KEY-PJ — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, up 26% year-over-year.
• Revenue Growth: Increased by 7% year-over-year; pre-provision net revenue grew 9%.
• Net Interest Margin (NIM): Expanded to 2.89%, with expectations to exceed 3% by year-end.
• Commercial Loan Growth: Period-end commercial and industrial (C&I) loans increased by $2.1 billion (3% sequentially).
• Net Charge-Off Ratio: 42 basis points; year-to-date charge-offs remain at the low end of the 40-45 basis point full-year outlook.
• Tangible Book Value: Grew 6% year-over-year.
• Deposits: Total deposit costs declined by 2 basis points to 1.63%.

Strategic Updates and Business Highlights

• Acquisition: Announced agreement to acquire Clearwater UK, enhancing middle market advisory capabilities and international reach.
• Client Growth: Relationship households increased by 3%, and commercial clients grew by 2% year-over-year.
• Investment Banking: Pipelines are at historically elevated levels, with a 9% sequential increase; expected mid-single-digit fee growth for the year.
• Wealth Management: Assets Under Management reached a record $74 billion, with significant growth from the mass affluent strategy.
• Commercial Payments: Total gross payment fees increased by 12% year-over-year.

Forward Guidance and Outlook

• Revenue Growth Guidance: Increased to 7-8% for 2026, up from 7%.
• Net Interest Income (NII) Guidance: Expected to grow by 9-11%, revised from 9-10%.
• Loan Growth Guidance: Average loans expected to increase by 4-5%, with commercial loans projected to rise by 8-10%.
• NIM Outlook: Expected to exit 2026 in the range of 3.0% to 3.05%.

Bad News, Challenges, or Points of Concern

• Asset Quality: Nonperforming loans increased modestly, attributed to idiosyncratic items in specific sectors (real estate, consumer goods, agriculture).
• Investment Banking Performance: Fell short of expectations, with a noted decline in middle market activity compared to larger deals.
• Market Conditions: Uncertainty in the macroeconomic environment could impact future performance; reliance on stable interest rates for deposit costs.
• Competitive Pressures: Increased competition in deposit pricing and loan yields, particularly in certain geographic markets.

Notable Q&A Insights

• NIM Concerns: Analysts questioned the sustainability of NIM growth given recent performance; management emphasized a focus on long-term returns rather than short-term margin pressures.
• Investment Banking Outlook: Management acknowledged the need for private equity activity to rebound for investment banking growth, citing strong pipelines but a lag in middle market M&A.
• Deposit Growth Confidence: Management expressed confidence in achieving 2% deposit growth in the second half of the year, supported by strong client relationships and historical data.
• Credit Quality Monitoring: The risk team highlighted proactive measures in monitoring credit quality, with specific attention to sectors showing signs of stress, ensuring minimal loss content.

Overall, KeyCorp demonstrated strong financial performance in Q2 2026, with positive growth metrics and strategic initiatives, while also navigating challenges in asset quality and competitive pressures. The company remains optimistic about future growth, backed by solid client engagement and robust pipelines.