KEY-PK — 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%, on track for 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 by 5 basis points to 2.87%, with expectations to exceed 3% by year-end.
• Commercial Loan Growth: Increased by $3.3 billion (4% sequentially), driven by broad-based demand across industries.
• Asset Quality: Net charge-off ratio at 38 basis points; nonperforming assets increased but remain below historical levels.

Strategic Updates and Business Highlights

• Capital Management: Repurchased nearly $400 million of common stock, exceeding the $300 million commitment. Plans to repurchase at least $1.3 billion in 2026.
• Investment in Technology: Committed approximately $1 billion in technology to enhance product capabilities and client service.
• Client Growth: Commercial clients up 3%, relationship households up 2%. Significant growth in fee-based businesses (Wealth, investment banking, and commercial payments) at 12%.
• Hiring Initiatives: Continued recruitment of bankers, including specialized teams in Atlanta and Kansas City, to support growth in targeted sectors.

Forward Guidance and Outlook

• Net Interest Income (NII): Revised growth expectation to 9%-10% for 2026, 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 decline in Q2 but expect mid-single-digit growth for the full year.
• Expense Growth: Guided at 3%-4% for the year, with ongoing investments in personnel and technology.

Bad News, Challenges, or Points of Concern

• Deposit Trends: Average deposits decreased by 2% sequentially, reflecting seasonal patterns and intentional runoff of higher-cost brokered CDs. Noninterest-bearing deposits also declined.
• Investment Banking Outlook: While the first quarter was strong, there are concerns about a potential slowdown in M&A activity due to geopolitical volatility and macroeconomic uncertainties.
• Credit Quality Monitoring: An increase in nonperforming assets driven by specific sectors (utilities and multifamily real estate) raises some caution, although overall credit quality remains stable.

Notable Q&A Insights

• Client Sentiment: Positive consumer sentiment with increased spending, but commercial clients are cautious due to macro uncertainties.
• Loan Demand Drivers: Utilization rates are improving, and sectors like utilities and healthcare show promise for future loan growth.
• Private Credit: Concerns about widening spreads in private credit markets, but KeyCorp remains comfortable with its exposure.
• AI and Technology: Emphasis on leveraging AI to enhance client services and operational efficiency, with a focus on the mass affluent segment.
• Risk Management: Ongoing vigilance regarding credit quality, particularly in sectors with potential leverage issues, but overall risk remains well-managed.

In summary, KeyCorp's first quarter of 2026 showcased strong financial performance and strategic initiatives aimed at growth, despite some challenges in deposit trends and investment banking outlook. The company remains optimistic about its trajectory, bolstered by disciplined capital management and a focus on technology investments.