Prior Year 3.5% $600 Net interest income
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Trust and investment services income $ 121 $ (10) $ 4 Noninterest income down $11 MM (-2%) from 4Q17 Investment banking and debt 186 (14) 20 placement fees Trust and investment services i
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Personnel $ 576 $ (33) $ 23 Noninterest expense down $86 MM, or 8% (down Net occupancy 75 (17) (1) $42 MM excl. notable items) Computer processing 55 1 3 Personnel expense reflects: Bus
Slide 12: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 4Q18 allowance for loan losses to period-end loans of .99% $100 1.00% $900 $877 $883 250% .80% $75 $60 $59 200% $52 $49 .60% $800 $50 174% 150% 163% .40% 100% $700 $25 .27% .20% 50% .24% $0
Slide 13: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 9.92%(a) at 12/31/2018 10.16% 9.92% 10.00% Increased common share dividend by 62% (from $0.105 to $0.17 per quarter) from 4Q17 8.00% Repurchased $278 MM(c) in common shares during 4Q18 6.00%
Slide 14: FY2019 Outlook & Long-term Targets
FY2019 Outlook & Long-term Targets FY 2019 Average Balance • Loans: average balances in the range of $90 B - $91 B Sheet • Deposits: average balances in the range of $108 B - $109 B Net Interest Income • Net interest income expected to be in the range of $4.0 B - $4.1 B (TE) • Outlook assumes no int
Slide 15: Appendix
Appendix 15
Slide 16: Loan Portfolio Detail, at 12/31/18
Loan Portfolio Detail, at 12/31/18 Total Loans Commercial Loans $ in billions 12/31/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 45.8 51 Transportation Automotive Business Products Commercial real estate 16.0 18 Techn
Slide 17: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $32.0 $29.6 $30.3 2.50% backed MBS and CMOs $24.0 2.39% 2.25% ‒ Primarily fixed rate 2.06% ‒ GNMA 45% of 4Q18 average balances $16.0 2.00% Portfolio used for funding and li
Slide 18: Asset & Liability Management Positioning
Asset & Liability Management Positioning Moderate asset sensitivity supports strong, stable net interest margin Business and Balance Sheet Highlights Positioning • Strong, low-cost deposit base • Actively hedging to reduce current and future – $78 B interest-bearing deposits at 89 bps exposure to de
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% .42% 3.4% .40% .35% 2.8% 2.0% .20% .13% .10% .00% .0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q
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 (%) 12/31/18 4Q18 4Q18 4Q18 12/31/18 12/31/18 12/
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended Twelve months ended 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Notable Items Efficiency initiative expenses $ 24 - - $ 24 - Pension settlement charge 17 - - 17 - Merger-related charges - - $ (56) - $ (217) Impacts of tax refor
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended Twelve months ended $ in millions 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,384 $ 15,210 $ 15,268 $ 15,131 $ 15,224 Less: Intangible assets (average) (a) 2,828 2,8