Keycorp · NYSE:KEY
Keycorp — RBC Capital Markets Financial Services Conference 2019
27 slides from Keycorp's conference presentation, Mar 12, 2019
Slide 1: RBC Capital Markets Financial Services Conference
RBC Capital Markets Financial Services Conference March 12, 2019 KeyCorp Don Kimble Vice Chairman and 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: Delivering Results
Delivering Results Improving efficiency, managing risk, and increasing returns Why KEY Executing on LT Targets Distinctive business model and offering − Leading commercial and investment banking Positive operating leverage platform for middle market companies − Attractive market presence 6 consecuti
Slide 4: Key Overview: Client Continuum
Key Overview Serving targeted clients by leveraging broad capabilities, insights and expertise Client Continuum Retail Private Banking Small Business Commercial Corporate $500 MM+ Commercial Client Revenue: < $10 MM $10 MM - $500 MM >$500 MM Lending Deposits Financial Wealth & Investment Payments In
Slide 5: Consumer Capabilities and Expertise
Consumer Capabilities and Expertise Transformation has created a strong franchise & differentiated offering: positioned for growth Current State Positioned for Growth 3.5 Million Clients 5 Consecutive Years Ease Value Expertise of Organic Growth Enabling simple and Knowing the client and Providing i
Slide 6: Commercial Capabilities and Expertise
Commercial Capabilities and Expertise Relationship model, paired with expertise and broad capabilities, delivers results Differentiated Product Set Traditional Bank Products Capital Markets Capabilities Deposits Commercial Derivatives & Equity Equity Loans & payments mortgage banking foreign exchang
Slide 7: Targeted Technology Investments
Targeted Technology Investments Technology remains foundational to Key’s strategy of building enduring client relationships Technology Strategy Business Enablement Optimization Digitize the Support Business Insights and Cyber/ Modernize/ Enterprise Growth Strategies Analytics Fraud Operating Efficie
Slide 8: Delivering on Efficiency Commitments
Delivering on Efficiency Commitments Focused on reaching our long-term efficiency commitment Growing and expanding relationships Targeting 5% cost savings in 2019 ($200MM) Expense Discipline Revenue Momentum Extending scale segments Branch reduction: ↓ 38 in FY 2018, with accelerated reducti
Slide 9: Strong Risk Management
Strong Risk Management Maintaining a strong risk culture and moderate risk profile Positioned to Outperform Through the Cycle Strong Asset Quality Significantly enhanced risk profile: focused on Net Charge-offs to Average Loans soundness, profitability, and growth 1.50% Key Peer median(a) 1.25%
Slide 10: Disciplined Capital Management
Disciplined Capital Management Disciplined in how we manage, invest, deploy, and return our capital Strong Capital Position Consistent Dividend Growth Cash Dividends Per Common Share 12/31/18 $0.565 21% CAGR Common Equity Tier 1 9.9% Tier 1 risk-based capital 11.1% Total risk-based capital 12.9% $0.
Slide 11: FY2019 Outlook & Long-term Targets
FY2019 Outlook & Long-term Targets 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 Income • Net interest income expected to be in the range of $4.0 B - $4.1 B (TE) • Outlook assumes no int
Slide 12: Appendix
Appendix 12
Slide 13: Strategic Acquisition: Laurel Road Finance
Strategic Acquisition: Laurel Road Finance Acquisition of online lending platform focused on super prime professionals Transaction Overview Positioned to Outperform Acquisition of leading national, digital-first consumer Revisiting 2018 Investor Day Themes lending platform • Leading digital origin
Slide 14: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 4Q18 3Q18 4Q17 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .45 $ .45 $ .17 - N/M EPS – excl. notable items(a), (b) .48 .45 .36 7 % 33 % Cash efficiency ratio(a) 59.9 % 58.7 % 66.7 % 120 bps (680) bps Cash efficiency –excl. notable items(a),
Slide 15: Loans
Loans Total Average Loans Highlights $ in billions vs. Prior Year $89 $90 $86 Average loans up 4% from 4Q17 – C&I balances up 9% driven by broad-based growth with middle-market clients $80 – Home equity loans continue to be impacted by market trends vs. Prior Quarter $70 1Q17 2Q17 3Q17 4Q17 1Q18 2
Slide 16: Loan Portfolio Detail, at 12/31/18
Loan Portfolio Detail, at 12/31/18 Total Loans Commercial Loans $ in billions 12/31/18 % of total Diversified Portfolio by Industry loans Total commercial loans: Utilities Agriculture Commercial and industrial $ 45.8 51 Transportation Automotive Business Products Commercial real estate 16.0 18 Techn
Slide 17: Deposits
Deposits Average Deposits Highlights $ in billions Deposit cost up 11 bps from 3Q18, reflecting: $110 $108 1.00% – Higher interest rates and beta $104 – Continued migration of portfolio into higher-yielding .80% products $100 .60% .64% Strong and stable deposit base .40% – 28% noninterest-bearin
Slide 18: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $32.0 $29.6 $30.3 2.50% backed MBS and CMOs $24.0 2.39% 2.25% ‒ Primarily fixed rate 2.06% ‒ GNMA 45% of 4Q18 average balances $16.0 2.00% Portfolio used for funding an
Slide 19: Asset & Liability Management Positioning
Asset & Liability Management Positioning Moderate asset sensitivity supports strong, stable net interest margin Business and Balance Sheet Highlights Positioning • Strong, low-cost deposit base • Actively hedging to reduce current and future – $78 B interest-bearing deposits at 89 bps exposure to de
Slide 20: 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, 4Q18 net interest income was $38 $952 $23 $1,008 $1,000 4.0% $985 MM and net interest margin was 3.09% $800 vs. Prior Year 3.5% $600 Net interest inc
Slide 21: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Trust and investment services income $ 121 $ (10) $ 4 Noninterest income down $11 MM (-2%) from 4Q17 Investment banking and debt 186 (14) 20 placement fees Trust and investment servic
Slide 22: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions up / (down) 4Q18 vs. 4Q17 vs. 3Q18 vs. Prior Year Personnel $ 576 $ (33) $ 23 Noninterest expense down $86 MM, or 8% (down Net occupancy 75 (17) (1) $42 MM excl. notable items) Computer processing 55 1 3 Personnel expense reflects:
Slide 23: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Allowance for Loan and Lease Losses $ in millions 4Q18 allowance for loan losses to period-end loans of .99% $100 1.00% $900 $877 $883 250% .80% $75 $60 $59 200% $52 $49 .60% $800 $50 174% 150% 163% .40% 100% $700 $25 .27% .20% 50% .24% $0
Slide 24: 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% 4.0% .42% 3.4% .40% .35% 2.8% 2.0% .20% .13% .10% .00% .0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q
Slide 25: Capital
Capital Common Equity Tier 1 Highlights 12.00% Strong capital position with Common Equity Tier 1 ratio of 9.93% at 12/31/2018 10.16% 9.93% 10.00% Increased common share dividend by 62% (from $0.105 to $0.17 per quarter) from 4Q17 8.00% Repurchased $278 MM(b) in common shares during 4Q18 6.00%
Slide 26: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended Twelve months ended 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Notable Items Efficiency initiative expenses $ 24 - - $ 24 - Pension settlement charge 17 - - 17 - Merger-related charges - - $ (56) - $ (217) Impacts of tax refor
Slide 27: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended Twelve months ended $ in millions 12/31/2018 9/30/2018 12/31/17 12/31/2018 12/31/2017 Average tangible common equity Average Key shareholders' equity (GAAP) $ 15,384 $ 15,210 $ 15,268 $ 15,131 $ 15,224 Less: Intangible assets (average) (a) 2,828 2,8
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