KEY-PI — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, a 26% increase year-over-year.
• Revenue Growth: 7% year-over-year; pre-provision net revenue increased 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 by 6% year-over-year.

Strategic Updates and Business Highlights

• Acquisition: Announced an agreement to acquire Clearwater UK to enhance middle-market advisory capabilities.
• Client Growth: Relationship households increased by 3%, and commercial clients grew by 2%.
• Investment Banking Performance: Pipelines up 9% sequentially; 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 since the launch of the mass affluent strategy in 2023.
• Commercial Payments: Total gross payment fees increased by 12% year-over-year, driven by investments in embedded banking.

Forward Guidance and Outlook

• Revenue Growth Guidance: Increased to 7-8% for 2026, up from a previous estimate of approximately 7%.
• Net Interest Income Guidance: Expected to increase by 9-11%, revised from 9-10%.
• Loan Growth Guidance: Average loans projected to increase by 4-5%, with commercial loans expected to rise by 8-10%.
• Operating Leverage: Anticipated to grow revenues at twice the rate of expenses in 2026.

Bad News, Challenges, or Points of Concern

• Nonperforming Loans: Increased modestly due to idiosyncratic items, with a slight uptick in criticized loans.
• Investment Banking Fees: Fell short of expectations, with a noted bifurcation in market activity favoring larger deals over middle-market transactions.
• Market Competition: Increased intensity in deposit pricing, with varying competitive pressures across different geographic markets.
• Economic Uncertainty: Continued macroeconomic uncertainties pose risks to future performance.

Notable Q&A Insights

• NIM Concerns: Analysts questioned the sustainability of NIM growth, with management indicating that the current quarter's performance was impacted by timing mismatches between loan growth and deposit levels.
• Investment Banking Outlook: Management expressed confidence in mid-single-digit growth for investment banking fees, despite a challenging environment, emphasizing strong pipelines and engagement.
• Deposit Growth Confidence: Management reiterated confidence in achieving 2% deposit growth in the second half of the year, supported by historical data and client relationships.
• Credit Quality: The management team remains optimistic about credit quality, with proactive measures in place to address any emerging risks, particularly in the multifamily and consumer goods sectors.

Overall, KeyCorp's Q2 2026 results reflect strong operational momentum and strategic growth initiatives, despite facing challenges in certain areas such as investment banking and competitive pressures in deposit pricing. The company remains focused on disciplined execution and maintaining a healthy balance sheet.