KEY-PL — KeyCorp

Key Financial Results and Metrics

• Earnings Per Share (EPS): $0.44, up 26% year-over-year.
• Revenue Growth: 7% year-over-year increase, with pre-provision net revenue growing 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 Growth: Increased by 6% year-over-year.

Strategic Updates and Business Highlights

• Acquisition: Announced agreement to acquire Clearwater UK, enhancing the middle market advisory franchise.
• Client Growth: Relationship households increased by 3%, and commercial clients grew by 2%.
• Investment Banking Performance: Pipelines are strong, with a 9% sequential increase and expectations for mid-single-digit fee growth.
• Wealth Management: Assets Under Management reached a record $74 billion, with significant growth in mass affluent strategy.
• Commercial Payments: Gross payment fees rose by 12% year-over-year.

Forward Guidance and Outlook

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

Bad News, Challenges, or Points of Concern

• Non-Performing Loans (NPLs): Increased modestly due to idiosyncratic items, with concerns about specific sectors such as real estate and agriculture.
• Investment Banking Fees: Fell short of expectations, with a noted lag in middle market activity compared to larger deals.
• Competitive Pressures: Increased intensity in deposit pricing competition, particularly in certain geographic markets.
• Economic Uncertainty: Ongoing macroeconomic challenges could impact future performance, despite a generally positive outlook.

Notable Q&A Insights

• NIM Concerns: Analysts questioned the sustainability of NIM growth given recent performance and competitive pressures. Management expressed confidence in achieving the 3% target due to expected deposit growth and fixed asset repricing.
• Investment Banking Outlook: Management acknowledged the need for a recovery in private equity-driven fees, emphasizing strong pipelines but recognizing the timing challenges in deal closures.
• Client Quality vs. Yield: Management indicated a strategic shift towards higher-quality clients, which may result in lower yields but is expected to enhance long-term returns.
• Credit Quality: Despite an uptick in criticized loans, management maintained a positive outlook on credit quality, attributing recent issues to specific idiosyncratic factors rather than systemic risks.

Overall, KeyCorp's Q2 2026 results reflect strong performance and strategic growth initiatives, although there are notable challenges in investment banking and competitive pressures in the deposit market.