KeyCorp Impresses as Revenue Jumps Year Over Year

KeyCorp earned $229 million, or $0.25 per diluted share, for the third quarter, up from $211 million, or $0.22 per diluted share, for the same period in 2012.

Non interest income grew to $459 million from $429 million in the previous quarter. Reported net interest was $584 million, flat with the previous quarter. Net interest margins declined, falling 12 basis points to 3.11% as earning asset yields fell faster than cost of funds. To combat this, the bank acquired $1 billion of escrow deposits while letting roughly half that amount of higher-yielding time deposits roll off. We expect loan growth to begin picking up as rising rates make this more attractive.

Credit quality again improved as charge-offs fell to 0.28% of average total loans. The nonperforming loan ratio also fell to 1.01% of period-end loans from 1.23% in the previous quarter. The allowance to nonperforming loan ratio improved to 160% from 134%. The reported tangible common equity ratio remained healthy at slightly under 10%, allowing the bank to repurchase $198 million of stock, almost 2% of its market capitalization.

The bank made strides in reducing costs; however, this was not fully reflected in its 67.5% cash efficiency ratio, defined as noninterest expense less intangible amortization divided by total taxable-equivalent revenue. In the second quarter, this ratio stood at 69.1%. When this is adjusted for a $25 million pension settlement and $21 million of reorganization costs, the bank was able to remove $50 million of noninterest expense compared with the same period in 2012, a decrease of nearly 7%. Cost savings were the main driver of improved return on assets to 1.2% and return on equity to 10.6% in the quarter, from 1.01% and 9.56% in the 2012 third quarter, respectively.

Signup for free to be the first to receive exclusive free links. Now in your mailbox!
Join over 15,000 subscribers
Send me links

Your information will not be shared to anyone