Keycorp · NYSE:KEY
Keycorp — RBC Capital Markets Financial Institutions Conference 2016
37 slides from Keycorp's conference presentation, Mar 8, 2016
Slide 1: RBC Capital Markets Financial Institutions Conference
RBC Capital Markets Financial Institutions Conference March 8, 2016 KeyCorp Focused Forward
Slide 2: Forward-Looking Statements and Additional Information Disclosure
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION DISCLOSURE 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 and First Niagara’s expectations or predictions of future financ
Slide 3: Key: Who We Are
Key: Who We Are A relationship-focused bank with scale and adaptability Top 20 U.S. bank-based financial services company Loans Deposits - Assets: $96 B 3% 1% - Deposits: $71 B 26% - Market capitalization: $11 B 45% - Strong footprint with 966 branches and 52% 73% 1,256 ATMs - Approximately 2 millio
Slide 4: Leveraging our Geographic Diversity
Leveraging our Geographic Diversity Delivering a consistent strategy across our franchise while also leveraging market- specific opportunities Western Markets Eastern Markets • Deposits: $17 B • Deposits: $32 B • Branches: 372 • Branches: 594 • Demographic: younger with high growth potential • Demog
Slide 5: Business Model: Aligned and Targeted
Business Model: Aligned and Targeted Local delivery of broad product set and industry expertise Differentiated platform with depth and maturity Traditional Bank Products Capital Markets Capabilities Commercial mortgage Derivatives & foreign Loans Deposits & payments Equity capital markets Equity res
Slide 6: Business Model: Growing and Taking Share
Business Model: Growing and Taking Share Key’s business model creates a competitive advantage with targeted clients and has enabled us to take market share Winning with Clients 2015 2015 2015 Commercial and Investment Banking and Industrial Loans(a): Debt Placement Fees(b): % change vs. 2Q11 LTM; $
Slide 7: Driving Positive Operating Leverage
Driving Positive Operating Leverage Executing action plans across our organization to improve efficiency Revenue Growth Expense Savings Acquiring and expanding relationships to grow revenue in our Continuous improvement efforts enable identification and businesses execution of expense savings Improv
Slide 8: Maintaining a Moderate Risk Profile
Maintaining a Moderate Risk Profile Enterprise-wide risk management approach Targeted, Relationship-based Approach • Target specific segments and sectors where we • Clearly defined and well understood risk appetite have expertise and tolerances • Execute rigorous and disciplined sales approach • Ris
Slide 9: Progress on Targets for Success: Key Stand-alone
Progress on Targets for Success: Key Stand-alone Metrics (a) 2014 2015 Targets Balance Sheet Loan to deposit ratio (b) 90% -100% 85% 88% Efficiency NCOs to average loans .20% .24% Moderate Risk Profile 40 - 60 bps Provision for credit losses .10% .28% to average loans Net interest margin 2.97% 2.88%
Slide 10: Outlook and Expectations
Outlook and Expectations FY 2016: Key Stand-alone Average Loans • Mid-single digit growth vs. FY 2015 • Up low single-digit percentage without the benefit from higher interest rates Net Interest Income • Mid-single digit growth with the benefit of higher interest rates Noninterest Income • Mid-singl
Slide 11: First Niagara Financial Group Acquisition
First Niagara Financial Group Acquisition 11
Slide 12: A Compelling Strategic Opportunity
A Compelling Strategic Opportunity Shelby_Sales-Presentation_150928_v5.pptx\28 SEP 2015\6:59 PM\11 Powerful combination creates high-performing regional bank with compelling shareholder returns 13th Largest U.S. Commercial Bank $135 billion assets $100 billion deposits Strengthens core operating and
Slide 13: Significant Value Created from Cost Savings
Significant Value Created from Cost Savings Unlocked value from cost synergies provides strong upside for shareholders • High degree of market overlap accelerates benefit realization − > 30% of FNFG branches within two miles of a Key branch • FNFG’s technology infrastructure largely outsourced Key h
Slide 14: Combined Company Uniquely Positioned to Unlock Value
Combined Company Uniquely Positioned to Unlock Value Three Million Clients Attractive Geographic Footprint Complementary Product Offering High Density Markets Broad, Complementary Product Capabilities Retail banking (branch; card; auto; etc.) Private banking Residential mortgage Indirect auto lendin
Slide 15: Strengthens Position in Attractive Northeast Markets
Strengthens Position in Attractive Northeast Markets Leading Position from Leading Market Share Shared Market Presence Accelerates Toledo to Albany Banks Outperform Value Realization Pro Forma Branch Footprint Leading Retail Presence in Upstate NY (a) $ in billions Buffalo, NY Albany, NY 8.0 4.7 3.9
Slide 16: Attractive Financial Impact
Attractive Financial Impact The First Niagara acquisition generates compelling financial returns for Key • IRR approximates 15% and ROIC exceeds 10% • Meaningful improvement in efficiency and profitability metrics FY18 Financial Performance Metrics Efficiency Key Cash > 300 bps Pro Forma Key ROTCE >
Slide 17: KeyCorp Financial Review
KeyCorp Financial Review 17
Slide 18: Investor Highlights – 2015
Investor Highlights – 2015 Pre-Provision Net Generated positive operating leverage from prior year Revenue (a) Total average loans up 5% from prior year +5% Positive Positive trends in fee-based businesses Operating - Investment banking and debt placement (record year, Leverage +12%), corporate serv
Slide 19: Financial Highlights
Financial Highlights Metrics 4Q15 3Q15 2Q15 1Q15 4Q14 EPS – assuming dilution $ .27 $ .26 $ .27 $ .26 $ .28 Financial Cash efficiency ratio (e) 66.4 % 66.9 % 65.1 % 65.1 % 64.4 % Performance (a) Net interest margin (TE) 2.87 2.87 2.88 2.91 2.94 Return on average total assets .97 .95 1.03 1.03 1.12 T
Slide 20: Loans
Loans Total Average Loans Highlights $ in billions Total average loans up 5% Average Loans $60.0 Average total loans up 5% in 4Q15 from 4Q14, $50.0 driven by CF&A loans up 14% – Broad-based growth across Key’s $40.0 commercial lines of business $30.0 Community Bank and Corporate Bank 4Q15 $20.0 aver
Slide 21: Deposits
Deposits Average Deposits (a) Highlights $ in billions Total average deposits up 3% Deposit cost remains relatively stable $75.0 0.50% $65.0 0.40% vs. Prior Quarter $55.0 0.30% Deposits up 2% from 3Q15 reflecting: $45.0 0.20% – Seasonal and short-term deposit inflows from commercial clients $35.0 .1
Slide 22: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions $20.0 $19.1 5.00% Portfolio composed primarily of GNMA and GSE- $17.1 backed MBS and CMOs 4.00% $15.0 Continue to position portfolio for regulatory 3.00% $10.0 liquidity requirements: 2.00% 2.12% 2.10% – 2015 average b
Slide 23: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations vs. Prior Quarter $620 $610 4.00% Net interest income up $12 MM, or 2%, from 3Q15, primarily due to higher earning asset $588 yields and loan fees 3.50% $580 3.00% vs.
Slide 24: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Actively Managing Rate Risk • Maintained moderate asset sensitive position of ~3% Loan Portfolio Deposits (a) - Assumes 200 basis point increase in short and intermediate- 4Q15 4Q15 term rates over a 12-month period CDs: • Utilize
Slide 25: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions 4Q15 vs. 3Q15 vs. 4Q14 vs. Prior Quarter Trust and investment services income $ 105 $ (3) $ (7) Noninterest income up 3% from 3Q15 Investment banking and debt 127 18 1 placement fees – Investment banking and debt placement Service charge
Slide 26: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions 4Q15 vs. 3Q15 vs. 4Q14 4Q15 noninterest expense includes: Personnel (a) $ 429 $ (3) $ (20) − Efficiency-related costs of $10 MM Net occupancy 64 (4) (1) Computer processing 43 (2) (3) Reflecting branch closures and severance Business s
Slide 27: Capital
Capital Common Equity Tier 1 Common Equity (a) Tier 1 (a), (b) Highlights 12.00% 11.17% Maintained strong capital position 10.94% 10.00% Common Equity Tier 1 ratio of 10.94% at 12/31/15 8.00% Increased quarterly common share dividend by 15% in 2Q15; planned increase of 13% in 2016 (subject to Board
Slide 28: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Net loan charge-offs remain below targeted range, $50 .60% $45 at 25 basis points of average loans $40 $37 $32 .40% Nonperforming loans represented 65 basis points $30 of period-end loans $22 $20 .25% .20% Nonperfo
Slide 29: 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 offs loans (%) (%) $ in millions (%) 12/31/15 4Q15 4Q15 4Q15 12/31/15 12/31/15 12/31/1
Slide 30: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations .75% 4.0% 3.1% 3.0% .50% 2.5% .41% .35% 2.0% .25% .17% .12% 1.0% .00% 0.0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2
Slide 31: Oil & Gas
Oil & Gas Longstanding history, expertise and relationships Strong Portfolio Characteristics >10 years of experience in energy lending with >20 Primarily secured by proven reserves specialists dedicated to oil & gas Relationships contributed ~2% of FY15 investment Focused on middle market companies,
Slide 32: Home Equity Portfolio
Home Equity Portfolio Highlights High quality portfolio $4.1 billion of the total portfolio are fixed rate loans that require Community bank loans and lines: 98% of total portfolio; branch- principal and interest payments; $6.2 billion are lines originated $1.1 billion in lines outstanding (11% of t
Slide 33: Exit Loan Portfolio
Exit Loan Portfolio Exit Loan Portfolio Balance on Balance Outstanding Change Net Loan Charge-offs $ in millions Nonperforming Status 12-31-15 vs. 12-31-15 9-30-15 4Q15 3Q15 (b) 12-31-15 9-30-15 9-30-15 Residential properties – homebuilder $ 6 $ 6 - - - $ 8 $ 5 Marine and RV floor plan 1 1 - - - - -
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation $ in millions Three months ended 12-31-15 9-30-15 6-30-15 3-31-15 12-31-14 Tangible common equity to tangible assets at period end Key shareholders’ equity (GAAP) $ 10,746 $ 10,705 $ 10,590 $ 10,603 $ 10,530 Less: Intangible assets (a) 1,080 1,084 1,085 1,088 1,090 Pr
Slide 35: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) $ in millions Three months ended 12-31-15 9-30-15 6-30-15 3-31-15 12-31-14 Pre-provision net revenue Net interest income (GAAP) $ 602 $ 591 $ 584 $ 571 $ 582 Plus: Taxable-equivalent adjustment 8 7 7 6 6 Noninterest income (GAAP) 485 470 488 437 490 Less:
Slide 36: Common Equity Tier 1 Under the Regulatory Capital Rules (estimated)
Common Equity Tier 1 Under the Regulatory Capital Rules (RCR) (estimated) (a) KeyCorp & Subsidiaries Quarter ended $ in billions December 31, 2015 Common Equity Tier 1 under current RCR $ 9.8 Adjustments from current RCR to the fully phased-in RCR: Deferred tax assets and other intangible assets (b)
Slide 37: Important Additional Information and Where to Find It
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT In connection with the proposed merger, KeyCorp has filed with the SEC a Registration Statement on Form S-4 on November 30, 2015 that includes the preliminary Joint Proxy Statement of KeyCorp and First Niagara and a preliminary Prospectus of KeyC
KeyCorp — RBC Capital Markets Financial Institutions Conference 2016 on 6ix