DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of KeyCorp (KEY or the Company), including the Company's Long-Term Issuer Rating of A (low).
At the same time, Morningstar DBRS confirmed the credit ratings of its primary banking subsidiary, KeyBank N.A. (the Bank). The trend for all credit ratings is Stable. The Intrinsic Assessment (IA) for the Bank is 'A,' while its Support Assessment remains SA1, reflecting the internal support provided by the Company. The Company's Support Assessment is SA3, meaning that timely systemic support is not expected. The Company's Long-Term Issuer Rating is positioned one notch below the Bank's IA.
KEY CREDIT RATING CONSIDERATIONS
The credit ratings and Stable trend reflect KeyCorp's diversified and well-established franchise, which encompasses a retail banking presence across 15 states, a targeted national consumer platform, and a corporate banking business focused on select middle-market industry verticals. This business mix supports a diversified earnings profile, including a higher proportion of noninterest income relative to peers. The ratings are further underpinned by KEY's strong balance sheet, characterized by a solid core deposit base, robust liquidity, and sound capitalization that is bolstered by Bank of Nova Scotia's strategic minority investment. Additionally, Morningstar DBRS expects KeyCorp's credit fundamentals to remain resilient despite the current operating environment, with prior actions to de-risk the loan portfolio positioning the Company well for future economic downturns.
CREDIT RATING DRIVERS
KeyCorp's credit ratings would be upgraded if it further strengthened its franchise and achieved a sustained improvement in operating performance while maintaining a similar risk profile. Further deterioration in operating profitability or an outsized increase in credit losses would result in a downgrade of KEY's credit ratings. Additionally, a significant reduction in capital levels would also result in a credit ratings downgrade.
CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Strong/Good
Headquartered in Cleveland, Ohio, KeyCorp is a regional banking organization with approximately $189 billion in total assets. The Company maintains a diversified business model spanning retail and commercial banking, commercial leasing, investment management, and capital markets activities, serving a broad base of consumer, corporate, and institutional clients. Morningstar DBRS views KeyCorp's capital markets platform as a key differentiating factor among regional bank peers, both enhancing earnings diversity and supporting a relatively higher contribution from fee-based revenues.
Earnings Power Combined Building Block Assessment: Good/Moderate
KEY's earnings are highly diversified by geography and segment, with a large percentage of revenues derived from noninterest income. KeyCorp's earnings improved meaningfully in 2025, supported by strong revenue growth and positive operating leverage. The Company reported record revenues of approximately $7.5 billion, with net interest income increasing by roughly 23% year over year, driven by lower deposit costs, an improved funding mix and balance sheet optimization through the redeployment of lower-yielding consumer mortgages into higher-yielding, relationship-focused commercial loans. Fee-based revenues also grew at a solid pace, supported by strength across capital markets, payments, and wealth management, resulting in a relatively high contribution from noninterest income compared with regional bank peers. In Q1 2026, KeyCorp's earnings reflected continued positive momentum from the strong rebound seen in 2025, with performance driven primarily by further expansion in net interest income, stable credit costs and strong fee income. While KEY's profitability metrics still trail higher-rated peers, the Company's diversified revenue streams and ongoing initiatives to enhance operating efficiency are expected to support further improvement in earnings generation capacity over the medium term.
Risk Profile Combined Building Block Assessment: Good/Moderate
Morningstar DBRS views KEY's risk profile as moderate. The Company maintains a conservative risk tolerance and has a granular loan portfolio that is heavily weighted toward commercial exposures. Asset quality indicators remain favorable, with low net charge-offs and improving trends in criticized and nonperforming assets. Previous steps to reduce exposure to some riskier segments (such as construction, indirect auto, and vendor finance) should help KEY perform relatively well through the credit cycle.
Funding and Liquidity Combined Building Block Assessment: Strong/Good
KEY benefits from a solid core deposit base that fully supports its loan portfolio and provides meaningful capacity to fund future loan growth. While the Company has reduced its reliance on wholesale funding since the 2023 regional banking stress, it retains broad and reliable access to multiple wholesale funding sources, if needed. In addition, KEY maintains strong on-balance sheet liquidity, supported by a securities portfolio that is predominantly classified as Available-for-Sale, with a more limited allocation to Held-to-Maturity assets.
Capitalization Combined Building Block Assessment: Strong/Good
KEY's capitalization reflects solid regulatory capital ratios and disciplined capital management. At the end of Q1 2026, the Company reported a CET1 ratio of approximately 11.4%, remaining comfortably above regulatory requirements, while the 'marked' CET1 ratio was approximately 10.0%, reflecting the impact of unrealized losses in the securities portfolio. Additionally, KeyCorp's capital position is further supported by strong internal capital generation and the strategic minority investment by Bank of Nova Scotia. While KeyCorp continues to return capital to shareholders through dividends and share repurchases, including $389 million of buybacks in 1Q26 and a plan to repurchase at least $1.3 billion in 2026, it maintains sufficient buffers to support growth and navigate potential stress scenarios.
Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/481805
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (May 23, 2025) https://dbrs.morningstar.com/research/454637. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.
The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
The primary sources of information used for these credit ratings include Morningstar Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.
The credit rating was not initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.
For more information on this credit or on this industry, visit dbrs.morningstar.com.
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