Keycorp · NYSE:KEY
Keycorp — Credit Suisse Financial Services Forum 2015
35 slides from Keycorp's conference presentation, Feb 11, 2015
Slide 1: Credit Suisse Financial Services Forum
Credit Suisse Financial Services Forum February 11, 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 presentation contains forward-looking statements, including statements about our financial condition, results of operations, asset quality trends, capital levels and profitability. Forward-looking statements can often be identifie
Slide 3: 2014 Highlights
2014 Highlights Our relationship strategy has translated into measurable results EPS up 12%; generated positive operating leverage Average Loans ($) Total up 5% CF&A up 11% Positive Total average loans up 5% from prior year Operating Noninterest income up 2% with positive trends in Leverage several
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: Maintaining a Moderate Risk Profile
Maintaining a Moderate Risk Profile Enterprise-wide risk management approach drives quality Targeted, Relationship-based Approach • Target specific segments and sectors where we • Clearly defined and well understood risk appetite have expertise and tolerances • Execute rigorous and disciplined sales
Slide 6: Disciplined Capital Management
Disciplined Capital Management Disciplined in how we manage, invest, deploy and return our strong capital position Capital Organic Share Opportunistic Priorities Dividends Growth Repurchases Growth Strong Capital Position Peer-leading Return Tier 1 Common Equity (a) Shareholder Payout (b) 11.36% 11.
Slide 7: Outlook and Expectations
Outlook and Expectations FY 2014 FY 2015 Average Loans Mid-single digit growth vs. FY 2013 • Mid-single digit growth vs. FY 2014 Relatively stable from 2013, with • Up low-to-mid single digit percentage vs. FY 2014 Net Interest Income slight downward pressure from (low single-digits without the bene
Slide 8: Key Community Bank
Key Community Bank A local relationship bank serving retail, private banking and business clients Key’s Community Bank Franchise Key 2014 Revenue Business Description Clients Provides deposit, investment, • Individuals and Retail and and loan products to clients families Business through our ~1,000
Slide 9: Leveraging our Model and Geographic Diversity
Leveraging our Model and Geographic Diversity Delivering a consistent strategy across our franchise while also leveraging market- specific opportunities Western Markets Eastern Markets • Deposits: $16 B • Deposits: $31 B • Branches: 382 • Branches: 612 • Demographic: younger with high growth potenti
Slide 10: Community Bank: Retail Priorities
Community Bank: Retail Priorities I Driving Positive Operating Leverage II Acquiring and expanding relationships with a compelling value proposition III Optimizing channels and investing in our digital future 10
Slide 11: Driving Positive Operating Leverage
I Driving Positive Operating Leverage Improving productivity and efficiency Delivering a Consistent, Productive and Efficient Model Across the Franchise Enhanced playbooks New coaching Investment in and Reorganization and Channel optimization Active performance and relationship structure and alignme
Slide 12: 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 Growth in new Ease • Drives client acquisition, opportunity for expansion • Early results: solid demand and sales
Slide 13: Optimizing Channels
III Optimizing Channels Multi-channel delivery, with investment in digital channels and redefined support of branches, aligns with changing client preferences Changing Client Behavior Multi-channel Offering Online and mobile transactions now exceed branch Branches Remain transactions by 2x Important
Slide 14: Community Bank: Focused Forward
Community Bank: Focused Forward Expenses well-controlled: I down 6% from 2012 Driving Positive Operating Leverage Revenue per FTE: up 10% from 2012 2012 2013 2014 2012 2013 2014 II Core deposits: Retail Priorities up 10% from 2012 Acquiring and expanding relationships with a compelling value proposi
Slide 15: Appendix
Appendix 15
Slide 16: Business Model: Aligned and Targeted
Business Model: Aligned and Targeted Local delivery of broad product set and industry expertise Differentiated platform with depth and maturity Traditional Bank Products Capital Markets Capabilities Commercial mortgage Derivatives & foreign Loans Deposits & payments Equity capital markets Equity res
Slide 17: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 4Q14 3Q14 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 85% 87% Efficiency NCOs to average loans .22% .22% Moderate Risk 40 - 60 bps Profile Provision to average loans .15% .15% High Quality, Net interest margin 2.94% 2.96% LT: >3.50% Diverse R
Slide 18: Financial Highlights
Financial Highlights Metrics 4Q14 3Q14 2Q14 1Q14 4Q13 EPS – assuming dilution $ .28 $ .23 $ .27 $ .26 $ .26 Cash efficiency ratio (e) 64.4 % 69.5 % 65.8 % 64.9 % 67.4 % Financial Performance (a) excl. efficiency and pension charges 63.4 66.0 63.4 63.9 65.1 Net interest margin (TE) 2.94 2.96 2.98 3.0
Slide 19: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions Average total loans up 5% in 4Q14 from prior year, driven by CF&A up 12% $28.0 $27.2 Achieved guidance with FY 2014 average loan $24.2 balances up 5% $21.0 – Both commercial and consumer loans up $14.0 Total comm
Slide 20: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Funding cost continues to improve .80% Transaction deposit balances up 4% from 4Q13 .60% .53% .51% Deposit growth from prior year (+2%) reflects inflows from commercial clients as well as .40% commercial mortgage servicing .20% .20% .15% Large commercial
Slide 21: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income & Net Interest Margin Trend (TE) $ in millions; continuing operations Net interest income relatively stable with prior year, as loan growth and a more favorable mix of lower- cost deposits mostly offset lower earning asset $620 4.00% yiel
Slide 22: 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 ~3% (b) Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short-term rates
Slide 23: Noninterest Income
Noninterest Income Highlights Noninterest Income Noninterest income up 8% from prior year and up $ in millions; continuing operations 18% from prior quarter, benefitting from: $525 $490 – Momentum in core businesses $453 $450 – Record quarter and year for investment banking and debt placement fees $
Slide 24: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions 4Q expenses down 1% from prior year, with benefit from continuous improvement efforts and lower $800 efficiency charges offsetting growth related to $712 $704 Pacific Crest acquisition $700 Expenses down 2% from 2013, achieving
Slide 25: Efficiency Ratio: Driving to 60% and Below
Efficiency Ratio: Driving to 60% and Below Business plans and macroeconomic environment provide path to an efficiency ratio below 60% Cash Efficiency Ratio(a) Outlook 70% 65% 2-3 year outlook: 60% 60% 55% 50% (b) 4Q14 Business Growth, Expense Savings Rising Rate Benefit Long-term Target: <60% Net of
Slide 26: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed primarily of GNMA and GSE- $20.0 5.00% $17.2 $17.1 backed MBS and CMOs $15.0 4.00% Currently reinvesting cash flows into GNMA 3.00% $10.0 securities in preparation for upcoming 2.00% reg
Slide 27: Continued Improvement in Asset Quality
Continued Improvement in Asset Quality Highlights Net Charge-offs & Provision for Loan and Lease Losses $ in millions Net loan charge-offs decreased 14% from 4Q13 to $60 .60% $32 MM, or 22 bps of average loans Total gross charge-offs down 26% from 4Q13 and $40 $37 .40% flat with 3Q14 $32 .27% $22 No
Slide 28: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings (a) Continuing operations Continuing operations .75% 0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 .58% (2)% .50% (3)% .41% (4)% (6)% .25% .17% .13% (8)% .00% (10)% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q1
Slide 29: 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 (%) 12/31/14 4Q14 4Q14 4Q14 12/31/14 12/31/14
Slide 30: 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 31: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $4.0 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 97% of total portfolio; branch- principal and interest payments; $6.5 billion are lines originated $1.5 billion in lines outstanding (14% of t
Slide 32: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 12-31-14 vs. 12-31-14 9-30-14 4Q14 (b) 3Q14 (b) 12-31-14 9-30-14 9-30-14 Residential properties – homebuilder $ 10 $ 11 $ (1) - $ 1 $ 9 $ 10 Marine and RV floor plan
Slide 33: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 12-31-14 9-30-14 6-30-14 3-31-14 12-31-13 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,530 $ 10,486 $ 10,504 $ 10,403 $ 10,303 Less: Intangible assets (a) 1,090 1,105 1,008 1,012 1,014 Pr
Slide 34: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 12-31-14 9-30-14 6-30-14 3-31-14 12-31-13 Average tangible common equity Average Key shareholders’ equity (GAAP) $ 10,562 $ 10,473 $ 10,459 $ 10,371 $ 10,272 Less: Intangible assets (average) (a) 1,096 1,037 1,010 1,013 1,0
Slide 35: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions December 31, 2014 Tier 1 common equity under current regulatory rules $ 9.5 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and PC
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