Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q2 2017 Earnings Presentation
23 slides from Keycorp's earnings presentation, Jul 20, 2017
Slide 1: KeyCorp Second Quarter 2017 Earnings Review
KeyCorp Second Quarter 2017 Earnings Review July 20, 2017 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 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: Investor Highlights – 2Q17
3 Investor Highlights – 2Q17 Positive Operating Leverage Strong Risk Management Disciplined Capital Management Increased common dividend by 12% Repurchased $94 MM in common shares(c) No objection from the Federal Reserve on 2017 capital plan, which includes: − Two common share dividend increas
Slide 4: First Niagara Drivers of 2Q Results and Recent Investments
First Niagara Drivers of 2Q Results and Recent Investments 4 • Strong client retention and deposit growth • Achieved $400 MM in cost savings − Plans to achieve incremental $50 MM by early 2018 • Progress on revenue synergies − Commercial mortgage banking, payments, residential mortgage Fee-based Bus
Slide 5: Financial Review
5 Financial Review
Slide 6: Financial Highlights
64.8% 64.9% 63.3% 60.4% 59.4% 2Q16 3Q16 4Q16 1Q17 2Q17 6 Financial Highlights EOP = End of Period (a) Non-GAAP measure: see Appendix for reconciliation (b) Notable items include one-time gain in merchant services, purchase accounting finalization, merger-related charges and charitable contribution i
Slide 7: Loans
$0 $30 $60 $90 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 $10 $20 $30 $40 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 7 Loans $ in billions Average Commercial & Industrial Loans Total Average Loans ConsumerCommercial $ in billions vs. Prior Year Highlights Average loans up 41% from 2Q16 – Growth primaril
Slide 8: Deposits
Average deposit balances up .7% from 1Q17 – Core deposit growth in CDs, NOW and MMDA, partially offset by a decline in escrow deposits $30.7 $54.4 $6.9 $10.8 .00% .10% .20% .30% .40% .50% .60% .70% $25 $45 $65 $85 $105 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 8 2Q17 Average Deposit Mix Average de
Slide 9: Net Interest Income and Net Interest Margin
$92 2.76% 3.30% 2.97% 2.0% 2.5% 3.0% 3.5% 4.0% $0 $200 $400 $600 $800 $1,000 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 NIM Change vs. Prior Quarter 1Q17: 3.13% PAA finalization .14 Higher earning asset yields .06 PAA (2Q vs. 1Q) .01 Funding cost (.03) Loan fees (.01) Total change .17 2Q17: 3.30% Net
Slide 10: Noninterest Income
10 Noninterest Income Noninterest Income $ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 Trust and investment services income $ 134 $ 24 $ (1) Investment banking and debt placement fees 135 37 8 Service charges on deposit accounts 90 22 3 Operating lease income and other leasing gains 30 12 7 Corpo
Slide 11: Noninterest Expense
$ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 Personnel $ 551 $ 124 $ (5) Net occupancy 78 19 (9) Computer processing 55 10 (5) Business services, professional fees 45 5 (1) Equipment 27 6 - Operating lease expense 21 7 2 Marketing 30 8 9 FDIC assessment 21 13 1 Intangible asset amortization 22 1
Slide 12: Credit Quality Highlights
$43 $66 $52 $66 .28% .31% .00% .20% .40% .60% .80% 1.00% $0 $30 $60 $90 $120 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 $619 $507 1.00% .59% .00% .40% .80% 1.20% 1.60% 2.00% $0 $200 $400 $600 $800 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 12 Nonperforming Loans(a) Net Charge-offs & Provision for Credit L
Slide 13: Capital
13 Strong capital position with Common Equity Tier 1 ratio of 9.97%(b) at 6/30/17 Increased common dividend 12% in 2Q17 Repurchased $94 MM(c) in common shares during 2Q17 No objection from the Federal Reserve on 2017 capital plan, which includes: − Two common share dividend increases (4Q17 a
Slide 14: Outlook and Expectations
Outlook and Expectations Average Balance Sheet • Loans: low-end of $87.0 B - $88.0 B range for FY17 average balances • Deposits: FY17 average balances in the range of $102.5 B - $103.0 B Net Interest Income • Net interest income expected to be in the range of $3.8 B - $3.9 B – Reflects consistent de
Slide 15: Appendix
15 Appendix
Slide 16: FNFG Merger-related Charges
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 $ 31 $ 30 $ 80 $ 97 $ 35 $ 16 - Net Occupancy $ (1) $ 5 $ 29 - - - - Bus
Slide 17: Loan Portfolio Detail, at 6/30/17
Agriculture Automotive Business Products Business Services Construction Consumer Discretionary Consumer Services Equipment Finance Healthcare Materials/ ExtractionMedia Oil & Gas Other Public Sector Real Estate Technology Transportation Utilities 17 Loan Portfolio Detail, at 6/30/17 Commercial Loans
Slide 18: Investment Portfolio
18 Average Total Investment Securities Highlights Average AFS securities Investment Portfolio Portfolio composed primarily of GNMA and GSE- backed MBS and CMOs; primarily fixed rate Continue to position portfolio for regulatory liquidity requirements: – Reinvesting cash flows into High Quality L
Slide 19: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet with Relatively Short Duration(a) Actively Managing Rate Risk $15.8 $19.2$9.2 $9.2 Size of swap portfolio: Modeled asset sensitivity : 1-3% (b) 0%6-8%(b) $9.2 Loans 1-mo. Libor: 44% Fixed: 31% Deposits Flexibility to adjust rate s
Slide 20: Credit Quality Trends
20 Credit Quality Trends Criticized Outstandings(a) to Period-end Total LoansDelinquencies to Period-end Total Loans (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $835
Slide 21: Loan Credit Quality 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 (%) 6/30/17 2Q17 2Q17 2Q17 6/30/17 6/30/17 6/30/17 6/30/17 Commercial and industrial(a) $ 40,914 $ 40,666
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 22 (a) For the three months ended June 30, 2017, March 31, 2017, and June 30, 2016, intangible assets exclude $33 million, $38 million, and $36 million, respectively, of period-end purchased credit card receivables (b) Net of capital surplus. (c) June 30, 2017, amount
Slide 23: GAAP to Non-GAAP Reconciliation (Return on Tangible Common Equity)
Three months ended 6-30-17 3-31-17 12-31-16 9-30-16 6-30-16 Average tangible common equity Average Key shareholders' equity (GAAP) 15,200$ 15,184$ 14,901$ 13,552$ 11,147$ Less: Intangible assets (average) (a) 2,756 2,772 2,874 2,255 1,076 Preferred Stock (average) 1,025 1,480 1,274 648 290 Average t