• EPS Loss: Reported a fourth quarter EPS loss of $0.28 per share; adjusted EPS was a positive $0.38.
• Revenue Growth: Adjusted revenue up 11% sequentially and 16% year-over-year.
• Net Interest Income: Increased by $54 million in 2024, with an expected additional $270 million in 2025.
• Client Deposit Growth: Up 1.5% sequentially and 4% year-over-year.
• Credit Performance: Criticized loans down $500 million; net charge-offs down $40 million sequentially.
• Assets Under Management: Reached a record of approximately $61.4 billion.
• Investment Banking Fees: Fourth quarter fees were $221 million; full year fees were the second strongest in history.
• Commercial Payments Revenue: Grew mid-single digits year-over-year for the fourth quarter.
• Average Loans: Declined 1.4% sequentially, ending the quarter at just over $104 billion.
• Average Deposits: Increased 1.3% sequentially to nearly $150 billion.
• Net Interest Margin: Increased 24 basis points from the prior quarter.
• Noninterest Income: Adjusted noninterest income up 18% year-over-year.
• Noninterest Expenses: $1.2 billion, up 12% both sequentially and year-over-year.
• CET1 Ratio: Increased to 12% as of December 31.
• 2025 Outlook: Net interest income expected to be up roughly 20%; expenses to grow 3% to 5%.

• Warning! GuruFocus has detected 11 Warning Signs with KEY.

Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• KeyCorp (NYSE:KEY) reported a positive adjusted EPS of $0.38 after accounting for strategic securities repositioning.
• Revenue increased by 11% sequentially and 16% year-over-year, driven by strong net interest income and fee growth.
• Client deposit growth was strong, with a 1.5% sequential increase and a 4% year-over-year increase.
• Credit performance improved, with criticized loans down by $500 million and net charge-offs reduced by $40 million sequentially.
• Investment Banking results were robust, with fourth-quarter fees reaching $221 million, marking the second strongest year in the company's history.

Negative Points

• KeyCorp (NYSE:KEY) reported an EPS loss of $0.28 per share before adjustments.
• Loan demand remained soft, contributing to a decline in average loans by 1.4% sequentially.
• Noninterest expenses increased by 12% year-over-year, driven by higher compensation and investment spend.
• Net charge-offs were at the high end of the original guidance range, partly due to a lower loan denominator.
• The company faced elevated expenses of approximately $50 million in the fourth quarter, which are not expected to recur.

Q & A Highlights

Q: Can you provide more color on the 20% net interest income (NII) outlook and any conservativeness in your assumptions? A: Clark Khayat, Chief Financial Officer, explained that the 20% NII growth is based on several factors, including the full-year impact of securities repositioning and cash flow swaps. The assumptions are conservative, considering potential rate cuts and loan growth. The company is confident in managing through various rate scenarios and expects to achieve the 20% growth, with potential upside if loan demand increases.

Q: What are your assumptions for loan growth, and how does commercial borrowing activity look? A: Clark Khayat noted that commercial loans stabilized and picked up slightly at the end of the fourth quarter. The expectation is for commercial loans to grow by 2% to 4%, offsetting a $3 billion decline in consumer loans. Christopher Gorman, CEO, added that client confidence is high, and there is potential for increased investment in property, plant, and equipment, which could drive loan growth.

Q: How does a robust M&A market impact loan demand? A: Christopher Gorman stated that a strong M&A market is beneficial for lending, as it often involves large deals that require financing. While some transactions may be stock-for-stock, private equity activity and leverage still play a significant role, supporting loan demand.

Q: What is your strategy regarding deposit growth and funding? A: Clark Khayat mentioned that KeyCorp expects stable to slightly increased deposits, with continued client deposit growth. The company will continue to optimize funding by reducing brokered deposits where possible and focusing on client engagement and pricing.

Q: How does KeyCorp plan to leverage its capital position for growth? A: Christopher Gorman emphasized ongoing investments in wealth management, investment banking, and technology. The company plans to hire more wealth advisers and expand its investment banking platform. KeyCorp is also exploring bolt-on acquisitions to enhance its industry verticals and drive growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.