Slide 1: Fourth Quarter 2013 Earnings Review
KeyCorp Fourth Quarter 2013 Earnings Review January 23, 2014 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, including statements about our financial condition, results of operations, asset quality trends, capital levels and profitability. Forward-looking statements can often be identifie
Slide 3: Investor Highlights – 2013
Investor Highlights – 2013 Grew commercial and consumer loans Total average loans up 5% from 2012, driven by CF&A up 12% Optimize and Net interest income up 3% from prior year Grow Fifth straight year of growth for investment banking and debt placement fees Revenue Benefitted from investme
Slide 4: Financial Review
Financial Review 4
Slide 5: Financial Highlights
Financial Highlights Metrics 4Q13 3Q13 2Q13 1Q13 4Q12 EPS – assuming dilution $ .26 $ .25 $ .21 $ .21 $ .20 Cash efficiency ratio (e) 67.4 % 67.5 % 69.1 % 66.0 % 69.0 % Financial Adj. cash efficiency ratio (ex. initiative charges ) (f) (e) 65.1 63.6 65.4 64.5 67.5 Performance (a) Net interest margin
Slide 6: Loan Growth
Loan Growth Highlights Average Commercial, Financial & Agricultural Loans $ in billions 4Q13 total average loans up 3% from the prior year; up 5% excluding the exit portfolio $25.0 $24.2 60.0% $22.4 – Driven by CF&A up 8% in 4Q13 from 4Q12 $20.0 55.0% Average loans up 1% unannualized from 3Q13 w
Slide 7: Improving Deposit Mix
Improving Deposit Mix Highlights Funding Cost Overall funding cost continues to improve, with 1.25% total deposit cost declining to 20 bps 1.00% Transaction deposit balances up 11% from 4Q12 .73% .75% .53% Total CD maturities and average cost .50% – 2014 Q1: $1.6 billion at .65% .31% .20% – 20
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin Highlights Net Interest Income (TE) & Net Interest Margin (TE) Trend $ in millions Net interest income up 1% from 3Q13 Continuing Operations – Relatively stable excl. the impact of leveraged $620 4.00% lease terminations, which reduced net interest $607 income by $8
Slide 9: Noninterest Income
Noninterest Income Highlights Noninterest Income Continuing Operations Core fee income businesses showing strength $ in millions – Excl. gains from leveraged lease terminations(a), $525 noninterest income is up 2% from prior year and up $439 $453 3% from prior quarter $450 $375 Benefitting from
Slide 10: Focused Expense Management
Focused Expense Management Highlights Noninterest Expense $ in millions Expenses down 3% from prior year and 1% from prior quarter $800 $734 $712 Compared to prior quarter, expenses impacted by: $700 – Lower efficiency initiative and pension settlement $600 charges (down $17 MM) – Increased ince
Slide 11: Continued Improvement in Asset Quality
Continued Improvement in Asset Quality Highlights Net Charge-offs & Provision for Loan and Lease Losses $ in millions Net loan charge-offs decreased 36% from 4Q12 to $120 3.00% $37MM, or 27 bps of average loans 2.00% 4Q13 commercial loan net charge-offs were $2MM $80 or 2 bps of average loans $5
Slide 12: Strong Capital Ratios
Strong Capital Ratios Highlights Tangible Common Equity to Tangible Assets (b) Disciplined execution of capital plan 12.00% Repurchased $99 million in common shares 10.15% during 4Q13 10.00% 9.80% Estimated Tier 1 common equity ratio under the Regulatory Capital Rules of 10.6%(a), (b) 8.00% 6.
Slide 13: 2014 Outlook and Expectations
2014 Outlook and Expectations Loans • Mid-single digit average balance growth Net Interest • Relatively stable from 2013 Income Noninterest • Low single-digit growth compared to prior year Income Expense • Low single-digit percentage decline from 2013 Efficiency / • Positive operating leverage Produ
Slide 14: Appendix
Appendix 14
Slide 15: Progress on Targets for Success
Progress on Targets for Success Metrics (a) 4Q13 3Q13 Targets Focus areas Improving balance Loan to deposit ratio (b) 84% 84% 90-100% sheet efficiency Maintaining NCOs to average loans .27% .28% moderate risk 40-60 bps profile Provision to average loans .14% .21% Net interest margin 3.01% 3.11% >3.5
Slide 16: High Quality Investment Portfolio
High Quality Investment Portfolio Highlights Average Total Investment Securities $ in billions Portfolio composed of Agency or GSE backed $20.0 5.00% $17.2 CMOs: Fannie, Freddie & GNMA $16.0 $15.0 4.00% – No private label MBS or financial paper 3.00% $10.0 2.69% Average portfolio life at 12/31/1
Slide 17: Asset Quality Trends
Asset Quality Trends Delinquencies to Period-end Total Loans Quarterly Change in Criticized Outstandings (a) Continuing Operations Continuing Operations 0% 1.00% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 .80% (2)% .75% (4)% .58% (6)% .50% (8)% (8)% .25% (10)% .15% .13% (12)% (11)% .00% (14)% 1Q12 2Q12
Slide 18: 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 (%) 12/31/13 4Q13 4Q13 4Q13 12/31/13 12/31/13
Slide 19: 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: 97% of total portfolio; branch- principal and interest payments; $6.8 billion are lines originated $1.3 billion in lines outstanding (
Slide 20: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 12-31-13 vs. 12-31-13 9-30-13 4Q13 (c) 3Q13 (c) 12-31-13 9-30-13 9-30-13- Residential properties – homebuilder $ 20 $ 26 $ (6) - - $ 7 $ 8 Marine and RV floor plan 24
Slide 21: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation (a) $ in millions Three months ended 12-31-13 9-30-13 12-31-12 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,303 $ 10,206 $ 10,271 Less: Intangible assets (b) 1,014 1,017 1,027 Preferred Stock, Series A (c) 282 282 291 Ta
Slide 22: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (a) (continued) $ in millions Three months ended 12-31-13 9-30-13 12-31-12 Average tangible common equity Average Key shareholders' equity (GAAP) $ 10,272 $ 10,237 $ 10,261 Less: Intangible assets (average) (b) 1,016 1,019 1,030 Preferred Stock, Series A (average) 291
Slide 23: Tier 1 Common Equity Under the Regulatory Capital Rules (estimated)
Tier 1 Common Equity Under the Regulatory Capital Rules (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions Dec. 31, 2013 Tier 1 common equity under current regulatory rules $ 9.3 Adjustments from current regulatory rules to the Regulatory Capital Rules: Deferred tax assets and PCCRs