Slide 1: KeyCorp Third Quarter 2015 Earnings Review
KeyCorp Third Quarter 2015 Earnings Review October 15, 2015 Beth E. Mooney Don Kimble Chairman and Chief Financial Officer Chief Executive Officer
Slide 2: Forward-Looking Statements and Additional Information Disclosure
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION DISCLOSURE This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usuall
Slide 3: Investor Highlights – 3Q15
Investor Highlights – 3Q15 Generated positive operating leverage from prior year Revenue up 7% from 3Q14: higher net interest income and noninterest income - Average loans increased 6%, driven by a 15% increase in CF&A loans Positive Operating - Strong fee-based income from corporate services, i
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Metrics 3Q15 2Q15 1Q15 4Q14 3Q14 EPS – assuming dilution $ .26 $ .27 $ .26 $ .28 $ .23 Financial Cash efficiency ratio (e) 66.9 % 65.1 % 65.1 % 64.4 % 69.7 % Performance (a) Net interest margin (TE) 2.87 2.88 2.91 2.94 2.96 Return on average total assets .95 1.03 1.03 1.12 .92 T
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions Average Loans Total average loans up 6% $60.0 Average total loans up 6% in 3Q15 from prior year, $50.0 driven by CF&A loans up 15% – Average total loans up in both the $40.0 Community Bank and the Corporate Bank $30.0 Period-End Loans $20.0 4Q13 1
Slide 7: Deposits
Deposits Average Deposits (a) Highlights $ in billions Total average deposits up 3% vs. Prior Quarter $70.0 0.50% Deposits down slightly from 2Q15 reflecting: $60.0 0.40% – Decline in short-term noninterest-bearing deposit balances from commercial clients and $50.0 0.30% lower certificates of depo
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 vs. Prior Quarter $620 4.00% NII up $7 MM, or 1%, from the prior quarter, $598 primarily due to improvement in the earning $581 3.50% asset mix, partially offset by l
Slide 9: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions 3Q15 vs. 2Q15 vs. 3Q14 vs. Prior Quarter Trust and investment services income $ 108 $ (3) $ 9 Noninterest income down 4% from 2Q15: Investment banking and debt 109 (32) 21 placement fees – Lower investment banking and debt Service char
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions 3Q15 vs. 2Q15 vs. 3Q14 vs. Prior Quarter Personnel (a) $ 426 $ 18 $ 21 Net occupancy 60 (6) (6) Expense growth of 2% from 2Q15 Computer processing 41 (1) 2 – Pension settlement charge of $19 MM in 3Q15 Business services, professional
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Net loan charge-offs remain below targeted range, $50 .60% $45 at 27 basis points of average loans $41 $40 $31 .40% Nonperforming loans represented 67 basis points $30 of period-end loans .22% $20 $19 .27% .20%
Slide 12: Capital
Capital Common Equity Tier 1 Common Equity (a) Tier 1 (a), (b), (c) Highlights 12.00% 11.26% Disciplined capital management 10.51% – Executing on capital priorities: organic 10.00% growth, dividends, share repurchases and opportunistic growth 8.00% 2015 Capital Plan includes share repurchases of
Slide 13: Outlook and Expectations
Outlook and Expectations FY 2015 Average Loans • Mid-single digit growth vs. FY 2014 • Up low single-digits without the benefit of higher rates Net Interest Income • NIM: down from FY 2014, reflecting continued elevated levels of liquidity; relatively stable with 2Q15 reported level Noninterest Inco
Slide 14: Appendix
Appendix 14
Slide 15: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 3Q15 2Q15 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 89% 87% Efficiency NCOs to average loans .27% .25% Moderate Risk Profile 40 - 60 bps Provision for credit losses .30% .28% to average loans Net interest margin 2.87% 2.88% LT: >3.50% High
Slide 16: 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),(b) Outlook 70% 65% 2-3 year outlook: 60% 60% 55% 50% (c) 3Q15 Business Growth, Expense Savings Rising Rate Benefit Long-term Target: <60% Ne
Slide 17: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.2 5.00% Portfolio composed primarily of GNMA and GSE- $17.0 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for upcoming 3.00% $10.0 regulatory liquidity requirements: 2.00% 2.15% 2.07% – 2
Slide 18: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~3% (b) Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short and intermediate- 3Q15 3Q15 term rates over a 12-month period CDs: • Uti
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 .75% 4.0% .61% 3.0% 3.0% .45% 2.6% .50% 2.0% .25% .13% 1.0% .09% .00% 0.0% 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q13 1Q14 2Q14 3Q14 4Q14 1
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 (%) 9/30/15 3Q15 3Q15 3Q15 9/30/15 9/30/15 9/
Slide 21: 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 midd
Slide 22: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $3.9 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 98% of total portfolio; branch- principal and interest payments; $6.3 billion are lines originated $1.2 billion in lines outstanding (
Slide 23: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 9-30-15 vs. 9-30-15 6-30-15 3Q15 (b) 2Q15 9-30-15 6-30-15 6-30-15 Residential properties – homebuilder $ 6 $ 6 - - - $ 5 $ 8 Marine and RV floor plan 1 2 $ (1) - - -
Slide 24: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 9-30-15 6-30-15 3-31-15 12-31-14 9-30-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,705 $ 10,590 $ 10,603 $ 10,530 $ 10,486 Less: Intangible assets (a) 1,084 1,085 1,088 1,090 1,105 Pre
Slide 25: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 9-30-15 6-30-15 3-31-15 12-31-14 9-30-14 Pre-provision net revenue Net interest income (GAAP) $ 591 $ 584 $ 571 $ 582 $ 575 Plus: Taxable-equivalent adjustment 7 7 6 6 6 Noninterest income (GAAP) 470 488 437 490 417 Less: N
Slide 26: Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions September 30, 2015 Common Equity Tier 1 under current RCR $ 9.7 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b