Slide 1: KeyCorp Second Quarter 2019 Earnings Review
KeyCorp Second Quarter 2019 Earnings Review July 23, 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: 2Q19 Investor Highlights
2Q19 Investor Highlights Revenue reflects solid balance sheet growth and momentum in fee-based businesses − Average loans up 2% vs. PY reflecting broad-based C&I growth and strength in consumer, driven by Laurel Road and residential mortgage • Successful integration of Laurel Road acquisition: $40
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 2Q19 1Q19 2Q18 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .40 $ .38 $ .44 5 % (9) % EPS – excl. notable items(a), (b) .44 .40 .44 10 - Cash efficiency ratio(a) 61.9 % 61.9 % 58.8 % - 310 bps Cash efficiency –excl. notable items(a), (b) 58.
Slide 6: Loans
Loans Total Average Loans Highlights $ in billions $91 vs. Prior Year $90 $89 Average loans up 2% from 2Q18 – Commercial balances reflect strong C&I growth (+5%) driven by broad-based growth with $80 middle-market clients, partially offset by a decline in commercial real estate – Consumer loans re
Slide 7: Deposits
Deposits Average Deposits Highlights $ in billions $110 Deposit cost up 6 bps from 1Q19, reflecting: $110 1.00% – Continued migration of portfolio into higher-yielding $104 products .80% .82% $100 Strong and stable deposit base .60% – 26% noninterest-bearing .40% – ~65% stable retail and low-cos
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, 2Q19 net interest income was $28 $987 $17 $989 $1,000 4.0% $972 MM and net interest margin was 3.01% $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) 2Q19 vs. 2Q18 vs. 1Q19 Trust and investment services income $ 122 $ (6) $ 7 Noninterest income down $38 MM (-6%) from 2Q18 Investment banking and debt 163 8 53 − Excluding notable items in prior period, down
Slide 10: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 2Q19 vs. 2Q18 vs. 1Q19 vs. Prior Year Personnel $ 589 $ 3 $ 26 Noninterest expense up $26 MM, or 3% Net occupancy 73 (6) 1 − Excluding notable items up $1 MM(a) Computer processing 56 5 2 Business services, professional f
Slide 11: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 2Q19 allowance for loan losses to period-end loans of .97% $100 1.00% $887 $890 $900 250% $74 .80% $75 $64 $65 200% $60 .60% $800 $50 150% 163% 159% .40% 100% $700 $25 .29% .20% 50% .27% $0
Slide 12: Capital
Capital Common Equity Tier 1(a) Highlights 12.00% Strong capital position: CET1 ratio of 9.60%(a) at 6/30/2019 10.13% 10.00% 9.60% Declared dividend of $0.17 per common share and repurchased $180 MM(c) in common shares in 2Q19 8.00% Planned capital actions for 3Q19-2Q20 − 9% common share divid
Slide 13: FY2019 Outlook & Long-term Targets
FY2019 Outlook & Long-term Targets FY2019 outlook excludes the impact of 3Q19 activity disclosed in Key’s Form 8-K filing on 7/16/2019 FY 2019 Average Balance • Loans: average balances in the range of $90 B - $91 B Sheet • Deposits: average balances in the range of $108 B - $109 B Net Interest Incom
Slide 14: Appendix
Appendix 14
Slide 15: Loan Portfolio Detail, at 6/30/19
Loan Portfolio Detail, at 6/30/19 Total Loans Commercial Loans $ in billions 6/30/19 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Automotive Commercial and industrial $ 48.5 53 Business Products Transportation Business Services Commercial real esta
Slide 16: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $32.1 Portfolio composed primarily of GNMA and GSE- $32.0 $29.7 2.75% backed MBS and CMOs 2.49% ‒ Primarily fixed rate $24.0 2.50% ‒ GNMA 41% of 2Q19 average balances 2.22% $16.0 2.25% Portfolio used for funding an
Slide 17: Asset & Liability Management Positioning
Asset & Liability Management Positioning Balanced positioning supports strong, stable net interest margin Business and Balance Sheet Highlights Positioning • Strong, low-cost deposit base • Actively hedging to reduce current and future – $82 B interest-bearing deposits at 110 bps exposure to declini
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% .49% 4.0% 3.5% .40% .33% 2.7% 2.0% .20% .12% .08% .00% .0% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q17 4Q17 1Q18 2Q18 3Q18 4Q
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 (%) 6/30/19 2Q19 2Q19 2Q19 6/30/19 6/30/19 6/30/1
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6/30/2019 3/31/2019 6/30/2018 Notable Items Efficiency initiative expenses $ (50) $ (26) $ (22) Laurel Road acquisition expenses (2) - - Sale of insurance business (net) - - 73 Lease residual loss - - (42) Total notable items $ (52) $
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended 6/30/2019 3/31/2019 6/30/2018 $ in millions Average tangible common equity Average Key shareholders' equity (GAAP) $ 16,531 $ 15,702 $ 15,032 Less: Intangible assets (average) (a) 2,959 2,813 2,883 Preferred Stock (average) 1,762 1,450 1,025 Average