KEY-PJ — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, a 33% increase year-over-year.
• Return on Tangible Common Equity (ROTCE): Exceeded 13%, on track to reach 15%+ by year-end 2027.
• Revenue Growth: 10% year-over-year, with adjusted pre-provision net revenue increasing by $29 million sequentially.
• Net Interest Margin (NIM): Expanded by 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 strong performance across various industries.
• Asset Quality: Net charge-off ratio at 38 basis points; nonperforming assets increased by $65 million but remain below historical levels.
• Capital Management: CET1 ratio at 11.4%, with plans to repurchase at least $1.3 billion in shares for 2026.

Strategic Updates and Business Highlights

• Client Growth: Commercial clients increased by 3%, and relationship households grew by 2% year-over-year.
• Investment Banking: Pipelines remain strong, with a 5% increase from year-end; however, a decline in fees is expected in Q2 due to market conditions.
• Technology Investment: Approximately $1 billion allocated for technology enhancements, focusing on AI applications to improve client services and operational efficiency.
• Wealth Management: Continued growth in mass affluent households, with significant potential for further penetration in this segment.

Forward Guidance and Outlook

• NII Growth: Revised full-year net interest income 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%.
• Expense Management: Full-year expense growth guidance maintained at 3%-4%, with expectations for continued investment in personnel and technology.

Bad News, Challenges, or Points of Concern

• Investment Banking Fees: Expected decline in Q2 fees, with mid-single-digit growth anticipated for the year, indicating potential market volatility impacts.
• Deposit Trends: Average deposits decreased by 2% sequentially, reflecting seasonal patterns and intentional runoff of higher-cost brokered CDs.
• Credit Quality Concerns: While overall metrics remain strong, there was an increase in nonperforming assets, driven by specific sectors (utilities and multifamily real estate).
• Macroeconomic Uncertainty: Ongoing vigilance required due to dynamic macroeconomic conditions, with potential impacts on loan demand and investment activity.

Notable Q&A Insights

• Client Sentiment: Positive consumer sentiment with increased spending, but commercial clients are cautious due to geopolitical volatility.
• Private Credit Market: Observations of tightening spreads in private credit, indicating potential shifts in market dynamics.
• Deposit Competition: Stable deposit pricing expected, with flexibility to manage funding needs based on loan growth.
• Emerging Affluent Segment: Significant opportunity to leverage AI for better service and penetration in the mass affluent market.
• Operational Risks in Payments: Emphasis on managing operational and reputational risks as the payments business expands, highlighting the importance of client education and proactive communication.

Overall, KeyCorp reported strong financial performance in Q1 2026, with strategic initiatives focused on growth and technology investment, while navigating challenges related to market conditions and credit quality. The outlook remains positive, with revised growth expectations, though caution is warranted due to potential macroeconomic headwinds.