Business Overview and History
KeyCorp, a diversified financial services company, celebrates its bicentennial in 2025, marking 200 years of service to clients and communities across the United States. Founded in 1825 in Albany, New York, KeyCorp has evolved from a single bank into a leading regional financial institution, providing a comprehensive suite of banking, investment, and wealth management solutions to individuals, small businesses, and large corporate clients.
KeyCorp's rich history is a testament to its resilience and adaptability in an ever-changing financial landscape. The company's origins can be traced back to the founding of the Albany Savings Bank in Albany, New York. Over the decades, the company grew through a series of mergers and acquisitions, expanding its footprint across the Northeast and eventually becoming a major regional bank.
In 1994, KeyCorp was formed through the merger of Key Banks and Society Corporation, creating one of the largest bank holding companies in the United States at the time. The merged company continued to grow, acquiring several other regional banks throughout the 1990s and 2000s.
During the 2008 financial crisis, KeyCorp faced significant challenges, suffering losses and having to take government bailout funds. However, the company demonstrated its resilience by weathering the storm and returning to profitability in the following years.
In the early 2010s, KeyCorp underwent a strategic shift, focusing on becoming a more streamlined, efficient organization. This involved divesting non-core businesses and assets, as well as restructuring its operations. The company also worked to strengthen its risk management and compliance practices in the wake of the financial crisis.
In 2016, KeyCorp made a significant move by acquiring First Niagara Financial Group, which substantially expanded its presence in the Northeast. This acquisition helped solidify KeyCorp's position as a major regional bank with a strong presence in key markets.
Today, KeyCorp operates through its KeyBank subsidiary, offering a wide range of banking and financial products and services to individuals and businesses across its national footprint. The company remains committed to responsible banking practices and continues to serve its communities with dedication.
Over the past two centuries, KeyCorp has strategically expanded its geographic footprint and diversified its business lines to better serve its clients. The company's key operating segments include the Consumer Bank, which provides a range of retail banking and wealth management services, and the Commercial Bank, which offers commercial and institutional banking, investment banking, and capital markets products and services.
Financial Performance and Ratios
As of the latest reported quarter, KeyCorp boasted a strong financial position with a Common Equity Tier 1 ratio of 12.0%, well above the regulatory minimum. The company's tangible common equity ratio stood at 7.1%, reflecting its robust capital levels. KeyCorp's liquidity position remains healthy, with a cash and short-term investments balance of $24.1 billion as of the most recent quarter-end.
Despite the challenges posed by the COVID-19 pandemic, KeyCorp has demonstrated resilience in its financial performance. For the most recent quarter, the company reported revenue of $793 million and a net loss of $280,000. The quarterly operating cash flow stood at $1.727 billion, with free cash flow at $1.704 billion.
Quarterly data shows that KeyCorp's net interest income stood at $952 million, while noninterest income was a net loss of $269 million, primarily due to the impact of strategic securities repositioning initiatives. The company's net charge-off ratio for the quarter was 0.43%, reflecting its stable credit quality.
Liquidity
KeyCorp's liquidity position remains healthy, with a cash and short-term investments balance of $24.1 billion as of the most recent quarter-end. This strong liquidity position allows the company to meet its financial obligations and take advantage of potential growth opportunities. The company's current ratio and quick ratio both stand at 18.52, indicating a strong ability to cover short-term liabilities.
Guidance and Outlook
For the full year 2025, KeyCorp has provided the following guidance:
- Average loans expected to decline 2% to 5% year-over-year, with year-end 2025 balances flat compared to 2024
- Net interest income projected to increase approximately 20%, with over 10% growth on a Q4 to Q4 exit rate basis
- Net interest margin expected to be 2.7% or better by Q4 2025
- Noninterest income anticipated to grow at least 5%, with potential upside if capital markets conditions remain favorable
- Expenses expected to rise 3% to 5% from the $4.5 billion in 2024, with a commitment to achieving fee-based operating leverage
- Full-year net charge-off ratio forecasted in the 40 to 45 basis point range, stable compared to Q4 2024 levels
- Nonperforming assets and criticized loans expected to improve over the course of 2025
- Effective tax rate projected at 21% to 22%, or 23% to 24% on a taxable equivalent basis
The company's management team remains optimistic about its ability to navigate the evolving market conditions and continue delivering value to its shareholders. KeyCorp's strategic investments in technology, digital capabilities, and talent acquisition are expected to drive future growth and enhance the client experience.
Segment Performance
Consumer Bank
The Consumer Bank serves individuals and small businesses throughout KeyCorp's 15-state branch footprint, as well as healthcare professionals nationally through its Laurel Road digital brand. For the third quarter of 2024, the Consumer Bank's net interest income on a taxable-equivalent basis increased by $50 million, or 9.4%, compared to the same period in 2023. This was driven by higher earning asset yields resulting from the higher interest rate environment and the maturity of lower-yielding interest rate swaps. Average loans and leases decreased $3.3 billion, or 7.9%, while average deposits increased $3.7 billion, or 4.5%, from the year-ago quarter.
The provision for credit losses in the Consumer Bank increased by $38 million compared to the third quarter of 2023, driven by changes in economic outlook and higher net charge-offs, partly offset by planned balance sheet optimization efforts. Noninterest income decreased $11 million, or 4.6%, while noninterest expense decreased $27 million, or 4.0%, from the third quarter of 2023.
Commercial Bank
The Commercial Bank, which includes KeyCorp's Institutional and Commercial operating segments, serves middle market clients, large corporate and institutional clients, and provides commercial real estate lending services. For the third quarter of 2024, the Commercial Bank's net interest income on a taxable-equivalent basis increased by $14 million compared to the third quarter of 2023. Average loan and lease balances decreased $8.1 billion, or 10.7%, while average deposit balances increased $2.6 billion, or 4.7%, compared to the third quarter of 2023.
The provision for credit losses in the Commercial Bank decreased $27 million compared to the third quarter of 2023. Noninterest income increased $45 million, primarily driven by an increase in investment banking and debt placement fees and commercial mortgage servicing fees. Noninterest expense increased $12 million compared to the third quarter of 2023.
Other
The Other segment includes various corporate treasury activities, KeyCorp's principal investing unit, and various exit portfolios. For the third quarter of 2024, the Other segment's net interest income on a taxable-equivalent basis increased by $23 million compared to the same period in 2023. Noninterest income in the Other segment increased $868 million, driven by a $935 million loss on the sale of securities as part of a strategic repositioning of KeyCorp's available-for-sale investment securities portfolio.
Risks and Challenges
As with any financial institution, KeyCorp faces a variety of risks and challenges that could impact its performance. These include:
- Interest rate risk: The company's net interest income and margin are susceptible to changes in the interest rate environment.
- Credit risk: KeyCorp's loan portfolio is exposed to the risk of borrower defaults, which could lead to increased provision for credit losses.
- Regulatory environment: The banking industry is subject to extensive regulations, and changes in the regulatory landscape could affect KeyCorp's operations and profitability.
- Competitive landscape: KeyCorp competes with other regional and national banks, as well as non-bank financial institutions, for clients and market share.
- Cybersecurity threats: The company's digital platforms and infrastructure are vulnerable to cyber attacks, which could result in data breaches and reputational damage.
Conclusion
KeyCorp's bicentennial celebration in 2025 underscores the company's enduring commitment to its clients, teammates, and communities. As it embarks on its third century of operation, KeyCorp remains well-positioned to leverage its strong financial foundation, innovative capabilities, and client-centric approach to drive sustainable growth and create long-term value for its shareholders. The company's performance across its Consumer and Commercial Bank segments, coupled with its strategic initiatives and positive guidance for 2025, demonstrates its resilience and adaptability in a challenging economic environment.