Keycorp · NYSE:KEY
Keycorp — Keycorp /New/ — Q1 2017 Earnings Presentation
23 slides from Keycorp's earnings presentation, Apr 20, 2017
Slide 1: KeyCorp First Quarter 2017 Earnings Review
KeyCorp First Quarter 2017 Earnings Review April 20, 2017 Beth E. Mooney Chairman and Chief Executive Officer Don Kimble Chief Financial Officer
Slide 2: Forward-Looking Statements and Additional Information
FORWARD-LOOKING STATEMENTS AND ADDITIONAL INFORMATION This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s expectations or predictions of future financial or business performance or
Slide 3: Investor Highlights – 1Q17
3 Investor Highlights – 1Q17 Positive Operating Leverage(a) Strong Risk Management Disciplined Capital Management Maintained strong capital position; Common Equity Tier 1 ratio of 9.87%(b) at 3/31/17 $160 MM common share repurchases in 1Q17(c) Planned common share dividend increase of 12% in 2
Slide 4: First Niagara: Significant Progress, Achieving Targets
First Niagara: Significant Progress, Achieving Targets Broad-based Progress Achieving Targets Delivering value through cost savings - Achieved 85% of $400 million initial target • Expect remaining savings to be achieved by 2Q17 Increased cost savings target to $450 million; expect to achieve by
Slide 5: Financial Review
5 Financial Review
Slide 6: Financial Highlights
6 Financial Highlights TE = Taxable equivalent; EOP = End of Period (a) Year-over-year average balance growth (b) From consolidated operations (c) 3-31-17 ratios are estimated EPS – assuming dilution $ .27 $ .20 $ .16 $ .23 $ .22 EPS –excl. merger-related charges(d), (e) .32 .31 .30 .27 .24 Cash eff
Slide 7: Loans
$0 $30 $60 $90 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 $10 $20 $30 $40 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 7 Loans $ in billions Average Commercial & Industrial Loans Total Average Loans ConsumerCommercial $ in billions vs. Prior Year Highlights Average loans up 43% from 1Q16 – Growth primaril
Slide 8: Deposits
Average deposit balances down 2% from 4Q16 – Largely driven by escrow deposits and a targeted reduction in certain short-term commercial deposits Period-end deposits stable – Reflects core retail deposit growth offset by lower escrow deposits $31.1 $54.3 $6.3 $10.3 .00% .10% .20% .30% .40% .50%
Slide 9: Net Interest Income and Net Interest Margin
2.89% 3.13% 2.95% 2.0% 2.5% 3.0% 3.5% 4.0% ($50) $150 $350 $550 $750 $950 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NIM Change vs. Prior Quarter 4Q16: 3.12% Higher earning asset yields .10 Lower levels of liquidity .03 4Q PAA refinement of 3Q results (.11) 1Q PAA vs. 4Q PAA (.01) Total change .01 1Q17
Slide 10: Noninterest Income
10 Noninterest Income Noninterest Income $ in millions Up / (Down) 1Q17 vs. 1Q16 vs. 4Q16 Trust and investment services income $ 135 $ 26 $ 12 Investment banking and debt placement fees 127 56 (30) Service charges on deposit accounts 87 22 3 Operating lease income and other leasing gains 23 6 2 Corp
Slide 11: Noninterest Expense
$ in millions Up / (Down) 1Q17 vs. 1Q16 vs. 4Q16 Personnel $ 556 $ 152 $ 92 Net occupancy 87 26 (25) Computer processing 60 17 (37) Business services, professional fees 46 5 (32) Equipment 27 6 (3) Operating lease expense 19 6 2 Marketing 21 9 (14) FDIC assessment 20 11 (3) Intangible asset amortiza
Slide 12: Credit Quality Highlights
$46 $58 $89 $63 .31% .27% .00% .20% .40% .60% .80% 1.00% $0 $30 $60 $90 $120 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 $676 $573 1.12% .67% .00% .40% .80% 1.20% 1.60% 2.00% $0 $200 $400 $600 $800 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 12 Nonperforming Loans(a) Net Charge-offs & Provision for Credit L
Slide 13: Capital
13 Strong capital position with Common Equity Tier 1 ratio of 9.87%(b) at 3/31/17 Repurchased $160 MM(c) in common shares during 1Q17 Redeemed Preferred Stock Series C ($350 MM) in February Converted all shares of 7.75% Preferred Stock Series A ($290 MM) to common shares, adding 20.6 MM comm
Slide 14: Outlook and Expectations
Outlook and Expectations Average Earning Assets • Loans: mid-single digit growth from 4Q16, which translates to $87 B - $88 B for FY17 average balances – Loan growth (%) to exceed deposit growth, with FY17 average deposits expected to be in the range of $104 B - $105 B Net Interest Income • Outlook
Slide 15: Appendix
15 Appendix
Slide 16: FNFG Merger-related Charges
1Q17 4Q16 3Q16 2Q16 1Q16 4Q15 Net interest income - - $ (6) - - - Operating lease income and other leasing gains - - $ (2) - - - Other income - $ 9 (10) - - - Noninterest income - $ 9 $ (12) - - - Personnel expense $ 30 $ 80 $ 97 $ 35 $ 16 - Net Occupancy $ 5 $ 29 - - - - Business services and profe
Slide 17: Loan Portfolio Detail, at 3/31/17
17 Loan Portfolio Detail, at 3/31/17 Commercial LoansTotal Loans C&I $40 CRE $18 Outstanding Balances Average Loan Size Average FICO 2008/ prior vintage First lien $ 7,425 59 % $ 65,694 774 23 % Second lien 5,116 41 41,997 770 41 Total home equity $ 12,541 Fixed 43%Variable57% Combined weighted-av
Slide 18: Investment Portfolio
18 Average Total Investment Securities Highlights Average AFS securities Investment Portfolio Portfolio composed primarily of GNMA and GSE- backed MBS and CMOs; primarily fixed rate Continue to position portfolio for regulatory liquidity requirements: – Reinvesting cash flows into High Quality L
Slide 19: Interest Rate Risk Management
Interest Rate Risk Management Naturally Asset Sensitive Balance Sheet with Relatively Short Duration(a) Actively Managing Rate Risk $16.2 $20.0$8.6 $8.6 Size of swap portfolio: Modeled asset sensitivity : 1-3% (b) 0%6-8%(b) $8.6 Loans 1-mo. Libor: 41% Fixed: 31% Deposits Flexibility to adjust rate s
Slide 20: Credit Quality Trends
20 Credit Quality Trends Criticized Outstandings(a) to Period-end Total LoansDelinquencies to Period-end Total Loans (a) Loan and lease outstandings; excludes purchase credit impaired loans from the First Niagara acquisition (b) From continuing operations (c) Nonperforming loan balances exclude $812
Slide 21: Loan Credit Quality by Portfolio
Period- end loans Average loans Net loan charge- offs Net loan charge-offs(b) / average loans (%) Nonperforming loans(c) Ending allowance(d) Allowance / period-end loans(d) (%) Allowance / NPLs (%) 3/31/17 1Q17 1Q17 1Q17 3/31/17 3/31/17 3/31/17 3/31/17 Commercial and industrial(a) $ 40,112 $ 40,002
Slide 22: GAAP to Non-GAAP Reconciliation
Three months ended 3-31-17 12-31-16 9-30-16 6-30-16 3-31-16 Tangible common equity to tangible assets at period end Key shareholders' equity (GAAP) $14,976 15,240$ 14,996$ 11,313$ 11,066$ Less: Intangible assets (a) 2,751 2,788 2,855 1,074 1,077 Preferred Stock (b) 1,009 1,640 1,150 281 281 Tangible
Slide 23: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) 23 Three months ended 3-31-17 12-31-16 9-30-16 6-30-16 3-31-16 Average tangible common equity Average Key shareholders' equity (GAAP) 15,184$ 14,901$ 13,552$ 11,147$ 10,953$ Less: Intangible assets (average) (a) 2,772 2,874 2,255 1,076 1,079 Preferred Stoc