KEY-PI — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): Reported at $0.43, adjusted EPS at $0.41.
• Revenue: Exceeded $2 billion, up 12% year-over-year on an adjusted basis.
• Net Interest Income (NII): Increased by 15% year-over-year; tax-equivalent NII up 23% against initial guidance.
• Expenses: Grew by 2% in Q4 and 4.6% for the full year, primarily due to hiring and technology investments.
• Net Charge-Offs: $104 million in Q4, with a full-year net charge-off ratio of 41 basis points.
• Capital Ratios: Marked Common Equity Tier 1 (CET1) ratio at 10.3%, with plans to manage it down to the higher end of the 9.5%-10% target range by 2026.

Strategic Updates and Business Highlights

• Capital Return: Initiated a significant return of capital to shareholders with $200 million in stock repurchases in Q4, doubling the initial commitment.
• Investment in Growth: Added nearly 10% to frontline banker staff and invested $100 million in technology to enhance customer-facing capabilities.
• Loan Growth: Commercial and Industrial (C&I) loans grew by 9%, with a focus on recycling lower-yielding consumer loans into higher-yielding commercial loans.
• Wealth Management: Assets under management reached a record $70 billion, with strong sales production in the mass affluent segment.

Forward Guidance and Outlook

• 2026 Revenue Growth: Expected to increase by approximately 7%, with NII growth projected at 8%-10% and non-interest income growth at 3%-4%.
• Loan Growth: Anticipated average loan growth of 1%-2%, with commercial loans expected to grow by about 5%.
• Expense Management: Projected expenses to increase by 3%-4%, indicating substantial operating leverage.
• Long-term Goals: Aiming for a return on tangible common equity (RoTE) of over 15% by the end of 2027, with potential for further growth to 16%-19%.

Challenges and Points of Concern

• Market Uncertainty: The macroeconomic environment remains uncertain, impacting visibility and confidence in sustained growth.
• Credit Quality Monitoring: While credit quality is improving, areas such as consumer discretionary and agriculture are being closely monitored for potential risks.
• Investment Banking Visibility: Limited visibility beyond Q1 for investment banking activities, with caution regarding the sustainability of recent momentum in middle market M&A.

Notable Q&A Insights

• Strategic Focus: CEO Chris Gorman emphasized organic growth in middle market, payments, investment banking, and wealth management as key priorities for 2026.
• Investment Banking Fees: CFO Clark Khayat noted a conservative outlook on investment banking fees due to uncertainty in M&A activity, despite a recent uptick.
• Hiring Impact: Gorman indicated that the hiring of bankers is expected to yield results over time, with a typical burn-in period of 12-18 months.
• Acquisition Strategy: Gorman reiterated that while the board changes do not alter their capital priorities, they remain open to strategic acquisitions that enhance capabilities.

Overall, KeyCorp's Q4 2025 results reflect strong financial performance and strategic initiatives aimed at sustaining growth, despite facing macroeconomic uncertainties and competitive pressures.