Slide 1: KeyCorp Second Quarter 2017 Earnings Review
KeyCorp Second Quarter 2017 Earnings Review July 20, 2017 Beth E. Mooney Don Kimble Chairman and Chief Financial Officer Chief Executive 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
Investor Highlights – 2Q17 Positive operating leverage vs. PY (+10%)(a) and Reported(b) Adjusted for PQ (+2%)(a) Notable Items(a) Revenue growth reflects core business Efficiency Positive momentum and value from the First Niagara Cash Operating Leverage acquisition 59.3% 59.4% Achieved $400 MM in co
Slide 4: Drivers of 2Q Results and Recent Investments
Drivers of 2Q Results and Recent Investments Investments in talent, products and capabilities driving growth First Niagara Financial Wellness: HelloWallet • Strong client retention and deposit growth • Acquired industry-leading personal finance software platform, a core component of Key’s financial
Slide 5: Financial Review
Financial Review 5
Slide 6: Financial Highlights
Financial Highlights Continuing operations, unless otherwise noted 2Q17 1Q17 2Q16 LQ ∆ Y/Y ∆ EPS – assuming dilution $ .36 $ .27 $ .23 33 % 57 % Impact of notable items(a),(b) on EPS .02 (.05) (.04) Cash efficiency ratio(a) 59.3 % 65.8 % 69.0 % (650) bps (970) bps Profitability Cash efficiency –excl
Slide 7: Loans
Loans Total Average Loans Highlights $ in billions $90 $87 vs. Prior Year Average loans up 41% from 2Q16 $61 $60 – Growth primarily reflects impact of FNFG – C&I continues to be a driver $30 vs. Prior Quarter $0 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Average loans up .4% from 1Q17 Commercial Consum
Slide 8: Deposits
Deposits Average Deposits(a) Highlights $ in billions $103 Deposit cost up 3 bps from 1Q17 $105 .70% – Contractual commercial rate increases .60% $85 .50% – Growth in higher-yielding deposit products $74 .40% $65 vs. Prior Year .30% $45 .20% Average deposit growth of 39% from 2Q16 .26% .19% .10% – G
Slide 9: Net Interest Income and Margin
Net Interest Income and Margin Net Interest Income & Net Interest Margin Trend (TE) Highlights $ in millions; continuing operations $1,000 $987 4.0% 2Q17 net interest income includes $42 MM, or 14 bps, $100 related to purchase accounting finalization $92 $53 $800 $19 3.30% 3.5% Excluding impact of P
Slide 10: Noninterest Income
Noninterest Income Noninterest Income Highlights $ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 2Q17 notable items of $61 MM include: $64 MM Trust and investment services income $ 134 $ 24 $ (1) one-time gain in merchant services and $(3) MM associated with purchase accounting finalization Investm
Slide 11: Noninterest Expense
Noninterest Expense Noninterest Expense Highlights $ in millions Up / (Down) 2Q17 vs. 2Q16 vs. 1Q17 Notable items: Personnel $ 551 $ 124 $ (5) $ in millions 2Q17 2Q16 1Q17 Net occupancy 78 19 (9) Merger-related charges $44 $45 $81 Computer processing 55 10 (5) Charitable contribution(b) 20 Business
Slide 12: Credit Quality
Credit Quality Net Charge-offs & Provision for Credit Losses Highlights $ in millions Portfolios continue to perform well $120 1.00% Net loan charge-offs of $66 MM .80% $90 – 31 basis points of average loans, below $66 $66 .60% targeted range $60 $52 $43 .40% Nonperforming loans down 12% from 1Q17 a
Slide 13: Capital
Capital Common Equity Tier 1(a), (b) Highlights 12.00% 11.10% Strong capital position with Common Equity Tier 1 ratio of 9.97%(b) at 6/30/17 9.97% 10.00% Increased common dividend 12% in 2Q17 Repurchased $94 MM(c) in common shares during 8.00% 2Q17 No objection from the Federal Reserve on 2017 6.00%
Slide 14: Outlook and Expectations
Outlook and Expectations FY 2017(a) Average Balance • Loans: low-end of $87.0 B - $88.0 B range for FY17 average balances Sheet • Deposits: FY17 average balances in the range of $102.5 B - $103.0 B • Net interest income expected to be in the range of $3.8 B - $3.9 B Net Interest Income – Reflects co
Slide 15: Appendix
Appendix 15
Slide 16: FNFG Merger-related Charges
FNFG Merger-related Charges $ in millions 2Q17 1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Increase / (Decrease) Net interest income - - - $ (6) - - - Operating lease income and other leasing - - - $ (2) - - - gains Other income - - $ 9 (10) - - - Noninterest income - - $ 9 $ (12) - - - Personnel expense $ 31 $ 3
Slide 17: Loan Portfolio Detail, at 6/30/17
Loan Portfolio Detail, at 6/30/17 Total Loans Commercial Loans $ in billions 6/30/17 % of total Diversified Portfolio by Industry loans Total commercial loans: Agriculture Commercial and industrial $ 40.9 47 Automotive Transportation Business Products Technology Utilities Commercial real estate 17.0
Slide 18: Investment Portfolio
Investment Portfolio Average Total Investment Securities Highlights $ in billions Portfolio composed primarily of GNMA and GSE- $28.5 $30.0 5.00% backed MBS and CMOs; primarily fixed rate 4.00% $19.2 Continue to position portfolio for regulatory $20.0 3.00% liquidity requirements: 2.06% 2.02% 2.00%
Slide 19: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet Utilize Swaps to Achieve and with Relatively Short Duration(a) Adjust Modest Asset Sensitivity Loans Deposits Investment • A/LM hedges aligned to floating rate LIBOR-based loans $87 B $103 B Portfolio • Short weighted average matu
Slide 20: Credit Quality Trends
Credit Quality Trends Delinquencies to Period-end Total Loans Criticized Outstandings(a) to Period-end Total Loans Continuing operations Continuing operations .50% 6.0% .33% .39% 4.0% 3.6% 3.1% .25% 2.0% .11% .10% .00% .0% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q
Slide 21: 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 (%) 6/30/17 2Q17 2Q17 2Q17 6/30/17 6/30/17 6/30/1
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Three months ended $ in millions 6-31-17 3-31-17 6-30-16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $15,253 $14,976 $ 11,313 Less: Intangible assets (a) 2,866 2,751 1,074 Preferred Stock (b) 1,009 1,009 281 Tangible common
Slide 23: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) Three months ended $ in millions 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 1,07