KEY-PK — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, up 26% year-over-year.
• Revenue: Increased by 7% year-over-year; net interest income (NII) rose 9% year-over-year.
• Pre-Provision Net Revenue: Grew by 9%.
• Net Interest Margin (NIM): Expanded to 2.89%, with expectations to exceed 3% by year-end.
• Commercial Loan Growth: C&I loans increased by $2.1 billion (3% sequentially).
• Deposit Costs: Declined by 2 basis points to 1.63%.
• Net Charge-Off Ratio: 42 basis points; year-to-date charge-offs remain at the low end of the 40-45 basis point outlook.
• Tangible Book Value per Share: Grew 6% year-over-year.

Strategic Updates and Business Highlights

• Acquisition: Announced the acquisition of Clearwater UK to enhance middle market advisory capabilities.
• Client Growth: Relationship households increased by 3%, and commercial clients by 2% year-over-year.
• Investment Banking: Pipelines are strong, with a 9% sequential increase; investment banking fees expected to grow mid-single digits for the year.
• Wealth Management: Assets Under Management reached a record $74 billion, with significant growth in mass affluent strategy.
• Commercial Payments: Total gross payment fees increased by 12% year-over-year.

Forward Guidance and Outlook

• Revenue Growth: Increased guidance to 7-8% for 2026, up from approximately 7%.
• Net Interest Income Growth: Now expected to increase by 9-11%, up from 9-10%.
• Loan Growth: Average loans expected to increase by 4-5%, with commercial loans projected to grow by 8-10%.
• Operating Leverage: Anticipated to grow revenues twice as fast as expenses in 2026.

Challenges and Points of Concern

• Asset Quality: Nonperforming loans increased modestly, attributed to idiosyncratic items in specific sectors (real estate, consumer goods, agriculture).
• NIM Performance: While NIM increased, it did not rise as much as expected due to a larger balance sheet with tighter spreads and reliance on wholesale funding.
• Investment Banking Performance: Results fell short of expectations, with a noted bifurcation between large and middle market deals.
• Economic Uncertainty: The macroeconomic environment remains uncertain, which could impact future performance.

Notable Q&A Insights

• Deposit Growth: Management expressed confidence in achieving 2% deposit growth in the second half, driven by strong client relationships and expected seasonal trends.
• Investment Banking Outlook: The team remains optimistic about a rebound in middle market M&A activity, despite recent underperformance.
• Credit Quality: Management reassured that the uptick in criticized loans is manageable and does not indicate broader issues within the portfolio.
• Strategic Focus: The company is committed to growing its client base while maintaining a disciplined approach to lending and capital allocation.

Overall, KeyCorp demonstrated strong financial performance in Q2 2026, with positive momentum in several business segments, although challenges in asset quality and investment banking performance were acknowledged. The company remains optimistic about its growth trajectory and strategic initiatives moving forward.