Slide 1: Third Quarter 2019 Earnings Review
KeyCorp Third Quarter 2019 Earnings Review October 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: 3Q19 Investor Highlights
3Q19 Investor Highlights Chairman and CEO Beth Mooney announced planned retirement effective 5/1/2020 Chris Gorman named President and COO and member of Key’s Board of Directors; Leadership will succeed Mooney as Chairman and CEO on 5/1/2020 Transition Reflects Board’s robust succession manage
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 3Q19 2Q19 3Q18 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .38 $ .40 $ .45 (5) % (16) % EPS – excl. fraud loss & notable items(a), (b) .48 .44 .45 9 7 Cash efficiency ratio(a) 56.0 % 61.9 % 58.7 % (588) bps (269) bps Cash efficiency – excl.
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $95 6.00% $92 Average loans up 4% from 3Q18 $90 $88 5.50% − Commercial balances reflect strong C&I growth (+8%) driven by broad-based growth with $85 5.00% middle-market clients, partially offset by a 4.67% decline in commercial rea
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $120 1.40% Deposit costs flat from 2Q19, reflecting: $110 $106 $100 1.09% 1.20% − Impact of lower interest rates and deposit pricing lag 1.00% $80 Strong and stable deposit base .74% 34% 0.80% $60 .82% − 26% noninterest-bearing(a) 0.60% − ~65% s
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 Excluding PAA, 3Q19 net interest income was $26 $993 $17 $980 $1,000 4.0% $963 MM and net interest margin was 2.95% $800 vs. Prior Year 3.5% $600 Net interest incom
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights vs. Prior Year $ in millions up / (down) 3Q19 vs. 3Q18 vs. 2Q19 Trust and investment services income $ 118 $ 1 $ (4) Noninterest income up $41 MM (+7%) from 3Q18, reflecting continued momentum across fee-based Investment banking and debt 176 10 13 p
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 3Q19 vs. 3Q18 vs. 2Q19 vs. Prior Year Personnel $ 547 $ (6) $ (42) Noninterest expense down $25 MM, or 3% Net occupancy 72 (4) (1) Computer processing 53 1 (3) − Reflects the successful implementation of expense initiativ
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions $ in millions 3Q19 allowance for loan losses to $200 $200 $196 1.00% period-end loans of .96% 3Q19 reflects $123 MM impact from previously disclosed fraud loss $887 $893 .85% $900 250% .80%
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 11.00% Strong capital position: CET1 ratio of 9.52%(a) at 9/30/2019 9.95% 10.00% 9.52% Increased common share dividend 9% ($.17 to 9.00% $.185 per share) Completed $248 MM(c) of common share 8.00% repurchases in 3Q19 7.00% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q1
Slide 13: 4Q Outlook and Long-term Targets
4Q Outlook and Long-term Targets 4Q19 (vs. 3Q19) Long-term Targets Average Loans: Up low single digit Positive operating leverage Average Deposits: Relatively stable Net Interest Income (TE): Relatively stable Cash efficiency ratio: 54% - 56% Noninterest Income: Up low single digit Moderate risk pro
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 9/30/19
Loan Portfolio Detail, at 9/30/19 Total Loans Commercial Loans $ in billions 9/30/19 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Automotive Utilities Commercial and industrial $ 48.4 52 Business Products Transportation Commercial real estate 14.6 16 Busines
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.6 Portfolio used for funding and liquidity $32.0 $29.7 2.75% management: 2.49% − Composed primarily of Fixed Rate GNMA and GSE- $24.0 2.50% backed MBS and CMOs 2.30% − GNMA 43% of 3Q19 average balances $16.0 2.25
Slide 17: Asset & Liability Management Positioning
Asset & Liability Management Positioning Hedging activities moderate interest rate risk: reduce current and future exposure to declining interest rates 3Q19 Balance Sheet Highlights(a) Balanced Interest Rate Risk Position Loan Composition Deposit Mix NII impact of ~1.5% for a ramped 100 bps parall
Slide 18: 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% .41% 3.3% .39% .40% 2.7% 2.0% .20% .10% .06% .00% .0% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q17 1Q18 2Q18 3Q18 4Q18 1Q
Slide 19: 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 (%) 9/30/19 3Q19 3Q19 3Q19 9/30/19 9/30/19 9/30/1
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2019 6/30/2019 9/30/2018 Notable Items Provision for credit losses $ (123) - - Efficiency initiative expenses - $ (50) - Laurel Road acquisition expenses - (2) - Total notable items $ (123) $ (52) - Income taxes (29) (12) - Total
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 9/30/2019 6/30/2019 9/30/2018 Return on average tangible common equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 383 $ 403 $ 468 Plus: Notable items, after