Attached files
| file | filename |
|---|---|
| EX-99.3 - EX-99.3 - KEYCORP /NEW/ | d757476dex993.htm |
| 8-K - FORM 8-K - KEYCORP /NEW/ | d757476d8k.htm |
| EX-99.1 - EX-99.1 - KEYCORP /NEW/ | d757476dex991.htm |
 KeyCorp
Second Quarter 2014 Earnings Review
July 17, 2014
Beth E. Mooney
Chairman and
Chief Executive Officer
Don Kimble
Chief Financial Officer
Exhibit 99.2
****
****
****
****
**** |
 2
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)
deterioration
of
commercial
real
estate
market
fundamentals;
(2)
declining
asset
prices;
(3)
adverse
changes
in
credit
quality
trends;
(4)
changes
in
local,
regional
and
international
business,
economic
or
political
conditions;
(5)
the
extensive
and
increasing
regulation
of
the
U.S.
financial
services
industry;
(6)
increasing
capital
and
liquidity
standards
under
applicable
regulatory
rules;
(7)
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;
(8)
our
ability
to
receive
dividends
from
our
subsidiary,
KeyBank;
(9)
downgrades
in
our
credit
ratings
or
those
of
KeyBank;
(10)
operational
or
risk
management
failures
by
us
or
critical
third-parties;
(11)
breaches
of
security
or
failures
of
our
technology
systems
due
to
technological
or
other
factors
and
cybersecurity
threats;
(12)
adverse
judicial
proceedings;
(13)
the
occurrence
of
natural
or
man-made
disasters
or
conflicts
or
terrorist
attacks;
(14)
a
reversal
of
the
U.S.
economic
recovery
due
to
economic,
political
or
other
shocks;
(15)
our
ability
to
anticipate
interest
rate
changes
and
manage
interest
rate
risk;
(16)
deterioration
of
economic
conditions
in
the
geographic
regions
where
we
operate;
(17)
the
soundness
of
other
financial
institutions;
(18)
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;
(19)
our
ability
to
timely
and
effectively
implement
our
strategic
initiatives;
(20)
increased
competitive
pressure
due
to
industry
consolidation;
(21)
unanticipated
adverse
effects
of
acquisitions
and
dispositions
of
assets
or
businesses;
and
(22)
our
ability
to
develop
and
effectively
use
the
quantitative
models
we
rely
upon
in
our
business
planning.
We
provide
greater
detail
regarding
these
factors
in
our
2013
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,”
and
“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. |
 3
Positive operating leverage year-over-year
Total average loans up 6% from prior year, driven by CF&A up 13%
CF&A loan growth and investment banking and debt placement fees (up 18%
year-over-year) reaffirms strength of business model
Expenses remain well-controlled, down 3% from prior year
Asset quality remains strong, with NCOs below targeted range
NPAs down 41% from prior year
New business originations are higher quality than overall book
Remaining disciplined with structure and relationship focus
Strong Risk
Management
Repurchased $108 million in common shares in 2Q14
Increased quarterly common share dividend by 18%
Committed to capital priorities: organic growth, dividends, repurchases,
opportunistic growth
Positive
Operating
Leverage
Investor Highlights –
2Q14
Execution of strategy and differentiated business model driving results
Disciplined
Capital
Management |
 Strategic Acquisition: Leading Technology Platform
Highlights
Expected Benefits
Industry-focused firm covering high growth
technology sub-verticals
Comprehensive platform aligned with Key’s business
model
-
Equity research
-
Sales and trading
-
Investment banking
Recognized as a leading research and capital
markets provider across technology sub-verticals
-
#1 ranked Technology Equity Sales Coverage for
the past 6 years
(a)
-
#2
ranked
for
Best
Sales
Professional
Support
(b)
-
Top 10 Greatest Knowledge of Industries/
Companies
(b)
Accelerates growth and impact in the market,
consistent with Key’s strategy
Adds new expertise and clients while driving
synergies across the platform
Provides the opportunity to expand new and
existing client relationships
-
Delivers breadth of Key platform to acquired
relationships
-
Capitalizes on convergence of technology
across other industry verticals
(a)
2014 Greenwich Small / Mid-cap Rankings
(b)
2014 Greenwich All U.S. institutions Rankings
Underscores Key’s commitment to be the leading corporate and
investment bank serving middle market companies
4
Industry Verticals
Note: Acquisition subject to regulatory approval and customary closing conditions;
expected closing date: end of third quarter 2014 |
 5
Financial Review
******************** |
 6
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)
6-30-14 ratios are estimated
(e)
Non-GAAP measure: see Appendix for reconciliation
Metrics
2Q14
1Q14
4Q13
3Q13
2Q13
EPS –
assuming dilution
$ .27
$ .26
$ .26
$ .25
$ .21
Cash efficiency ratio
(e)
65.8
%
64.9
%
67.4
%
67.5
%
69.1
%
Net interest margin (TE)
2.98
3.00
3.01
3.11
3.13
Return on average total assets
1.14
1.13
1.08
1.12
.95
Total loans and leases
6
%
4
%
3
%
5
%
7
%
CF&A loans
13
9
8
11
14
Deposits (excl. foreign deposits)
2
4
8
5
8
Tier 1 common equity
(d), (e)
11.3
%
11.3
%
11.2
%
11.2
%
11.2
%
Tier 1 risk-based capital
(d)
12.1
12.0
12.0
11.9
11.9
Tangible common equity to tangible assets
(e)
10.2
10.1
9.8
9.9
10.0
NCOs to average loans
.22
%
.15
%
.27
%
.28
%
.34
%
NPLs to EOP portfolio loans
.71
.81
.93
1.01
1.23
Allowance for loan losses to EOP loans
1.46
1.50
1.56
1.62
1.65
Balance
Sheet
Growth
(a),
(b)
Capital
(c)
Asset
Quality
(a)
Financial
Performance
(a) |
 7
Average total loans up 6% from prior year
–
Driven by 13% increase in CF&A
Total commitments continue to grow with
utilization relatively stable
High quality new loan originations: consistent with
moderate risk profile
Remaining disciplined with structure and
relationship focus
Loan Growth
$ in billions
Highlights
Average Commercial, Financial & Agricultural Loans
Average Loans
Exit Portfolios
(a)
Home Equity & Other
Total Commercial
$ in billions
(a)
Growth in exit portfolio in 1Q14 reflects movement of international leasing
business |
 8
Improving Deposit Mix
Highlights
Funding Cost
Overall funding cost continues to improve
Transaction deposit balances up 4% from 2Q13
Growth from prior year reflects inflows from
commercial clients as well as commercial
mortgage servicing
Total CD maturities and average cost
–
2014 Q3: $1.8 billion at .98%
–
2014 Q4: $.8 billion at .66%
–
2015 and beyond: $3.6 billion at 1.22%
Average
Deposits
(a)
$ in billions
Note: Transaction deposits include noninterest-bearing, and NOW and MMDA
(a)
Excludes deposits in foreign office
Cost of total deposits
(a)
Interest-bearing liability cost
CDs and other time deposits
Savings
Noninterest-bearing
NOW and MMDA |
 9
Net Interest Income and Margin
TE = Taxable equivalent
Continuing Operations
Highlights
Net Interest Income (TE) & Net Interest Margin (TE) Trend
Net interest income down 1% from prior year due to:
–
Competitive environment and asset repricing
offsetting loan growth
–
2Q14 leveraged lease
termination
(-$2 MM impact)
Growth from the prior quarter (up 2%) reflects
continued loan growth, day count and funding cost
improvement
Maintaining moderate asset sensitive position
–
Naturally asset sensitive balance sheet flows:
approximately 70% of loans variable rate
–
High quality investment portfolio with average
life of 3.6 years
–
Flexibility to quickly adjust interest rate risk
position
NIM Change (bps):
vs. 1Q14
Loan yield
(.05)
Leveraged lease termination
(.01)
Loan fees
.02
CD maturities / repricing
.01
Interest rate risk management / swaps
.01
Total Change
(.02)
Net interest income (TE)
NIM (TE)
$ in millions |
 10
Noninterest Income
TE = Taxable equivalent
Continuing Operations
Highlights
Noninterest Income
Noninterest income up 6% from prior year, due to:
–
Investment banking and debt placement fees
up 18%
–
Gains from leveraged lease termination and
principal investing
Change from prior quarter (up 5%) reflects:
–
Investment banking and debt placement fees
up 18%
–
Leveraged lease early termination gain
–
Seasonal pickup in activity levels
•
Cards and payments: +13%
•
Deposit service charges: +5%
2Q14
Noninterest Income Diversity
$ in millions
(a)
Other includes corporate-owned life insurance, principal investing, etc.
Leveraged lease termination gains
TruPS gains
$455
$429 |
 11
Focused Expense Management
Noninterest Expense
$ in millions
Highlights
$689
Noninterest Expense Outlook
(a)
Non-GAAP measure: see Appendix for reconciliation
(b)
Excludes one-time gains of $54 million related to the redemption of trust
preferred securities $711
$2.8 B
Cash Efficiency Ratio
(a)
(b)
Expenses down 3% from prior year, benefitting
from continuous improvement efforts
Increase from prior quarter reflects:
Seasonal trends in marketing and personnel
Higher level of efficiency charges
Focused on improving efficiency and driving into
targeted range
Y-o-Y:
low to
mid-
single
digit %
decline
FY13 Reported
FY14 Outlook
Efficiency charges:
Pension charges:
$15
$37
$16
$22
$10
$ 2
$25
Efficiency and pension charges, as a % of revenue:
.8%
1.5%
1.5%
3.6%
3.9%
2.3%
1.0%
Cash efficiency ratio,
excluding efficiency
and pension charges
$24
2.3% |
 Focused Expense Management
$2.82 B
$117 MM
$2.70 B
Low to mid-
single digit
decline year-
over-year
Continued cost savings enable investments and offset normal expense growth
(4) % –
(6) %
1 % –
2.5 %
1 % -
2%
(a)
Operating cost increase includes inflationary adjustments, annual merit increases,
etc. 2 % –
2.5 %
12
Note: Percentage ranges based upon 2014 expense plans and calculated from 2013
reported NIE |
 Improving Efficiency
Cash Efficiency Ratio
(a)
Driving progress toward the low end of our targeted range
Rising interest rates present an opportunity for additional improvement,
with long-term goal of moving below targeted range
(a)
Non-GAAP measure: see Appendix for reconciliation
13
Current Target:
60% -
65% |
 14
Nonperforming Assets
Net Charge-offs & Provision for Loan and Lease Losses
NPLs
NPLs to period-end loans
NCOs
Provision for loan and
lease losses
NCOs to average loans
$ in millions
$ in millions
NPLs held for sale,
OREO & other NPAs
Continued Improvement in Asset Quality
Highlights
Net loan charge-offs decreased 33% from 2Q13 to
$30 MM, or 22 bps of average loans
Total gross charge-offs down 24% from 2Q13 and
down 2% from 1Q14
Commercial loan recoveries exceeded gross
charge-offs by $3 MM in 2Q14
Net charge-offs expected to continue below the
targeted range for the remainder of the year
Allowance for Loan and Lease Losses
Allowance for loan and
lease losses to NPLs
Allowance for loan
and lease losses
$ in millions
$693
$410 |
 15
Disciplined capital management
Continuing to invest in businesses
Increased quarterly common share dividend
by 18%
Repurchased $108 MM in common shares
Tier 1 Common Equity
(a), (b)
Tangible Common Equity to Tangible Assets
(a)
Strong Capital
Highlights
Book Value per Share
(a)
Non-GAAP measure: see Appendix for reconciliations
(b)
6-30-14 ratio is estimated |
 2014
Outlook and Expectations Loans
•
Mid-single digit average balance growth
Net Interest
Income
•
Relatively stable from 2013, with slight downward pressure from
competitive environment
Noninterest
Income
•
Low single-digit growth compared to prior year
Expense
•
Low to mid-single digit percentage decline from 2013
Efficiency /
Productivity
•
Positive operating leverage
Asset Quality
•
Net charge-offs to average loans expected to continue below
targeted
range
of
40
–
60
bps
for
the
remainder
of
the
year
Capital
•
Disciplined execution of 2014 capital plan, including dividends and
share repurchases
16
Guidance
ranges:
relatively
stable:
+/-
2%;
low
single-digit:
<5%;
mid-single
digit:
4%
-
6% |
 17
Appendix
***************************** |
 Progress on Targets for Success
Focus areas
Metrics
(a)
2Q14
1Q14
Targets
Improving balance
sheet efficiency
Loan to deposit ratio
(b)
87%
88%
90-100%
Maintaining
moderate risk
profile
NCOs to average loans
.22%
.15%
40-60 bps
Provision to average loans
.07%
.04%
Growing high
quality, diverse
revenue streams
Net interest margin
2.98%
3.00%
>3.50%
Noninterest income
to total revenue
44%
43%
>40%
Generating
positive operating
leverage
Cash efficiency ratio
(c)
66%
65%
60-65%
Strengthening
returns with
disciplined capital
management
Return on average assets
1.14%
1.13%
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 Appendix for
reconciliation 18 |
 Supporting business activities with
technology development
Driving productivity through improved
talent management
Driving Positive Operating Leverage
Revenue Growth
Expense Savings
Community
Bank
Corporate
Bank
Improving sales productivity with
existing and new bankers
Launched new product: Hassle-Free
Enhancing online and mobile channels
Optimizing branch channel
Driving greater efficiencies through back
and middle-office processes
Enterprise
Adding senior bankers with industry
expertise and relationships
Strengthening commercial payment
product capabilities
Strategic investment in technology vertical
Exiting international leasing originations
and reducing related cost structure
Variablizing cost through utilization of third-
party partners
Rationalization of fixed income trading
platform
Improving operational effectiveness
(Lean Six Sigma, variablizing costs)
Reducing occupancy costs
Right-sizing support activities
19 |
 20
Average Total Investment Securities
Highlights
Average AFS securities
$ in billions
High Quality Investment Portfolio
Portfolio composed of Agency-backed CMOs:
Fannie, Freddie & GNMA
–
No private label MBS or financial paper
Currently reinvesting cash flows into GNMA
securities, for Basel III liquidity (LCR)
–
31% of total portfolio was GNMA at 6/30/14
Securities cash flows of $.9 billion in 2Q14
and $.8 billion in 1Q14
Average portfolio life at 6/30/14 of 3.6 years,
unchanged from 3/31/14
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
$17.4
2.33%
$17.4 |
 21
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)
2Q14
1Q14
4Q13
3Q13
2Q13
Delinquencies to EOP total loans: 30-89 days
.49
%
.48
%
.58
%
.54
%
.47
%
Delinquencies to EOP total loans: 90+ days
.15
.16
.13
.17
.15
NPLs to EOP portfolio loans
.71
.81
.93
1.01
1.23
NPAs to EOP portfolio loans + OREO + Other NPAs
.74
.85
.97
1.08
1.30
Allowance for loan losses to period-end loans
1.46
1.50
1.56
1.62
1.65
Allowance for loan losses to NPLs
205.6
185.7
166.9
160.4
134.4
Continuing Operations
Continuing Operations |
 Period-
end loans
Average
loans
Net loan
charge-offs
Net loan
charge-offs
(b)
/
average loans
(%)
Nonperforming
loans
(c)
Ending
allowance
(d)
Allowance /
period-end
loans
(d)
(%)
Allowance /
NPLs
(%)
6/30/14
2Q14
2Q14
2Q14
6/30/14
6/30/14
6/30/14
6/30/14
Commercial, financial and agricultural
(a)
$ 26,327
$ 26,444
-
-
$
37
$ 373
1.42
N/M
Commercial real estate:
Commercial Mortgage
7,946
7,880
-
-
38
159
2.00
418.42
Construction
1,047
1,049
$ (1)
(.38)
9
34
3.25
377.78
Commercial lease financing
4,241
4,257
(2)
(.19)
15
60
1.41
400.00
Real estate –
residential mortgage
2,189
2,189
1
.18
89
25
1.14
28.09
Home equity
10,679
10,627
10
.38
189
86
.81
45.50
Credit cards
718
702
11
6.29
1
30
4.18
N/M
Consumer other –
Key Community Bank
1,514
1,479
7
1.90
2
24
1.59
N/M
Consumer other –
Exit Portfolio
939
984
4
1.63
16
23
2.45
143.75
Continuing total
(e)
$ 55,600
$ 55,611
$ 30
.22
$
396
$ 814
1.46
205.56
Discontinued operations
4,162
4,273
7
1.16
19
32
1.31
168.42
Consolidated total
$ 59,762
$ 59,884
$ 37
.26
$
415
$ 846
1.46
203.86
Credit Quality by Portfolio
Credit Quality
$ in millions
22
(a) 6-30-14
ending
loan
balances
include
$94
million
of
commercial
credit
card
balances;
6-30-14
average
loan
balances
include
$95
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)
6-30-14 NPL amount excludes $15 million of purchased credit impaired
loans (d) 6-30-14 allowance by portfolio is estimated.
Allowance/period loans ratios for discontinued operations and consolidated Key exclude education
loans in the securitization trusts since valued at fair-market value
(e) 6-30-14
ending
loan
balances
include
purchased
loans
of
$151
million,
of
which
$15
million
were
purchased
credit
impaired
N/M = Not meaningful |
 (a) Average LTVs are at origination. Current average LTVs for Community Bank total
home equity loans and lines is approximately 71%, which compares to 71% at
the end of the first quarter of 2014. Home Equity Portfolio –
6/30/14
$ in millions, except average loan size
Home Equity Portfolio
Highlights
High quality portfolio
Community bank loans and lines: 97% of total portfolio; branch-
originated
–
59% first lien position
–
Average FICO score of 765
–
Average LTV at origination: 71%
$4.0 billion of the total portfolio are fixed rate loans that require
principal and interest payments; $6.7 billion are lines
$1.5 billion in lines outstanding (14% of the total portfolio)
come to end of draw period in the next four years
–
Proactive communication and client outreach initiated
near end of draw period
23 |
 Balance Outstanding
Change
Net Loan Charge-offs
Balance on
Nonperforming Status
6-30-14
3-31-14
6-30-14
vs.
3-31-14
2Q14
(c)
1Q14
(c)
6-30-14
3-31-14
Residential properties –
homebuilder
$ 19
$ 20
$ (1)
-
$ (1)
$
7 $ 7
Marine and RV floor plan
23
23
-
-
-
6
6
Commercial lease financing
(a)
1,154
1,381
(227)
$ (5)
(2)
3
3
Total commercial loans
1,196
1,424
(228)
(5)
(3)
16
16
Home equity –
Other
300
315
(15)
1
2
11
11
Marine
888
965
(77)
5
4
15
15
RV and other consumer
61
66
(5)
(1)
1
1
1
Total consumer loans
1,249
1,346
(97)
$ 5
7
27
27
Total exit loans in loan portfolio
$ 2,445
$ 2,770
$ (325)
-
$ 4
$ 43
$
43 Discontinued
operations – education lending
business (not included in exit loans above)
(b)
$ 4,162
$ 4,354
$ (192)
$ 7
$ 9
$ 19
$
20 Average balances, $
in millions (a)
Includes (1) the business aviation, commercial vehicle, office products,
construction and industrial leases; (2) Canadian lease financing portfolios;
(3) European lease financing portfolios; and (4) 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
1Q14 growth in exit portfolio
reflects movement of
international leasing business
Exit Loan Portfolio
24 |
 Three months ended
6-30-14
3-31-14
12-31-13
9-30-13
6-30-13
Tangible common equity to tangible assets at period end
Key shareholders’
equity (GAAP)
$
10,504
$
10,403
$
10,303
$
10,206
$
10,229
Less:
Intangible assets
(a)
1,008
1,012
1,014
1,017
1,021
Preferred Stock, Series A
(b)
282
282
282
282
282
Tangible common equity (non-GAAP)
$
9,214
$
9,109
$
9,007
$
8,907
$
8,926
Total assets (GAAP)
$
91,798
$
90,802
$
92,934
$
90,708
$
90,639
Less:
Intangible assets
(a)
1,008
1,012
1,014
1,017
1,021
Tangible assets (non-GAAP)
$
90,790
$
89,790
$
91,920
$
89,691
$
89,618
Tangible common equity to tangible assets ratio (non-GAAP)
10.15
%
10.14
%
9.80
%
9.93
%
9.96
%
Tier 1 common equity at period end
Key shareholders’
equity (GAAP)
$
10,504
$
10,403
$
10,303
$
10,206
$
10,229
Qualifying capital securities
339
339
339
340
339
Less:
Goodwill
979
979
979
979
979
Accumulated other comprehensive income (loss)
(c)
(325)
(367)
(394)
(409)
(359)
Other assets
(d)
81
84
89
96
101
Total Tier 1 capital (regulatory)
10,108
10,046
9,968
9,880
9,847
Less:
Qualifying capital securities
339
339
339
340
339
Preferred Stock, Series A
(b)
282
282
282
282
282
Total Tier 1 common equity (non-GAAP)
$
9,487
$
9,425
$
9,347
$
9,258
$
9,226
Net risk-weighted assets (regulatory)
(e)
$
83,729
$
83,637
$
83,328
$
82,913
$
82,528
Tier 1 common equity ratio (non-GAAP)
(e)
11.33
%
11.27
%
11.22
%
11.17
%
11.18
%
Pre-provision net revenue
Net interest income (GAAP)
$
573
$
563
$
583
$
578
$
581
Plus:
Taxable-equivalent adjustment
6
6
6
6
5
Noninterest income (GAAP)
455
435
453
459
429
Less:
Noninterest expense (GAAP)
689
662
712
716
711
Pre-provision net revenue from continuing operations (non-GAAP)
$
345
$
342
$
330
$
327
$
304
GAAP to Non-GAAP Reconciliation
$ in millions
25
a)
Three
months
ended
June
30,
2014,
March
31,
2014,
December
31,
2013,
September
30,
2013,
and
June
30,
2013,
exclude
$79
million,
$84
million,
$92
million,
$99
million, and $107 million of period-end purchased credit card receivable
intangible assets, respectively b)
Net
of
capital
surplus
for
the
three
months
ended
June
30,
2014,
March
31,
2014,
December
31,
2013,
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 June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and
June 30, 2013
e)
6-30-14 amount is estimated |
 Three months ended
6-30-14
3-31-14
12-31-13
9-30-13
6-30-13
Average tangible common equity
Average Key shareholders’
equity (GAAP)
$
10,459
$
10,371
$
10,272
$
10,237
$
10,314
Less:
Intangible assets (average)
(a)
1,010
1,013
1,016
1,019
1,023
Preferred Stock, Series A (average)
291
291
291
291
291
Average tangible common equity (non-GAAP)
$
9,158
$
9,067
$
8,965
$
8,927
$
9,000
Return on average tangible common equity from continuing operations
Net
income
(loss)
from
continuing
operations
attributable
to
Key
common
shareholders (GAAP)
$
242
$
232
$
229
$
229
$
193
Average tangible common equity (non-GAAP)
9,158
9,067
8,965
8,927
9,000
Return on average tangible common equity from continuing operations
(non-GAAP) 10.60
%
10.38
%
10.13
%
10.18
%
8.60
%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
214
$
236
$
224
$
266
$
198
Average tangible common equity (non-GAAP)
9,158
9,067
8,965
8,927
9,000
Return on average tangible common equity consolidated (non-GAAP)
9.37
%
10.56
%
9.91
%
11.82
%
8.82
%
Cash efficiency ratio
Noninterest expense (GAAP)
$
689
$
662
$
712
$
716
$
711
Less:
Intangible asset amortization (GAAP)
9
10
10
12
10
Adjusted noninterest expense (non-GAAP)
$
680
$
652
$
702
$
704
$
701
Net interest income (GAAP)
$
573
$
563
$
583
$
578
$
581
Plus:
Taxable-equivalent adjustment
6
6
6
6
5
Noninterest income (GAAP)
455
435
453
459
429
Total taxable-equivalent revenue (non-GAAP)
$
1,034
$
1,004
$
1,042
$
1,043
$
1,015
Cash efficiency ratio (non-GAAP)
65.8
%
64.9
%
67.4
%
67.5
%
69.1
%
GAAP to Non-GAAP Reconciliation
(continued)
$ in millions
(a)
Three months ended June 30, 2014, March 31, 2014, December 31, 2013, September 30,
2013, and June 30, 2013 exclude $82 million, $89 million, $96 million, $103
million, and $110 million of average purchased credit card receivable intangible assets, respectively
26 |
 KeyCorp & Subsidiaries
$ in billions
Quarter ended
June 30, 2014
Tier 1 common equity under current regulatory rules
$
9.5 Adjustments from current regulatory rules
to the Regulatory Capital Rules: Deferred tax assets and PCCRs
(b)
(.1)
Common
Equity
Tier
1
anticipated
under
the
Regulatory
Capital
Rules
(c)
$
9.4 Total risk-weighted assets under
current regulatory rules
$
83.7 Adjustments from current regulatory rules to the
Regulatory Capital Rules: Loan commitments <1 year
1.0
Past Due Loans
.2
Mortgage servicing assets
(d)
.5
Deferred tax assets
(d)
.2
Other
1.5
Total risk-weighted assets anticipated under the Regulatory Capital
Rules
$
87.1 Common Equity Tier 1 ratio under the Regulatory Capital
Rules 10.8
%
(a)
Common
equity
Tier
1
capital
is
a
non-generally
accepted
accounting
principle
(GAAP)
financial
measure
that
is
used
by
investors,
analysts
and
bank
regulatory
agencies
to
assess
the
capital
position
of
financial
services
companies.
Management
reviews
Common
Equity
Tier
1
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, as well as
the deductible portion
of purchased credit card receivables
(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
27
Common Equity Tier 1 Under the Regulatory Capital
Rules (estimated)
(a) |