Attached files
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| 8-K - 8-K - KEYCORP /NEW/ | d640832d8k.htm |
 KeyCorp
Goldman Sachs US Financial Services Conference 2013
Beth E. Mooney
Chairman and
Chief Executive Officer
Focused Forward
EXHIBIT 99.1 |
 FORWARD-LOOKING STATEMENTS AND ADDITIONAL
INFORMATION DISCLOSURE
This
presentation
contains
forward-looking
statements,
including
statements
about
our
financial
condition,
results
of
operations,
asset
quality
trends,
capital
levels
and
profitability.
Forward-looking
statements
can
often
be
identified
by
words
such
as
“outlook,”
“goal,”
“objective,”
“plan,”
“expect,”
“anticipate,”
“intend,”
“project,”
“believe,”
or
“estimate.”
Forward-looking
statements
represent
management’s
current
expectations
and
forecasts
regarding
future
events.
If
underlying
assumptions
prove
to
be
inaccurate
or
unknown
risks
or
uncertainties
arise,
actual
results
could
vary
materially
from
these
projections
or
expectations.
Risks
and
uncertainties
include
but
are
not
limited
to:
(1)
continued
strain
on
the
global
financial
markets;
(2)
the
slow
progress
of
the
U.S.
economic
recovery;
changes
in
trade,
monetary
and
fiscal
policies;
(3)
our
ability
to
anticipate
interest
rate
changes
correctly
and
manage
interest
rate
risk;
(4)
changes
in
local,
regional
and
international
business,
economic
or
political
conditions;
(5)
regulatory
initiatives
in
the
U.S.,
including
the
Dodd-Frank
Act,
subjecting
us
to
new
and
more
stringent
regulatory
requirements;
(6)
the
increase
in
unemployment
or
deterioration
in
real
estate
asset
values
or
their
failure
to
recover
for
an
extended
period
of
time;
(7)
adverse
changes
in
credit
quality
trends;
(8)
our
ability
to
determine
accurate
values
of
certain
assets
and
liabilities;
(9)
adverse
behaviors
in
securities,
public
debt,
and
capital
markets
;
(10)
unanticipated
changes
in
our
liquidity
position,
including
but
not
limited
to,
changes
in
the
cost
of
liquidity,
our
ability
to
enter
the
financial
markets
and
to
secure
alternative
funding
sources;
(11)
the
soundness
of
other
financial
institutions;
(12)
our
ability
to
satisfy
new
capital
and
liquidity
standards
such
as
those
imposed
by
the
Dodd-Frank
Act
and
those
adopted
by
the
Basel
Committee;
(13)
our
ability
to
receive
dividends
from
our
subsidiary,
KeyBank;
(14)
downgrades
in
our
credit
ratings
and
the
credit
ratings
of
KeyBank;
(15)
our
ability
to
timely
and
effectively
implement
our
strategic
initiatives;
(16)
operational
or
risk
management
failures;
breaches
of
security
or
failures
of
our
technology
systems
due
to
technological
or
other
factors
and
cybersecurity
threats;
(17)
the
occurrence
of
natural
or
man-made
disasters
or
conflicts
or
terrorist
attacks;
(18)
the
adequacy
of
our
risk
management
programs;
(19)
adverse
judicial
proceedings;
(20)
increased
competitive
pressure
due
to
industry
consolidation;
(21)
our
ability
to
attract
and
retain
talented
executives
and
employees,
to
effectively
sell
additional
products
or
services
to
new
or
existing
customers,
and
to
manage
our
reputational
risks;
and
(22)
unanticipated
adverse
effects
of
acquisitions
and
dispositions
of
assets
or
businesses.
We
provide
greater
detail
regarding
these
factors
in
our
2012
Form
10-K
and
subsequent
filings,
which
are
available
online
at
www.key.com/ir
and
www.sec.gov.
Forward
looking
statements
speak
only
as
of
the
date
they
are
made
and
Key
does
not
undertake
any
obligation
to
update
the
forward-
looking
statements
to
reflect
new
information
or
future
events.
This
presentation
also
includes
certain
Non-GAAP
financial
measures
related
to
“tangible
common
equity,”
“Tier
1
common
equity,”
“pre-provision
net
revenue,”
“cash
efficiency
ratio,”
and
“adjusted
cash
efficiency
ratio.”
Management
believes
these
ratios
may
assist
investors,
analysts
and
regulators
in
analyzing
Key’s
financials.
Although
Key
has
procedures
in
place
to
ensure
that
these
measures
are
calculated
using
the
appropriate
GAAP
or
regulatory
components,
they
have
limitations
as
analytical
tools
and
should
not
be
considered
in
isolation,
or
as
a
substitute
for
analysis
of
results
under
GAAP.
For
more
information
on
these
calculations
and
to
view
the
reconciliations
to
the
most
comparable
GAAP
measures,
please
refer
to
the
Appendix
to
this
presentation
or
our
most
recent
earnings
press
release,
which
is
accessible
at
www.key.com/ir.
2 |
 Progress Made on 2013 Key Focus Areas
Increased dividend by 10% in 2Q13
Repurchased $375 MM in shares
3Q13 YTD
Maintaining peer-leading capital position
Acquired and expanded
commercial relationships
Enhanced core consumer and
small business payment products
–
Launched self-issuance credit card
capabilities
–
Realigned merchant services
Achieved cost savings of $207 MM
through 3Q13
–
Consolidated 6% of branches through 3Q13
–
Streamlined support functions and
improved sales processes
Optimize and
Grow
Revenue
Improve
Efficiency
Effectively
Manage
Capital
Shareholder Payout %
Adj. Cash Efficiency Ratio
(a)
Credit Card Production (#)
CF&A Loans ($)
3Q12
YTD
3Q13
YTD
46%
79%
2Q12
3Q13
69%
64%
3Q12
3Q13
3Q12
YTD
3Q13
YTD
3
+11%
+58%
(7)%
+72%
(a) Excludes efficiency initiative and pension settlement charges; non-GAAP
measure: see Appendix for reconciliation |
 2013
Performance Pre-provision Net Revenue
(a)
Price / Tangible Book Value, as of 11/30/13
Source: SNL Financial, peer SEC filings
Peers include BBT, CMA, FHN, FITB, HBAN, MTB, PBCT, PNC, RF, STI, USB, and
ZION; payout ratio excludes peers not participating in 2013 CCAR or CapPR
Executing
on
our
commitments
has
driven
PPNR
growth
and
peer
leading
shareholder
return
through
the
3rd
quarter…
…
but
Key
remains
focused
on
continuing
to
close
the
valuation
gap
to
peers
4
$ in millions
Total Shareholder Payout Ratio (3Q13 YTD)
Peers
Peers
Median 1.5x
Median 51%
(a) Pre-provision net revenue excludes gains from the redemption of
trust preferred securities and net gains from the early termination of leveraged leases; non-GAAP
measure: see Appendix for reconciliation |
 5
Focused Forward
Positive
Operating
Leverage
Committed to improving returns by driving the business forward, with
positive operating leverage and disciplined risk and capital management
•
Improve productivity
•
Deliver solid organic revenue growth
•
Drive continuous improvement culture
Disciplined
Capital
Management
Effective Risk
Management
•
Execute
relationship
strategy
with
focus
on
segments
and
sectors
where
we have expertise and presence
•
Maintain discipline and commitment to core risk appetite and tolerances
•
Prioritize organic business growth and return of capital to shareholders,
consistent with capital priorities
•
Purposeful approach to capital management that is shareholder-friendly
I
II
III |
 Positive Operating Leverage
Key’s culture of continuous improvement is focused on both revenue and
expense levers to deliver positive operating leverage
Infrastructure
Sales and Service
Products and Capabilities
Streamline overall infrastructure while
continuing to invest in new and
enhanced capabilities to better serve
clients and meet regulatory
requirements
Build cross-franchise capabilities to
acquire new and expand existing
client relationships across our
franchise
Invest in client-facing FTE and sales
process --
more productive bankers
calling on more targeted prospects
more often
•
Branch rationalization
•
Vendor management
•
Support alignment
•
Continued process improvement
•
Payments and card products
–
Credit card
–
Purchase card
–
Prepaid card
–
Merchant services
•
Treasury platform upgrades
•
Industry expertise
•
Digital channels
•
Sales FTE
–
Corporate Banking
–
Commercial Banking
–
Private Banking
–
Retail
•
Rigorous pipeline and
sales/relationship management
•
Goals and incentives
Driving Productivity Across the Franchise
6
I |
 Effective Risk Management
Significant Improvement in Credit Quality
Enterprise-wide Risk Management Approach
•
Execute rigorous and disciplined sales
approach
–
Relationship-oriented model
–
Clearly defined prospect pools
–
Standard relationship reviews
•
Target specific segments and sectors
where we have expertise
–
Dedicated relationship bankers and product
experts
–
Full suite of capabilities
•
Clearly defined and well understood risk
appetite and tolerances
–
Concentration and hold limits
–
Client level ROE thresholds
•
Risk management principles applied
actively
–
Exited >2,000 client relationships that did not
fit our risk/return criteria
–
Reduced non-core and construction CRE
–
Divested businesses not consistent with
relationship strategy (i.e. Victory Capital
Management)
(a)
Source: SNL; Peers include BBT, CMA, FITB, FHN, HBAN, MTB, PBCT,
PNC, RF, STI, USB and ZION
II
7
Improved Loan Portfolio
Exit
Consumer
Leasing
CRE
CF&A
29%
(41)%
(14)%
(66)%
13%
Targeted areas for strategic growth; reducing non-core assets
Early resolution through the credit cycle
For the past 12 quarters, Key
has been approximately 20%
better than peer median
Net charge-offs to average loans |
 Disciplined Capital Management
1. Organic Growth
4. Opportunistic Growth
Disciplined capital management allows Key to execute on its strategic priorities and
maximize shareholder value
Capital Priorities
2. Dividends
3. Share Repurchases
•
Franchise investments to drive execution of relationship
strategy: product capabilities, client-facing personnel mix
•
10% increase in common share dividend in 2Q13
•
Repurchased $375 million 3Q13 YTD with remaining
authority of $187 million over the next two quarters
•
Acquisitions to strengthen business: commercial servicing,
credit card and Western NY branches
79% total payout to shareholders 3Q13 YTD, up from 46% in the prior year
III
8 |
 Focused
Forward Key is well-positioned to grow and improve returns
9 |
 Appendix
10
*
*
*
*
*
*
*
*
*
* |
 Business Model: Aligned and Targeted
Traditional Bank Products
Capital Markets Capabilities
Deposits & payments
Loans
Wealth management &
private banking
Equipment
finance
Commercial mortgage
banking
Derivatives & foreign
exchange
Equity capital markets
Equity research
M&A /
financial sponsors /
leveraged finance
Investment grade & high-
yield debt
Loan syndications
Public finance
Local delivery of broad product set and industry expertise
Community Bank
Corporate Bank
Consumer
Energy Healthcare Industrial
Public Sector Real Estate
Targeted Industries
11
$3
$50
$1,500
$2,000
Commercial Client Revenue Size ($MM)
$25
$100
$250
$500 |
 Financial Highlights
TE = Taxable equivalent, EOP = End of Period
(a)
From continuing operations
(b)
Year-over-year average balance growth
(c)
From consolidated operations
(d)
Non-GAAP measure: see slides 24-25 in Appendix for reconciliation
(e)
Efficiency initiative charges include pension settlement in 3Q13
Metrics
3Q13
2Q13
1Q13
4Q12
3Q12
EPS –
assuming dilution
$ .25
$ .21
$ .21
$ .20
$ .22
Cash efficiency ratio
(d)
67.5
%
69.1
%
66.0
%
69.0
%
64.1
%
Adj.
cash
efficiency
ratio
(ex.
initiative
charges
)
63.6
65.4
64.5
67.5
63.3
Net interest margin (TE)
3.11
3.13
3.24
3.37
3.23
Return on average total assets
1.12
.95
.99
.96
1.06
Total loans and leases
5
%
7
%
6
%
7
%
6
%
CF&A loans
11
14
16
21
24
Deposits (excl. foreign deposits)
5
8
7
7
7
Tier 1 common equity
(d)
11.2
%
11.2
%
11.4
%
11.4
%
11.3
%
Tier 1 risk-based capital
11.9
11.9
12.2
12.2
12.1
Tangible common equity to tangible assets
(d)
9.9
10.0
10.2
10.2
10.4
NCOs to average loans
.28
%
.34
%
.38
%
.44
%
.86
%
NPLs to EOP portfolio loans
1.01
1.23
1.24
1.28
1.27
Allowance for loan losses to EOP loans
1.62
1.65
1.70
1.68
1.73
Financial
Performance
(a)
Balance
Sheet
Growth
(a),
(b)
Capital
(c)
Asset
Quality
(a)
(d)
(e)
12 |
 Progress on Targets for Success
Focus areas
Metrics
(a)
KEY
FY11
KEY
FY12
KEY
3Q13 YTD
Targets
Improving balance
sheet efficiency
Loan to deposit ratio
(b)
87%
86%
84%
90-100%
Maintaining
moderate risk profile
NCOs to average loans
1.11%
.69%
.33%
40-60 bps
Provision to average loans
(.12)%
.45%
.28%
Growing high
quality, diverse
revenue streams
Net interest margin
3.16%
3.21%
3.16%
>3.50%
Noninterest income
to total revenue
42%
46%
43%
>40%
Generating positive
operating leverage
Adj. cash efficiency ratio
(ex. efficiency initiative
charges)
(c)
67%
67%
65%
60-65%
Strengthening
returns with
disciplined capital
management
Return on average assets
1.17%
1.05%
1.02%
1.00-1.25%
(a)
Continuing operations, unless otherwise noted
(b)
Represents period-end consolidated total loans and loans held for sale
(excluding education loans in the securitization trusts) divided by
period-end consolidated total deposits (excluding deposits in foreign office)
(c)
Excludes intangible asset amortization; non-GAAP measure: see slides 24-25
in Appendix for reconciliation 13 |
 Efficient Balance Sheet: Improving Balance Sheet Mix
Average Loans Continue to Increase, Driven by Commercial, Financial &
Agricultural (CF&A) Exit Portfolios
Home Equity & Other
Total Commercial
Growth in Non-time Deposits with Improved Funding Cost
CDs and other time deposits
Savings
Noninterest-bearing
NOW and MMDA
Cost of total deposits
Note: Loan and deposit figures represent average balances; deposits exclude
deposits in foreign office (a)
Source: Federal Reserve H8; industry data are not seasonally adjusted
(b)
Transaction deposits include noninterest-bearing, NOW, and MMDA
Key
U.S. Commercial Banks
(a)
14
$ in billions
$ in billions
CF&A Loans
Cumulative change since 4Q11 |
 High
Quality Revenue: Diverse Streams TE = Taxable equivalent
(a) Excludes gains from the redemption of trust preferred securities
and leveraged lease terminations Noninterest Income Diversity Provides
Strength; Growth in Core Businesses (a)
Net Interest Income & Net Interest Margin (TE) Trend
Net interest income (TE)
NIM
Noninterest Income
Leveraged lease termination gains
TruPS gains
Trust and investment services
Investment banking and debt placement
Service charges on deposit accounts
Cards and payments
Corporate Services
Operating lease income and other leasing gains
Other
Continuing Operations
15
Continuing Operations
$ in millions
3Q13
Continuing Operations
$ in millions
3Q12 |
 Operating Leverage: Driving Productivity and Efficiency
Adjusted cash efficiency ratio
(ex. efficiency initiative charges)
Cash efficiency ratio
(a)
Efficiency initiative charges include pension settlement in 3Q13
(b)
Non-GAAP measures: see slides 24-25 in Appendix for reconciliation
(c)
Excludes one-time gains of $54 million related to the redemption of trust
preferred securities Achieved Cost Savings Target; Focused on Further
Efficiency Improvement Efficiency initiative charges
(a)
Driving Productivity Enhancements: Improving Annualized Revenue per FTE
16
$ in thousands
$ in thousands
Noninterest Expense
Efficiency Ratio
(b) |
 Significant Improvement in Credit Quality Trends
Net charge-offs (NCOs)
Provision for loan and lease losses
NCOs to average loans
$ in millions
Moderate Risk Profile: Strong Credit Quality
Maintaining Moderate Risk Profile
3Q13
YTD
Net
Charge-offs
to
Average
Loans
(a)
NPLs
NPLs to period-end loans
NPLs held for sale,
OREO & other NPAs
17
(a)
Source: SNL; Peers include BBT, CMA, FITB, FHN, HBAN, MTB, PBCT,
PNC, RF, STI, USB and ZION
Peers
Peers |
 Outlook and Expectations
Loans
•
Mid-single digit average balance growth
NIM
•
Downward pressure in 4Q13 as a result of higher liquidity
Revenue
•
Net interest income relatively stable in 2H13
•
Continued strength in fee income businesses
Expense
•
$680 -
$700 million for 4Q13, including one-time charges
Efficiency
•
60% -
65% cash efficiency
NCOs / Provision
•
Within
or
below
targeted
range
of
40
–
60
bps
of
average
loans
•
Provision near the level of net charge-offs
Capital
•
Remaining
share
repurchase
authority
of
$187
million
over
the
next
two quarters
18 |
 Average Total Investment Securities
Highlights
Average AFS securities
$ in billions
High Quality Investment Portfolio
•
Portfolio composed of Agency or GSE backed
CMOs: Fannie, Freddie & GNMA
•
No private label MBS or financial paper
•
Average portfolio life at 9/30/13 of 3.8 years
compared to 3.2 years at 6/30/13
•
Unrealized net gain of $3 million on available-for-
sale securities portfolio at 9/30/13
•
Securities cash flows of $1.3 billion in 3Q13
and $1.5 billion in 2Q13
•
Yields on purchases were 67 bps lower than
3Q13 maturities
Securities to Total Assets
(b)
(a) Yield is calculated on the basis of amortized cost
(b) Includes end of period held-to-maturity and
available-for-sale securities Average yield
(a)
Average HTM securities
19 |
 Asset
Quality Trends Quarterly Change in Criticized Outstandings
(a)
Delinquencies to Period-end Total Loans
(a)
Loan and lease outstandings
(b)
From continuing operations
30 –
89 days delinquent
90+ days delinquent
Metric
(b)
3Q13
2Q13
1Q13
4Q12
3Q12
Delinquencies to EOP total loans: 30-89 days
.54
%
.47
%
.70
%
.80
%
.69
%
Delinquencies to EOP total loans: 90+ days
.17
.15
.16
.15
.17
NPLs to EOP portfolio loans
1.01
1.23
1.24
1.28
1.27
NPAs to EOP portfolio loans + OREO + Other NPAs
1.08
1.30
1.34
1.39
1.39
Allowance for loan losses to period-end loans
1.62
1.65
1.70
1.68
1.73
Allowance for loan losses to NPLs
160.4
134.4
137.4
131.8
136.0
Continuing Operations
Continuing Operations
20 |
 Period-
end
loans
Average
loans
Net loan
charge-offs
Net loan
charge-offs
(b)
/
average loans
(%)
Nonperforming
loans
(c)
Ending
allowance
Allowance /
period-end
loans
(d)
(%)
Allowance /
NPLs
(%)
9/30/13
3Q13
3Q13
2Q13
3Q13
2Q13
9/30/13
6/30/13
9/30/13
9/30/13
9/30/13
Commercial, financial and agricultural
(a)
$24,317
$23,864
$ 4
$ 8
.07
.14
$ 102
$ 146
$
370 1.52
362.75
Commercial real estate:
Commercial Mortgage
7,544
7,575
(8)
(2)
(.42)
(.11)
58
106
172
2.28
296.55
Construction
1,058
1,073
(6)
1
(2.22)
.38
17
26
36
3.40
211.76
Commercial lease financing
4,550
4,633
15
(2)
1.28
(.17)
22
14
64
1.41
290.91
Real estate –
residential mortgage
2,198
2,193
2
4
.36
.74
98
94
35
1.59
35.71
Home equity:
Key Community Bank
10,285
10,247
12
14
.46
.56
198
205
82
.80
41.41
Other
353
364
2
5
2.18
5.16
13
16
14
3.97
107.69
Consumer other –
Key Community Bank
1,440
1,435
7
5
1.94
1.44
2
3
27
1.88
N/M
Credit cards
698
700
8
6
4.53
3.45
4
11
34
4.87
850.00
Consumer other:
Marine
1,083
1,120
1
5
.35
1.66
25
30
31
2.86
124.00
Other
71
67
-
1
-
5.42
2
1
3
4.23
150.00
Continuing total
(e)
$53,597
$53,271
$ 37
$ 45
.28
.34
$ 541
$ 652
$
868 1.62
160.44
Discontinued operations
4,738
4,905
9
7
1.36
1.04
23
19
38
.80
165.22
Consolidated total
$58,335
$58,176
$46
$ 52
.33
.38
$ 564
$ 671
$
906 1.55
160.64
Credit Quality by Portfolio
Credit Quality
(a)
9-30-13
ending
loan
balances
include
$96
million
of
commercial
credit
card
balances;
9-30-13
average
loan
balances
include
$96
million
of
assets
from commercial credit cards
(b)
Net loan charge-off amounts are annualized in calculation. NCO ratios for
discontinued operations and consolidated Key exclude education loans in the
securitization trusts since valued at fair-market value (c)
9-30-13 and 6-30-13 NPL amounts exclude $18 million and $19
million respectively of purchased credit impaired loans acquired in July 2012.
(d) Allowance/period loans ratios for discontinued operations and
consolidated Key exclude education loans in the securitization trusts since valued at
fair-market value
(e) 9-30-13 ending loan balances include purchased loans of $176
million of which $18 million were purchased credit impaired $ in millions
N/M = Not Meaningful
21 |
 Vintage (% of Loans)
Loan
Balances
Average Loan
Size ($)
Average
FICO
Average
LTV
(a)
% of Loans
LTV>90%
2012 and
later
2011
2010
2009
2008 and
prior
Home equity loans and lines
First lien
$
16 $ 23,209
744
35
%
.4
%
-
-
1%
1%
98
%
Second lien
337
23,003
729
82
32.5
-
-
-
-
100
Total home equity loans and lines
$ 353
23,013
729
80
31.0
-
-
-
-
100
Nonaccrual loans
First lien
$
1 $
24,247 729
33
%
-
-
-
-
-
100
%
Second lien
12
24,712
702
82
35.1
%
-
-
-
-
100
Total home equity nonaccrual loans
$
13 24,685
703
80
33.0
-
-
-
-
100
Exit Portfolio -
Home Equity
Third quarter net charge-offs
$
2 -
-
-
-
100
%
Net loan charge-offs to average loans
2.18
%
Vintage (% of Loans)
Loan
Balances
Average Loan
Size ($)
Average
FICO
Average
LTV
(a)
% of Loans
LTV>90%
2012 and
later
2011
2010
2009
2008 and
prior
Home equity loans and lines
First lien
$
5,932 $
67,691 765
67
%
.6
%
40
%
6%
4
%
4
%
46%
Second lien
4,353
47,569
760
76
3.2
25
6
4
4
61
Total home equity loans and lines
$ 10,285
57,525
763
71
1.8
33
6
4
4
53
Nonaccrual loans
First lien
$
108 $
58,708 713
73
%
.4%
2
%
3%
3
%
5
%
87%
Second lien
90
48,922
711
78
2.0
-
2
2
4
92
Total home equity nonaccrual loans
$
198 53,794
712
75
1.1
1
2
3
5
89
Community Bank -
Home Equity
Third quarter net charge-offs
$
12 -
3%
-
4
%
93%
Net loan charge-offs to average loans
.46
%
(a)
Average LTVs are at origination. Current average LTVs for Community Bank total
home equity loans and lines is approximately 74%, which compares to 75% at
the end of the second quarter 2013. Community Bank –
Home Equity
Exit Portfolio –
Home Equity
$ in millions, except average loan size
Home Equity Loans –
9/30/13
$ in millions, except average loan size
22 |
 Balance Outstanding
Change
Net Loan Charge-offs
Balance on
Nonperforming Status
9-30-13
6-30-13
9-30-13
vs.
6-30-13
3Q13
(c)
2Q13
(c)
9-30-13
6-30-13
Residential
properties
–
homebuilder
$ 26
$ 26
-
-
$ 1
$ 8
$ 8
Marine and RV floor plan
25
28
$ (3)
-
-
6
7
Commercial lease financing
(a)
796
931
(135)
$ (2)
(2)
1
1
Total commercial loans
847
985
(138)
(2)
(1)
15
16
Home equity –
Other
353
375
(22)
2
5
14
16
Marine
1,083
1,160
(77)
1
5
25
31
RV and other consumer
71
69
2
-
1
2
-
Total consumer loans
1,507
1,604
(97)
3
11
41
47
Total exit loans in loan portfolio
$ 2,354
$ 2,589
$ (235)
$ 1
$ 10
$ 56
$ 63
Discontinued
operations
–
education
lending
business (not included in exit loans above)
(b)
$ 4,738
$ 4,992
$ (254)
$ 9
$ 7
$ 23
$ 19
$ in millions
(a)
Includes (1) the business aviation, commercial vehicle, office products,
construction and industrial leases; (2) Canadian lease financing portfolios;
and (3) all remaining balances related to lease in, lease out; sale in, lease out;
service contract leases; and qualified technological equipment leases (b)
Includes loans in Key’s consolidated education loan securitization
trusts (c)
Credit amounts indicate recoveries exceeded charge-offs
$ in millions
Exit Loan Portfolio
Exit Loan Portfolio
23 |
 Three
months ended 9-30-13
6-30-13
9-30-12
Tangible common equity to tangible assets at period end
Key shareholders’
equity (GAAP)
$
10,206
$
10,229
$
10,251
Less:
Intangible assets
(a)
1,017
1,021
1,031
Preferred Stock, Series A
(b)
282
282
291
Tangible common equity (non-GAAP)
$
8,907
$
8,926
$
8,929
Total assets (GAAP)
$
90,708
$
90,639
$
86,950
Less:
Intangible assets
(a)
1,017
1,021
1,031
Tangible assets (non-GAAP)
$
89,691
$
89,618
$
85,919
Tangible common equity to tangible assets ratio (non-GAAP)
9.93
%
9.96
%
10.39
%
Tier 1 common equity at period end
Key shareholders' equity (GAAP)
$
10,206
$
10,229
$
10,251
Qualifying capital securities
340
339
339
Less:
Goodwill
979
979
979
Accumulated other comprehensive income (loss)
(c)
(409)
(359)
(109)
Other assets
(d)
96
101
121
Total Tier 1 capital (regulatory)
9,880
9,847
9,599
Less:
Qualifying capital securities
340
339
339
Preferred Stock, Series A
(b)
282
282
291
Total Tier 1 common equity (non-GAAP)
$
9,258
$
9,226
$
8,969
Net risk-weighted assets (regulatory)
(d)
$
82,913
$
82,528
$
79,363
Tier 1 common equity ratio (non-GAAP)
11.17
%
11.18
%
11.30
%
Three months ended
Nine months ended
9-30-13
6-30-13
9-30-12
9-30-13
9-30-12
Pre-provision net revenue
Net interest income (GAAP)
$
578
$
581
$
572
$
1,742
$
1,663
Plus:
Taxable-equivalent adjustment
6
5
6
17
18
Noninterest income (GAAP)
459
429
518
1,313
1,417
Less:
Noninterest expense (GAAP)
716
711
712
2,108
2,084
Pre-provision net revenue from continuing operations (non-GAAP)
$
327
$
304
$
384
$
964
$
1,014
Pre-provision net revenue from continuing operations (non-GAAP)
$
964
$
1,014
Less:
Gains from redemption of trust preferred securities
-
54
Less:
Net gains from the early termination of leveraged leases
15
61
Adjusted pre-provision net revenue from continuing operations
(non-GAAP) $
949
$
899
GAAP to Non-GAAP Reconciliation
$ in millions
(a)
Three months ended September 30, 2013, June 30, 2013, and September 30, 2012
exclude $99 million, $107 million, and $130 million, respectively, of
period end purchased credit card receivable intangible assets (b)
Net of capital surplus for the three months ended September 30, 2013 and June 30,
2013 (c)
Includes net unrealized gains or losses on securities available for sale (except
for net unrealized losses on marketable equity securities), net gains or
losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other
postretirement plans
(d)
Other assets deducted from Tier 1 capital and net risk-weighted assets consist
of disallowed intangible assets (excluding goodwill) and deductible
portions of nonfinancial equity investments. There were no disallowed
deferred tax assets at 9-30-13, 6-30-13, and 9-30-12
24 |
 Three
months ended 9-30-13
6-30-13
9-30-12
Average tangible common equity
Average Key shareholders' equity (GAAP)
$
10,237
$
10,314
$
10,222
Less:
Intangible assets (average)
(a)
1,019
1,023
1,026
Preferred Stock, Series A (average)
291
291
291
Average tangible common equity (non-GAAP)
$
8,927
$
9,000
$
8,905
Return on average tangible common equity from continuing operations
Net
income
(loss)
from
continuing
operations
attributable
to
Key
common
shareholders (GAAP)
$
229
$
193
$
211
Average tangible common equity (non-GAAP)
8,927
9,000
8,905
Return on average tangible common equity from continuing operations (non-
GAAP)
10.18
%
8.60
%
9.43
%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
266
$
198
$
214
Average tangible common equity (non-GAAP)
8,927
9,000
8,905
Return on average tangible common equity consolidated (non-GAAP)
11.82
%
8.82
%
9.56
%
Three months ended
Nine
months
ended
Twelve months ended
Cash efficiency ratio
9-30-13
6-30-13
9-30-12
9-30-13
12-31-12
12-31-11
Noninterest expense (GAAP)
$
716
$
711
$
712
$
2,108
$
2,818
$
2,684
Less:
Intangible asset amortization on credit cards (GAAP)
8
7
6
23
14
-
Other intangible asset amortization (GAAP)
4
3
3
11
9
4
Adjusted noninterest expense (non-GAAP)
$
704
$
701
$
703
$
2,074
$
2,795
$
2,680
Net interest income (GAAP)
$
578
$
581
$
572
$
1,742
$
2,264
$
2,267
Plus:
Taxable-equivalent adjustment
6
5
6
17
24
25
Noninterest income (GAAP)
459
429
518
1,313
1,856
1,688
Total taxable-equivalent revenue (non-GAAP)
$
1,043
$
1,015
$
1,096
$
3,072
$
4,144
$
3,980
Cash efficiency ratio (non-GAAP)
67.5
%
69.1
%
64.1
%
67.5
%
67.4
%
67.3
%
Three months ended
Nine
months
ended
Twelve months ended
9-30-13
6-30-13
9-30-12
9-30-13
12-31-12
12-31-11
Adjusted cash efficiency ratio
Adjusted noninterest expense (non-GAAP)
$
704
$
701
$
703
$
2,074
$
2,795
$
2,680
Less:
Efficiency initiative and pension settlement charges (non-GAAP)
41
37
9
93
25
-
Net adjusted noninterest expense (non-GAAP)
$
663
$
664
$
694
$
1,981
$
2,770
$
2,680
Total taxable-equivalent revenue (non-GAAP)
$
1,043
$
1,015
$
1,096
$
3,072
$
4,144
$
3,980
Adjusted cash efficiency ratio (non-GAAP)
63.6
%
65.4
%
63.3
%
64.5
%
66.8
%
67.3
%
GAAP to Non-GAAP Reconciliation (continued)
$ in millions
(a)
Three months ended September 30, 2013, June 30, 2013, and September 30, 2012
exclude $103 million, $110 million and $86 million, respectively,
of
average
ending
purchased
credit
card
receivable
intangible
assets
25 |
 Tier 1
Common Equity Under the Regulatory Capital Rules, Incorporating Basel III
Guidance (estimated) (a)
KeyCorp & Subsidiaries
$ in billions
Quarter ended
Sept. 30, 2013
Tier 1 common equity under current regulatory rules
$
9.3 Adjustments from current regulatory rules
to the Regulatory Capital Rules: Deferred tax assets and other
(b)
(.1)
Tier 1 common equity anticipated under the Regulatory Capital Rules
(c)
$
9.1 Total risk-weighted
assets under current regulatory rules
$
82.9 Adjustments from current regulatory rules to the
Regulatory Capital Rules: Loan commitments <1 year
.5
Past Due Loans
.2
Mortgage servicing assets
(d)
.6
Deferred tax assets
(d)
.2
Other
1.5
Total risk-weighted assets anticipated under the Regulatory Capital
Rules
$
85.9 Tier 1 common equity ratio under the Regulatory Capital
Rules 10.6
%
(a)
Tier
1
common
equity
is
a
non-generally
accepted
accounting
principle
(GAAP)
financial
measure
that
is
used
by
investors,
analysis
and
bank
regulatory agencies to assess the capital position of financial services
companies; management reviews Tier 1 common equity along with other
measures of capital as part of its financial analyses
(b)
Includes the deferred tax asset subject to future taxable income
for realization, primarily tax credit carryforwards
(c)
The
anticipated
amount
of
regulatory
capital
and
risk-weighted
assets
is
based
upon
the
federal
banking
agencies’
Regulatory
Capital
Rules
(as
fully phased-in on January 1, 2019); Key is subject to the Regulatory
Capital Rules under the “standardized approach”
(d)
Item is included in the 10%/15% exceptions bucket calculation and is
risk-weighted at 250% Table may not foot due to rounding
26 |