Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q4 2017 Earnings Presentation
24 slides from Keycorp's earnings presentation, Jan 18, 2018
Slide 1: KeyCorp Fourth Quarter 2017 Earnings Review
KeyCorp Fourth Quarter 2017 Earnings Review January 18, 2018 Beth E. Mooney Chairman and Chief Executive Officer Don Kimble Chief Financial Officer
Slide 2: Forward-Looking Statements and Additional Information
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION 2 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 o
Slide 3: 2017 – A Step Change in Performance Driving Stronger Returns
3 2017 – A Step Change in Performance Driving Stronger Returns Strong Risk Management Disciplined Capital Management Maintained strong capital position − CET1 ratio of 10.1%(b) Two common share dividend increases in 2017 (up 24% from year-end 2016) $730MM(c) of common share repurchases in 2017
Slide 4: Long-term Targets
Long-term Targets 4 FY 2017 New LT TargetsFY 2015 Previous LT Targets Positive operating leverage (YoY) Drive YoY positive operating leverage Drive YoY positive operating leverage Maintain moderate risk profile Net charge-offs to avg. loans targeted range of 40-60 bps 24 bps 24 bps Net charge-off
Slide 5: Financial Review
5 Financial Review
Slide 6: Financial Highlights
63.3% 60.4% 59.4% 59.7% 61.3% 4Q16 1Q17 2Q17 3Q17 4Q17 6 Financial Highlights EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliation (b) Notable items include merger-related charges (all periods); impact of tax reform and related actions in 4Q17; merchant services gain adj. in 3Q1
Slide 7: Loans
$0 $30 $60 $90 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 $10 $20 $30 $40 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 7 Loans $ in billions Average Commercial & Industrial Loans $ in billions ConsumerCommercial vs. Prior Year Total Average Loans Highlights Average loans up 1% from 4Q16 – Broad-based C&I
Slide 8: Deposits
Deposit cost up 3 bps from 3Q17 – Cumulative beta of 21% since December 2015 (contractual commercial rates and relationship rates) – Continued migration of portfolio into time deposits Deposit mix: 31% noninterest-bearing (+$762 MM vs. 3Q17) Average deposit balances up 1% from 3Q17 – Nonintere
Slide 9: Net Interest Income and Net Interest Margin
3.12% 3.09% 2.82% 2.97% 2.0% 2.5% 3.0% 3.5% 4.0% $0 $200 $400 $600 $800 $1,000 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 NIM Change vs. Prior Quarter 3Q17: 3.15% PAA (4Q vs. 3Q) (.04) Increased liquidity (.03) Interest rate benefit .01 Total change (.06) 4Q17: 3.09% Net interest income stable from 3
Slide 10: Noninterest Income
10 Noninterest Income Noninterest Income $ in millions Up / (Down) 4Q17 vs. 4Q16 vs. 3Q17 Trust and investment services income $ 131 $ 8 $ (4) Investment banking and debt placement fees 200 43 59 Service charges on deposit accounts 89 5 (2) Operating lease income and other leasing gains 27 6 11 Corp
Slide 11: Noninterest Expense
$ in millions Up / (Down) 4Q17 vs. 4Q16 vs. 3Q17 Personnel $ 608 $ (40) $ 50 Net occupancy 92 (20) 18 Computer processing 54 (43) (2) Business services, professional fees 52 (26) 3 Equipment 31 1 2 Operating lease expense 28 11 4 Marketing 35 - 1 FDIC assessment 20 (3) (1) Intangible asset amortizat
Slide 12: Credit Quality
12 $ in millions Credit Quality $ in millions $72 $52 $66 $49 .34% .24% .00% .20% .40% .60% .80% 1.00% $0 $25 $50 $75 $100 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 NCOs Provision for credit losses NCOs to average loans $625 $503 .73% .58% .00% .40% .80% 1.20% 1.60% 2.00% $0 $200 $400 $600 $800 1Q16 2
Slide 13: Capital Highlights
Common Equity Tier 1(a) 13 Strong capital position with Common Equity Tier 1 ratio of 10.08%(a) at 12/31/17 Repurchased $199 MM(c) in common shares during 4Q17 Increased common share dividend to $.105 per common share in 4Q17; 11% increase from PQ and 24% increase for FY17 The impact of tax
Slide 14: Outlook and Expectations
Outlook and Expectations Average Balance Sheet • Loans: average balances in the range of $88.5 B - $89.5 B • Deposits: average balances in the range of $104.5 B - $105.5 B Net Interest Income • Net interest income expected to be in the range of $3.9 B - $4.0 B • Outlook includes one rate increase in
Slide 15: Appendix
15 Appendix
Slide 16: Loan Portfolio Detail, at 12/31/17
Total Loans Commercial Loans Agriculture Automotive Business Products Business Services Construction Consumer Discretionary Consumer Services Equipment Finance HealthcareMaterials/ ExtractionMedia Oil & Gas Other Public Sector Real Estate Technology Transportation Utilities 16 Loan Portfolio Detail,
Slide 17: Investment Portfolio
Average Total Investment Securities 17 Average AFS securities Investment Portfolio (a) Yield is calculated on the basis of amortized cost (b) Includes end-of-period held-to-maturity and available-for-sale securities Average yield(a) Average HTM securities 1.87% 1.00% 1.50% 2.00% 2.50% 3.00% $0.0 $10
Slide 18: Interest Rate Risk Management
18 Interest Rate Risk Management The strength and diversity of our franchise positions Key to benefit from economic growth and a rising rate environment Business and Balance Sheet Highlights Net Interest Income Sensitivities (FY18) ($MM) • Strong, low-cost deposit base – $72B interest-bearing deposi
Slide 19: Credit Quality Trends
Criticized Outstandings(a) to Period-end Total LoansDelinquencies to Period-end Total Loans 19 Credit Quality Trends (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $738
Slide 20: Loan Credit Quality Summary by Portfolio
Period- end loans Average loans Net loan charge- offs Net loan charge-offs(b) / average loans (%) Nonperforming loans(c) Ending allowance(d) Allowance / period-end loans(d) (%) Allowance / NPLs (%) 12/31/17 4Q17 4Q17 4Q17 12/31/17 12/31/17 12/31/17 12/31/17 Commercial and industrial(a) $ 41,859 $ 41
Slide 21: FNFG Merger-related Charges
4Q17 3Q17 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Net interest income - - - - - $ (6) - - - Operating lease income and other leasing gains - - - - - $ (2) - - - Other income - - - - $ 9 (10) - - - Noninterest income - - - - $ 9 $ (12) - - - Personnel expense $ 26 $ 25 $ 31 $ 30 $ 80 $ 97 $ 35 $ 16 - Net
Slide 22: Estimated Impact of Tax Reform and Related Actions
22 Estimated Impact of Tax Reform and Related Actions Estimated Federal Tax Reform Impact Tax Reform Related Actions Total Estimated Tax Reform Impact Net interest income (TE) - - - Noninterest income $ (1) - $ (1) Noninterest expense 29 Personnel expense - $ 16 16 Nonpersonnel expense 13 - 13 Provi
Slide 23: Non-GAAP Reconciliations: Notable Items and EPS
Three months ended 12/31/2017 9/30/2017 12/31/2016 12/31/2017 12/31/2016 Notable Items Merger-related charges (56)$ (36)$ (198)$ (217)$ (474)$ Impacts of tax reform and related actions (30) - - (30) - Merchant services gain - (5) - 59 - Purchase accounting finalization, net - - - 43 - Charitable con
Slide 24: Return on Average Tangible Common Equity Reconciliation
Three months ended 12/31/2017 9/30/17 6/30/17 3/31/17 12/31/16 12/31/2017 12/31/2016 Average tangible common equity Average Key shareholders' equity (GAAP) 15,268$ 15,241$ 15,200$ 15,184$ 14,901$ 15,224$ 12,647$ Less: Intangible assets (average) (a) 2,939 2,878 2,756 2,772 2,874 2,837 1,825 Preferre