Slide 1: KeyCorp Fourth Quarter 2023 Earnings Review
KeyCorp Fourth Quarter 2023 Earnings Review January 18, 2024 Chris Gorman Clark Khayat Chairman and Chief Financial Officer Chief Executive 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: 2023 Results
2023 Results Strengthened the foundation to drive sound, profitable growth moving forward Supported clients through dynamic market conditions Focused on expense management – simplifying and streamlining − Growth in commercial clients and consumer households our businesses − Raised $80Bn in capital f
Slide 4: Financial Review
Financial Review
Slide 5: Financial Highlights
Financial Highlights 4Q23 3Q23 4Q22 LQ Δ Y/Y Δ Continuing operations, unless otherwise noted EPS – assuming dilution Includes $0.22 impact from selected items(1) $.03 $.29 $ .38 (89.7) % (92.1) % Cash efficiency ratio(2) 88.6 % 70.3 % 60.3 % 1,830 bps 2,830 bps Return on average tangible common equi
Slide 6: Loans
Loans Results reflect our balance sheet optimization efforts as we deemphasize non-relationship business Total Average Loans Highlights $ in billions vs. Prior Year Average loans down 3% from 4Q22 $117.7 $119.8 $120.7 − Decline in C&I loans (-$1.5Bn) $117.6 $113.9 Average Consumer − Decrease in av
Slide 7: Deposits
Deposits Primacy focus driving customer and deposit growth with average and ending balances up vs. prior quarter Total Average Deposits Highlights $ in billions Cumulative total interest-bearing deposit beta: 49%(2) $145.7 $143.4 $144.8 $145.1 vs. Prior Year $142.9 $3.9 $6.6 $9.0 $6.1 $3.3 Average
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Net interest income in the quarter reflected the continued higher interest rate environment and our balance sheet positioning Net Interest Income (TE) Net Interest Margin Trend (TE) $ in millions, continuing operations $1,227 $1,106 $986 $923 $928 2.73% 2.47% 2.12% 2.0
Slide 9: Noninterest Income
Noninterest Income Continued challenging environment for investment banking and debt placement fees Noninterest Income Highlights vs. Prior Year $ in millions - up / (down) 4Q23 vs. 4Q22 vs. 3Q23 Noninterest income down $61MM (-9%) from 4Q22 Trust and investment services income $ 132 $ 6 $ 2 − Low
Slide 10: Noninterest Expense
Noninterest Expense Excluding the select items(1), expenses remained relatively stable compared to the prior quarter and down from the year-ago period Noninterest Expense Highlights vs. Prior Year $ in millions - favorable / (unfavorable) 4Q23 vs. 4Q22 vs. 3Q23 Noninterest expense up $216MM (+19%)
Slide 11: Credit Quality
Credit Quality Disciplined underwriting with net charge-offs remaining below our long-term targeted range Net Charge-offs & Provision for Credit Losses Delinquencies to Period-end Total Loans $ in millions Continuing Operations 0.20% $265 0.15% 0.15% 0.14% $167 0.26% 0.12% 0.24% 0.14% $139 0.09% 0.1
Slide 12: Capital
Capital Strong regulatory capital position with our primary ratio up 20 basis points QoQ and 90 basis points YoY, well above our targeted range Common Equity Tier 1(1) Projected AOCI Impacts(2) $ in billions Target operating range: 9% - 9.5% AOCI Position AOCI Forward Rates AOCI Flat Rates 12/31/202
Slide 13: 2024 Outlook
2024 Outlook FY 2024 Growth (vs. FY 2023) • Average Loans: down 5 - 7% | EOP Loans: relatively stable vs. YE23 balances Balance Sheet • Average Deposits: flat to down 2% • Net interest income: down 2 - 5% Net Interest Income (TE) Up low-single digits vs. 4Q23 annualized exit rate 10%+ 4Q24 vs. 4
Slide 14: Net Interest Income Outlook
Net Interest Income Outlook Tailwinds from Short-term Swaps & Treasuries Maturities(1) Maturities Schedule $ in millions; cumulative view $ in billions $219 $4.9 $180 $4.5 $140 $3.1 $3.0 $2.7 $112 $78 $1.7 $1.1 0.37% 0.33% 0.54% 0.49% 0.50% 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 2Q23 3Q23 4Q23 1Q24 2Q24
Slide 15: Net Interest Income Outlook
Net Interest Income Outlook NII & NIM Outlook Other Key Inputs & Assumptions Interest Rates: Blend of 12/31/23 and 1/5/24 forward curves Loan Balances 10%+ growth $1Bn+ − Period-end loans relatively stable (12/31/24 vs 12/31/23) 2.40 – Deposit Costs 2.50% − Deposit costs peak in 1H24 − Lag in
Slide 16: Appendix
Appendix
Slide 17: Positioned for the Future
Positioned for the Future Made significant progress in 2023 to position Key for the future and for the new environment Repositioned Company in 2023 Well-Positioned Moving Forward Proactive balance sheet management − Significantly increase CET1 through RWA optimization Franchise momentum, client
Slide 18: Strengthened the Balance Sheet
Strengthened the Balance Sheet Significant Funding Improvement Earning Asset Optimization ~$12Bn Reduction in Highest-Cost Funding Sources ~90 bps CET1 Build in 9 months $ in billions 50bps 20bps 20bps Avg Cost: 6.5% (1) (1) ~$5B Remix into Core Customer Deposits Significant RWA Optimization With Li
Slide 19: Deposits: A Diverse Core Base
Deposits: A Diverse Core Base Key’s deposit base is made up of over 3.5 million retail, small business, private banking, and commercial clients, with two-thirds of balances covered by FDIC insurance or collateralized 4Q23 Mix by Client Highlights As of 12/31/2023 $13.1Bn of uninsured deposits are
Slide 20: Commercial Business Loan Detail
Commercial Business Loan Detail Total Commercial Loans Targeted Industry Verticals $ in millions 12/31/23 % of total loans Consumer Healthcare Technology Energy Commercial and industrial $ 55,815 50% Commercial real estate 18,253 16 Industrial Real Estate Public Sector Commercial lease financing 3,5
Slide 21: Commercial Real Estate Loan Portfolio Detail
Commercial Real Estate Loan Portfolio Detail Key has limited exposure to riskier asset classes like office, lodging, and retail Portfolio by Asset Class Office Loan Detail Office Loans as a Portion of Total Loans $ in millions, non-owner occupied 12/31/23 % of total loans 3.1% Multifamily $ 8,853 7.
Slide 22: Consumer Business Detail
Consumer Business Detail Total Consumer Loans Wealth Management $ in billions 12/31/23 % of total loans WA FICO at origination Assets under management of $54.9Bn, up $3.6Bn from the year-ago period Consumer mortgage $ 20,958 19% 753 Collaborating with businesses across Key, representing strong c
Slide 23: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan charge- Allowance / Period-end Average Net loan Nonperforming Ending Allowance / offs(3) / average period-end $ in millions loans loans charge-offs loans allowance NPLs (%)(4) loans (%)(4) loans (%)(4) 12/31/23 4Q23 4Q23 4Q23 12/31/23 12/31/23 12/3
Slide 24: Balance Sheet Management Detail
Balance Sheet Management Detail 4Q23 Balance Sheet Mix and Trends Highlights Loan Composition(1) Deposit Mix(2) Attractive business model with relationship-oriented lending Other 2% Noninterest- franchise bearing 22% − Over 60% of loans are floating rate 1M SOFR Fixed 21% − Core funded franchise w
Slide 25: Hedging Strategy
Hedging Strategy Opportunistically locking in future benefit while managing downside risk Hedging Strategy Hedge Portfolio Balancing desire to lock in potential benefit in the midst of macroeconomic uncertainty and $ in billions 12/31/2023 an inverted yield curve ALM Hedges $ 15.0 − Sensitive to t
Slide 26: Investment Portfolio
Investment Portfolio Existing Portfolio Repricing Characteristics Highlights $ in billions Portfolio used primarily for liquidity and interest rate risk $21.9 management $14.5 $13.2 ‒ Portfolio composed primarily of agency MBS and CMOs ‒ Agency MBS/CMO investments constructed to limit extension ri
Slide 27: Securities Maturity Schedule
Securities Maturity Schedule Available for Sale (AFS) Held to Maturity (HTM) Agency Agency Agency Agency Agency Agency U.S. Treasury, Residential Residential Commercial Remaining maturity, Residential Residential Commercial Asset- Remaining maturity, Agencies, and Collateralized Mortgage- Mortgage-
Slide 28: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 12/31/2023 9/30/2023 12/31/2022 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 14,637 $ 13,356 $ 13,454 Less: Intangible assets (1) 2,806 2,816 2,844 Preferred Stock (2) 2,446 2,446 2,446 T
Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 12/31/2023 9/30/2023 12/31/2022 Return on average tangible com m on equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 30 $ 266 $ 356 Average tangible common
Slide 30: Selected Items Impact on Earnings
Selected Items Impact on Earnings $ in millions; except per share amounts Selected Items Impact on Earnings (a) (Dollars in millions, except per share amounts) Pretax (b) After-tax at marginal rate (b) Quarter to date results Amount Net Income EPS(c) Three months ended December 31, 2023 Efficiency r