Slide 1: KeyCorp First Quarter 2023 Earnings Review
KeyCorp First Quarter 2023 Earnings Review April 20, 2023 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: Well Positioned for Dynamic Market Conditions
Well Positioned for Dynamic Market Conditions Positioned to deliver sound, profitable growth ✓ Durable, relationship-based business model provides stability and positions Key to perform through the cycle ✓ Diverse core deposit base driven by a sustained focus on primacy ✓ Strong liquidity position -
Slide 4: 1Q23 Highlights
1Q23 Highlights Results 2023 Outlook and Updates ▪ EPS of $.30 per diluted common share ▪ Supporting relationship clients through ‒ Includes $64MM(1) of charges related to expense actions dynamic market conditions ‒ Includes $94MM(1) related to reserve build ‒ Offering on and off-balance sheet solut
Slide 5: Financial Review
Financial Review
Slide 6: Financial Highlights
Financial Highlights 1Q23 4Q22 1Q22 LQ Δ Y/Y Δ Continuing operations, unless otherwise noted EPS – assuming dilution $.30 $ .38 $ .45 (21.1) % (33.3) % Cash efficiency ratio(1) 68.0 % 60.3 % 62.4 % 770 bps 560 bps Return on average tangible common equity(1) 13.2 18.1 14.1 (490) (90) Profitability Re
Slide 7: Loans
Loans Growth driven by relationship-based strategy across commercial and consumer Total Average Loans Highlights $ in billions vs. Prior Year $114.4 $117.7 $119.8 ▪ Average loans up 16% from 1Q22 $109.1 $103.8 − Growth in C&I and commercial mortgage real estate loans $36.7 $36.8 $34.1 $36.1 − Growth
Slide 8: Deposits
Deposits Balances remained stable, with continuing mix shift Deposits Highlights $ in billions ▪ Cumulative total interest-bearing deposit beta: 29%(1) $150.2 $147.5 $143.4 $144.2 $145.7 $144.1 ▪ Expecting cumulative beta to peak in the low 40s Average Commercial $58.7 $56.2 $54.2 $58.4 $58.9 $60.2
Slide 9: Deposits: A Diverse Core Base
Deposits: A Diverse Core Base Key’s deposit base is made up of over three and a half million retail, small business, private banking, and commercial clients, with two thirds of balances covered by FDIC insurance or collateralized 1Q23 Mix by Client Highlights $ in billions ▪ 54% of deposits are from
Slide 10: Net Interest Income and Margin
Net Interest Income and Margin Linked quarter benefit of higher interest rates and earning assets offset by interest-bearing deposit costs and funding mix shift Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions, continuing operations vs. Prior Year $1,203 $1,227 $1,104 $1
Slide 11: Net Interest Income Opportunities
Net Interest Income Opportunities Expecting significant benefit from swap and Treasury maturities NII Pickup from Short-dated Maturities(1) Illustrative, $ in millions $180 $147 $71 Treasuries $114 $50 Swaps $92 $17 $29 ~$720MM annualized NII $66 benefit by 1Q25 $11 $109 $41 $85 $97 ~$1Bn $28 $6 $76
Slide 12: Noninterest Income
Noninterest Income Growth from trust and investment services income offset by lower deposit service charges, investment banking and debt placement as expected Noninterest Income Highlights vs. Prior Year $ in millions - up / (down) 1Q23 vs. 1Q22 vs. 4Q22 ▪ Noninterest income down $68MM (-10%) from 1
Slide 13: Noninterest Expense
Noninterest Expense Completed actions this quarter which represented $200MM in annualized benefit to allow for investment while keeping costs stable Noninterest Expense Highlights vs. Prior Year $ in millions - favorable / (unfavorable) 1Q23 vs. 1Q22 vs. 4Q22 ▪ Noninterest expense up $106MM (+10%) f
Slide 14: Credit Quality
Credit Quality Disciplined underwriting with net charge-offs remaining near historically low levels Net Charge-offs & Provision for Credit Losses Delinquencies to Period-end Total Loans $ in millions $265 Continuing Operations 0.16% 0.15% 0.15% 0.14% 0.16% 0.12% 0.15% 0.11% 0.14% 0.13% $139 $109 $83
Slide 15: Credit Quality: Prudently Managing CRE
Credit Quality: Prudently Managing CRE We have meaningfully de-risked our business by repositioning our commercial real estate (CRE) portfolio following the global financial crisis ➔ Key’s CRE exposure has declined significantly, and we remain rigorously focused on managing risk Repositioned Portfol
Slide 16: Liquidity
Liquidity Prudent management – capacity comfortably exceeds the level of uninsured deposits Additional Available Liquidity $ in billions, as of 3/31/2023 Liquidity Sources Federal Reserve Cash Balance ~$8 Unpledged Investment Securities ~16 Available FHLB Borrowing Capacity ~7 Fed Availability ~45 T
Slide 17: Capital
Capital Strong, stable position within targeted range, with significant AOCI accretion expected over the next 7 quarters Common Equity Tier 1(1) Projected AOCI Accretion Illustrative, $ in billions Target operating range: 9% - 9.5% ~40% Burn down 9.4% 9.2% 9.1% 9.1% 9.1% $5.5 $4.3 $3.3 1Q22 2Q22 3Q2
Slide 18: 2023 Outlook
2023 Outlook Full Year 2023 (vs. Full Year 2022) Updated Guidance (as of 4/20/2023) ➔ Changes reflected in red • Loans: up 6% - 9% Average Balance Sheet • Deposits: flat to down 2% Net Interest Income (TE) • Net interest income: down 1% - 3% (previously up 1% - 4%) Noninterest Income • Noninterest i
Slide 19: Appendix
Appendix
Slide 20: Commercial Loan Portfolio Detail
Commercial Loan Portfolio Detail Total Commercial Loans Targeted Industry Verticals $ in millions 3/31/23 % of total loans Consumer Healthcare Technology Energy Commercial and industrial $ 60,565 50% Commercial real estate 18,938 16 Industrial Real Estate Public Sector Commercial lease financing 3,7
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 (1) 2.9% $ in millions, non-owner occupied 3/31/23 % of total loans Multifamily $ 8,934
Slide 22: Credit Quality
Credit Quality Nonperforming Loans $ in millions $439 $429 $390 $416 $387 .41% .38% .34% .32% .35% 1Q22 2Q22 3Q22 4Q22 1Q23 NPLs NPLs to period-end loans Metric(1) 1Q23 4Q22 3Q22 2Q22 1Q22 Delinquencies to EOP total loans: 30-89 days .14 % .15 % .16 % .12 % .11 % Delinquencies to EOP total loans: 90
Slide 23: Credit Quality
Credit Quality Credit Quality by Portfolio Net loan charge- Allowance / Allowance / Period-end Average Net loan Nonperforming Ending offs(3) / average period-end NPLs $ in millions loans loans charge-offs loans allowance loans (%) loans (%) (%) 3/31/23 1Q23 1Q23 1Q23 3/31/23 3/31/23 3/31/23 3/31/23
Slide 24: Consumer Loan Portfolio Detail
Consumer Loan Portfolio Detail Total Consumer Loans Laurel Road $ in millions Origination Volume $ in millions 3/31/23 % of total loans WA FICO at origination $820 Consumer mortgage $ 21,632 18% 759 $445 Home equity 7,706 6 810 $194 $118 $100 Consumer direct 6,359 5 741 Credit card 969 1 793 1Q22 2Q
Slide 25: Balance Sheet Management Detail
Balance Sheet Management Detail 1Q23 Balance Sheet Highlights Highlights Loan Composition(1) Deposit Mix(2) Short-term Treasury Maturities(4) $3.5 $ in billions Noninterest- $2.9 Other 1M LIBOR $3.0 $2.6 bearing 27% WA yield on portfolio 0.43% 8% 8% $2.5 $2.0 .48% Fixed 3M LIBOR $1.5 3% $1.5 .44% 36
Slide 26: Hedging Strategy
Hedging Strategy Opportunistically locking in future benefit while managing downside risk Hedge Portfolio Recent ALM Hedge Actions(3) $ in billions $ in billions 3/31/23 1Q23 • Added $3Bn of forward-starting receive fixed swaps - WA receive rate: 3.4% A/LM Hedges $ 27.0 QTD • Executed $3.3Bn of forw
Slide 27: Investment Portfolio
Investment Portfolio Existing Portfolio Repricing Characteristics Highlights $ in billions ▪ Portfolio used for funding and liquidity management $16.0 ‒ Portfolio composed primarily of fixed-rate GNMA and GSE- backed MBS and CMOs ‒ Portfolio yield excluding short-term Treasury/Agency securities: 2.3
Slide 28: 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 Residential Residential Commercial Asset- Remaining maturity, Agencies, and Collateralized Mortgage- Mortgage- Total Remaining matu
Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 3/31/2023 12/31/2022 3/31/2022 Tangible com m on equity to tangible assets at period end Key shareholders' equity (GAAP) $ 14,322 $ 13,454 $ 15,308 Less: Intangible assets (1) 2,836 2,844 2,810 Preferred Stock (2) 2,446 2,446 1,856 Ta
Slide 30: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three m onths ended 3/31/2023 12/31/2022 3/31/2022 Return on average tangible com m on equity from continuing operations Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) $ 275 $ 356 $ 420 Average tangible common