KEY-PJ — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, up 33% year-over-year.
• Return on Tangible Common Equity (ROTCE): Exceeded 13%, with a goal of 15%+ by year-end 2027.
• Revenue Growth: 10% year-over-year, with adjusted pre-provision net revenue (PPNR) increasing by $29 million sequentially.
• Net Interest Margin (NIM): Expanded 5 basis points sequentially to 2.87%, with expectations to exceed 3% by year-end.
• Commercial Loan Growth: Increased by $3.3 billion (4% sequentially), with a healthy loan pipeline up nearly 20% from year-end.
• Asset Quality: Net charge-off ratio at 38 basis points; nonperforming assets increased by $65 million but remain below historical levels.

Strategic Updates and Business Highlights

• Capital Management: Repurchased nearly $400 million in common stock, exceeding the $300 million commitment. Plans to repurchase at least $1.3 billion in 2026.
• Investment in Technology: Approximately $1 billion allocated for technology enhancements, including AI applications to improve client experiences and operational efficiencies.
• Client Growth: Commercial clients up 3% and relationship households up 2% year-over-year. Wealth and investment banking businesses collectively grew by 12%.
• Hiring Initiatives: Continued hiring of frontline bankers and specialized teams to support growth in targeted areas.

Forward Guidance and Outlook

• Net Interest Income (NII): Revised full-year growth guidance to 9%-10%, up from 8%-10%.
• Loan Growth: Average loans expected to increase by 2%-4%, with commercial loans projected to grow by 6%-8%.
• Investment Banking Fees: Anticipated mid-single-digit growth for the year, despite a forecasted decline in Q2 due to current market conditions.

Bad News, Challenges, or Points of Concern

• Deposit Trends: Average deposits decreased by 2% sequentially, with a decline in noninterest-bearing deposits. Expected to trough in early May before growth resumes.
• Investment Banking Outlook: While pipelines remain strong, there is concern over the slower-than-expected recovery in middle-market M&A activity, with geopolitical uncertainties affecting deal timelines.
• Credit Quality Monitoring: Increase in nonperforming assets driven by specific sectors (utilities and multifamily real estate), though not seen as systemic risks.

Notable Q&A Insights

• Client Sentiment: Mixed feelings among commercial clients due to geopolitical volatility; however, consumer sentiment remains strong with increased spending.
• Loan Growth Drivers: Utilization rates have improved, with expectations for continued growth in sectors like utilities, healthcare, and commercial real estate.
• Private Credit Market: Not viewed as a significant risk; however, there is ongoing scrutiny of credit quality across various sectors, particularly in oil and gas and transportation.
• AI Utilization: Emphasis on leveraging AI to enhance client service and operational efficiency, particularly in wealth management.

Overall, KeyCorp reported a strong Q1 2026 with significant year-over-year growth in earnings and revenue, while also navigating challenges in deposit levels and investment banking activity. The outlook remains positive with strategic investments and a focus on client growth.