Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - KEYCORP /NEW/ | d854267d8k.htm |
| EX-99.3 - EX-99.3 - KEYCORP /NEW/ | d854267dex993.htm |
| EX-99.1 - EX-99.1 - KEYCORP /NEW/ | d854267dex991.htm |
 KeyCorp
Fourth Quarter 2014 Earnings Review
January 22, 2015
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,”
“assume,”
“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
and to page 99 of our 2013 Form 10-K. |
 3
EPS up 8% reflecting successful business model and investments to grow
Positive operating leverage, with revenue growth of 4% and expenses down 1%
-
Cash efficiency ratio of 64.4%
Total average loans up 5%, driven by CF&A balances up 12%
Noninterest income up 8%; record high quarter for investment banking and debt
placement fees
Asset quality remains strong, with NCOs below targeted range
-
NCOs down 14%, representing 22 bps of average loans in 4Q14
-
NPAs down 18%
New business originations are higher quality than overall book
Remaining disciplined with structure and relationship focus
Strong Risk
Management
Repurchased
$128
million
of
common
shares
in
4Q14
(a)
Committed to capital priorities: organic growth, dividends, repurchases,
opportunistic growth
Positive
Operating
Leverage
Investor Highlights –
4Q14 vs. prior year
Disciplined
Capital
Management
(a)
Common share repurchase amount includes repurchases to offset issuances of common
shares under our employee compensation plans |
 4
EPS up 12%; generated positive operating leverage
Business model and strategic investments drove core business activity
Total average loans up 5% from prior year
-
Grew both commercial and consumer loan balances
Noninterest income up 2% with positive trends in several fee-based
businesses -
Record high year for investment banking and debt placement fees
Expenses well-controlled, down 2% from prior year
-
Down 3% excluding the acquisition of Pacific Crest Securities in
September 2014
Asset quality remains strong, with NCOs below targeted range
-
NCOs down 33%, representing 20 bps of average loans in 2014
-
NPAs down 18% from prior year
New business originations are higher quality than overall book
Remaining disciplined with structure and relationship focus
Strong Risk
Management
2014
shareholder
payout
of
82%
(a)
-
Repurchased $496 million of common shares in 2014
(a)
-
Increased quarterly common share dividend by 18% during 2014
Committed to capital priorities: organic growth, dividends, repurchases,
opportunistic growth
Positive
Operating
Leverage
Investor Highlights –
2014
Disciplined
Capital
Management
(a)
The 2014 shareholder payout and common share repurchase amounts include
repurchases to offset issuances of common shares under our employee
compensation plans |
 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)
12-31-14 ratios are estimated
(e)
Non-GAAP measure: see Appendix for reconciliation
EPS –
assuming dilution
$ .28
$ .23
$ .27
$ .26
$ .26
Cash efficiency ratio
(e)
64.4
%
69.5
%
65.8
%
64.9
%
67.4
%
excl. efficiency and pension charges
63.4
66.0
63.4
63.9
65.1
Net interest margin (TE)
2.94
2.96
2.98
3.00
3.01
Return on average total assets
1.12
.92
1.14
1.13
1.08
Total loans and leases
5
%
5
%
6
%
4
%
3
%
CF&A loans
12
11
13
9
8
Deposits (excl. foreign deposits)
2
4
2
4
8
Tier 1 common equity
(d), (e)
11.2
%
11.3
%
11.3
%
11.3
%
11.2
%
Tier 1 risk-based capital
(d)
11.9
12.0
12.0
12.0
12.0
Tangible common equity to tangible assets
(e)
9.9
10.3
10.2
10.1
9.8
NCOs to average loans
.22
%
.22
%
.22
%
.15
%
.27
%
NPLs to EOP portfolio loans
.73
.71
.71
.81
.93
Allowance for loan losses to EOP loans
1.38
1.43
1.46
1.50
1.56
Balance
Sheet
Growth
(a),
(b)
Capital
(c)
Asset
Quality
(a)
Financial
Performance
(a)
Metrics
4Q14
3Q14
2Q14
1Q14
4Q13 |
 7
Average total loans up 5% in 4Q14 from prior year,
driven by CF&A up 12%
Achieved guidance with FY 2014 average loan
balances up 5%
–
Both commercial and consumer loans up
Total commitments continue to grow with
utilization relatively stable
High quality new loan originations: consistent with
moderate risk profile
Loan Growth
$ in billions
Highlights
Average Commercial, Financial & Agricultural Loans
Average Loans
Exit Portfolios
Home Equity & Other
Total Commercial
$ in billions
$56.5
$53.6 |
 8
Improving Deposit Mix
Highlights
Funding Cost
Funding cost continues to improve
Transaction deposit balances up 4% from 4Q13
Deposit growth from prior year (+2%) reflects
inflows from commercial clients as well as
commercial mortgage servicing
Large commercial client inflows drove balances 2%
higher than 3Q14
Average
Deposits
(a)
$ in billions
Note: Transaction deposits include noninterest-bearing, as well as 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
$69.1
$67.8 |
 9
Net Interest Income and Margin
TE = Taxable equivalent
Highlights
Net Interest Income & Net Interest Margin Trend (TE)
Net interest income relatively stable with prior year,
as loan growth and a more favorable mix of lower-
cost deposits mostly offset lower earning asset
yields
Modest growth from prior quarter (up 1%) driven by
higher earning asset levels and loan fees, which
more than offset lower earning asset yields
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. 3Q14
Higher levels of liquidity
(.03)
Lower earning asset yields
(.03)
Growth in commercial loans & HFS
.04
Total Change
(.02)
Net interest income (TE)
NIM (TE)
$ in millions; continuing operations |
 10
Noninterest Income
TE = Taxable equivalent
Highlights
Noninterest Income
Noninterest income up 8% from prior year and up
18% from prior quarter, benefitting from:
–
Momentum in core businesses
–
Record quarter and year for investment
banking and debt placement fees
–
Strategic investments in fee-based
businesses
Full year noninterest income grew 2% from 2013,
driven by core businesses, including investment
banking and debt placement
4Q14 Noninterest Income Diversity
$ in millions; continuing operations
(a)
Other includes corporate-owned life insurance, principal investing, etc.
Leveraged lease termination gains
$490
$453
Investment Banking & Debt Placement: Record Qtr.
$ in millions; continuing operations
Investment Banking & Debt Placement Fees:
Trailing Twelve Months |
 11
Focused Expense Management
Noninterest Expense
$ in millions
Highlights
$704
4Q14 Expense Detail
$712
4Q expenses down 1% from prior year, with benefit
from continuous improvement efforts and lower
efficiency charges offsetting growth related to
Pacific Crest acquisition
Expenses down 2% from 2013, achieving full year
guidance and driving positive operating leverage in
2014
Cash efficiency ratio improved to 64% in 4Q14, or
63% excluding pension and efficiency charges
Efficiency charges:
Pension charges:
$15
$37
$16
$22
$10
$2
$25
$24
$ in millions
$15
$20
Pension settlement
Efficiency charges
All remaining expense
Pacific Crest
(a)
Non-GAAP measure: see Appendix for reconciliation
(b)
Excludes one-time gains of $54 million related to the
redemption of trust preferred securities
Cash Efficiency Ratio
(a)
Efficiency and pension charges, as a
% of revenue:
1.5%
1.5%
3.6%
3.9%
2.3%
1.0%
Cash efficiency ratio,
excluding efficiency
and pension charges
2.3%
3.5%
(b)
.8%
$8
$3
1.0% |
 Net
Charge-offs & Provision for Loan and Lease Losses Highlights
12
Nonperforming Assets
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
Net loan charge-offs decreased 14% from 4Q13 to
$32 MM, or 22 bps of average loans
Total gross charge-offs down 26% from 4Q13 and
flat with 3Q14
Nonperforming assets down 18% from prior year
Allowance for Loan and Lease Losses
Allowance for loan and
lease losses to NPLs
Allowance for loan
and lease losses
$ in millions
$531
$436 |
 13
Disciplined capital management
–
Repurchased $128 MM of common shares
in 4Q14
Total common share repurchases of $496 MM in
2014, contributing to shareholder payout of 82%
including the impact of dividends
Tier 1 Common Equity
(a), (b)
Tangible Common Equity to Tangible Assets
(a)
Strong Capital
Highlights
Book Value per Share
Note: The 2014 shareholder payout and common share repurchase amounts include
repurchases to offset issuances of common shares under our employee
compensation plans (a)
Non-GAAP measure: see Appendix for reconciliations
(b)
12-31-14
ratio
is
estimated |
 Outlook and Expectations
Average Loans
Mid-single digit growth vs. FY 2013
•
Mid-single digit growth vs. FY 2014
Net Interest Income
Relatively stable from 2013, with slight
downward pressure from competitive
environment
•
Up low-to-mid single digit percentage vs. FY 2014
(low
single-digits without the benefit of higher rates)
•
NIM stable-to-slightly higher later in the year
Noninterest Income
Low single-digit growth compared to
prior year
•
Mid-single digit growth compared to 2014, including full
year impact of Pacific Crest
Expense
Low to mid-single digit percentage
decline from 2013
Efficiency /
Productivity
Positive operating leverage
•
Positive operating leverage
Asset Quality
Net charge-offs to average loans
below targeted range of 40 –
60 bps
•
Net charge-offs to average loans below targeted range
of 40 –
60 bps
•
Provision expected to approximate net charge-offs
Capital
Disciplined execution of 2014 capital
plan, including dividends and share
repurchases
•
Disciplined management of capital including dividends
and share repurchases
14
Guidance
ranges:
relatively
stable:
+/-
2%;
low
single-digit:
<5%;
mid-single
digit:
4%
-
6%;
low
double-digit:
10%
-
13%
FY 2014
FY 2015
•
Relatively stable with 2014 |
 15
Appendix
*
*
*
*
*
*
*
*
*
* |
 Progress on Targets for Success
(a)
Continuing operations, unless otherwise noted
(b)
Represents period-end consolidated total loans and loans held for sale divided
by period-end consolidated total deposits (excluding deposits in foreign office)
(c)
Excludes intangible asset amortization; non-GAAP measure: see Appendix for
reconciliation 16
Balance Sheet
Efficiency
Moderate Risk
Profile
High Quality,
Diverse
Revenue Streams
Positive
Operating
Leverage
Disciplined
Capital
Management
Metrics
(a)
4Q14
3Q14
Targets
Loan
to
deposit
ratio
(b)
NCOs to average loans
Provision to average loans
Net interest margin
Noninterest income to total revenue
Cash
efficiency
ratio
(c)
Return on average assets
85%
87%
.22%
.22%
64.4%
69.5%
1.12%
.92%
.15%
.15%
2.94%
2.96%
45%
42%
90% -100%
40 -
60 bps
LT: >3.50%
LT: <60%
1.00% -1.25%
>40% |
 17
Efficiency Ratio: Driving to 60% and Below
Business plans and macroeconomic environment provide path to an
efficiency ratio below 60%
Cash
Efficiency
Ratio
(a)
Outlook
(a)
Non-GAAP measure: see Appendix for reconciliation
(b)
Assumes implied forward curve
2-3 year outlook: 60%
Long-term, committed to moving below 60%
(b) |
 Oil
& Gas Longstanding history, expertise and relationships
18
Strong Portfolio Characteristics
>10 years of experience in energy lending with >20
specialists dedicated to oil & gas
Focused on middle market companies, aligned with our
relationship strategy
Portfolio regularly stress tested
Primarily secured by proven reserves
Total Loans Outstanding, 12/31/14
>40% of clients’
2015 production is hedged
Relationships
contribute
to
noninterest
income;
~5%
of
FY14
investment
banking
and
debt
placement
fees
Solid credit quality, with net charge-offs lower than overall
portfolio
Allowance reflects estimated impact of current oil prices
Oil & Gas: 2%
Other: 98%
Oil & Gas Outstanding Balances, 12/31/14
Oilfield Services
Upstream: 67%,
$0.7 B
Midstream: 24%,
$0.3 B
Downstream: 9%,
$0.1 B
$0.1 B
Oil & Gas
$1.1 B |
 19
Average Total Investment Securities
Highlights
Average AFS securities
$ in billions
High Quality Investment Portfolio
Portfolio composed primarily of GNMA and GSE-
backed MBS and CMOs
Currently reinvesting cash flows into GNMA
securities in preparation for upcoming
regulatory liquidity requirements
–
42% of total portfolio was GNMA at
12/31/14
Period-end growth of $1.1 billion from 9/30/2014;
driven by liquidity management strategy and
LCR positioning
Securities cash flows of $.9 billion in both 4Q14
and 3Q14
Average portfolio life at 12/31/14 of 3.6 years,
unchanged from 9/30/14
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
$17.2
2.25%
$17.1 |
 Interest Rate Risk Management
Naturally Asset Sensitive Balance Sheet
Actively Managing Rate Risk
•
High quality
•
Fixed rate agency MBS and CMOs
•
Average maturity: 3.6 years
•
GNMAs total 42% of total portfolio
•
Reinvesting cash flows into GNMAs
$10
$17
$5
$5
Size of swap
portfolio
Modeled asset
sensitivity
~3%
0%
~8%
$5
Flexibility to Adjust Rate
Sensitivity with Swaps
Loan Portfolio
Variable:
69%
Fixed:
31%
Deposits
(a)
Flexibility to adjust rate sensitivity for changes in balance
sheet growth/mix as well as interest rate outlook
Debt
hedges
A/LM
hedges
Investment Portfolio
Noninterest-
bearing:
38%
Interest-
bearing, non-
time: 54%
CDs:
8%
•
Maintaining
moderate
asset
sensitive
position
of
~3%
(b)
-
Assumes 200 basis point increase in short-term rates over a
12-month period
•
Utilize swaps for debt hedging and asset liability management
-
Fairly even pace of A/LM swap maturities
4Q14
Swaps
($ in B)
12/31/14
Notional Amt.
Wtd. Avg.
Maturity (Yrs.)
Receive
Rate
Pay
Rate
A/L Management
$ 9.7
1.8
.8%
.2%
Debt
5.2
3.9
2.3
.2
$ 14.9
1.3%
.2%
4Q14
$18 B
AFS: $13 B
HTM: $5 B
Balance sheet has relatively short duration and is
more impacted by the short-end of the curve
$15 B
20
Actively managing a naturally asset sensitive balance sheet
(a)
Excludes deposits in foreign office
(b)
Preliminary estimate
4Q14
4Q14 |
 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)
4Q14
3Q14
2Q14
1Q14
4Q13
Delinquencies to EOP total loans: 30-89 days
.41
%
.61
%
.49
%
.48
%
.58
%
Delinquencies to EOP total loans: 90+ days
.17
.13
.15
.16
.13
NPLs to EOP portfolio loans
.73
.71
.71
.81
.93
NPAs to EOP portfolio loans + OREO + Other NPAs
.76
.74
.74
.85
.97
Allowance for loan losses to period-end loans
1.38
1.43
1.46
1.50
1.56
Allowance for loan losses to NPLs
190.0
200.5
205.6
185.7
166.9
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
(%)
12/31/14
4Q14
4Q14
4Q14
12/31/14
12/31/14
12/31/14
12/31/14
Commercial, financial and agricultural
(a)
$ 27,982
$ 27,188
$
4 .06
$
59
$ 391
1.40
662.71
Commercial real estate:
Commercial Mortgage
8,047
8,161
3
.15
34
148
1.84
435.29
Construction
1,100
1,077
-
-
13
28
2.55
215.38
Commercial lease financing
4,252
4,119
2
.19
18
56
1.32
311.11
Real estate –
residential mortgage
2,225
2,223
3
.54
79
23
1.03
29.11
Home equity
10,633
10,639
6
.22
195
71
.67
36.41
Credit cards
754
728
7
3.81
2
33
4.38
N/M
Consumer other –
Key Community Bank
1,560
1,552
5
1.28
2
22
1.41
N/M
Consumer other –
Exit Portfolio
828
854
2
.93
16
22
2.66
137.50
Continuing total
(e)
$ 57,381
$ 56,541
$ 32
.22
$
418
$ 794
1.38
189.95
Discontinued operations
2,295
2,328
8
4.85
20
29
1.26
145.00
Consolidated total
$ 59,676
$ 58,869
$ 40
.28
$
438
$ 823
1.38
187.90
Credit Quality by Portfolio
Credit Quality
$ in millions
22
(a)
12-31-14
ending
loan
balance
includes
$88
million
of
commercial
credit
card
balances;
12-31-14
average
loan
balance
includes
$90
million
of
assets
from
commercial
credit
cards
(b)
Net loan charge-off amounts are annualized in calculation
(c)
12-31-14 NPL amount excludes $13 million of purchased credit impaired
loans (d)
12-31-14 allowance by portfolio is estimated
(e)
12-31-14 ending loan balance includes purchased loans of $138
million, of which $13 million were purchased credit impaired
N/M = Not meaningful |
 Vintage (% of Loans)
Loan
Balances
Average
Loan
Size
($)
Average
FICO
Average
LTV
(a)
%
of
Loans
LTV>90%
2012 and
later
2011
2010
2009
2008 and
prior
Loans and lines
First lien
$
6,178
$
66,174
772
67
%
.6
%
51
%
5%
3%
3%
38
%
Second lien
4,188
54,159
766
76
3.7
34
5
3
4
54
Community Bank
$
10,366
60,358
770
71
1.8
45
5
3
3
44
Exit portfolio
267
16,861
729
80
31.8
1
-
-
-
99
Total home equity portfolio
$
10,633
Nonaccrual loans and lines
First lien
$
116
$
64,539
722
73
%
1.0%
7
%
4%
3%
6%
80
%
Second lien
69
47,343
712
80
2.1
3
2
2
5
88
Community Bank
$
185
56,848
718
77
1.5
6
4
2
5
83
Exit portfolio
10
24,138
699
77
28.9
-
-
-
-
100
Total home equity nonaccruals
$
195
Fourth quarter net charge-offs (NCOs)
Community Bank
$
6
4
%
-
3%
1%
92
%
% of average loans
.22
%
Exit Portfolio
-
-
-
-
-
-
% of average loans
-
(a) Average LTVs are at origination. Current average LTVs for Community Bank total
home equity loans and lines is approximately 70%, which compares to 71% at
the end of the third quarter of 2014. Home Equity Portfolio –
12/31/14
$ in millions, except average loan size
Home Equity Portfolio
Highlights
High quality portfolio
Community bank loans and lines: 97% of total portfolio; branch-
originated
–
60% first lien position
–
Average FICO score of 770
–
Average LTV at origination: 71%
$4.0 billion of the total portfolio are fixed rate loans that require
principal and interest payments; $6.5 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
12-31-14
9-30-14
12-31-14
vs.
9-30-14
4Q14
(b)
3Q14
(b)
12-31-14
9-30-14
Residential
properties
–
homebuilder
$ 10
$ 11
$ (1)
-
$ 1
$
9 $ 10
Marine and RV floor plan
7
7
-
-
-
5
5
Commercial
lease
financing
(a)
967
1,046
(79)
$ 3
(1)
1
1
Total commercial loans
984
1,064
(80)
3
-
15
16
Home
equity
–
Other
267
283
(16)
-
1
10
10
Marine
779
828
(49)
3
2
15
16
RV and other consumer
54
57
(3)
(1)
1
1
1
Total consumer loans
1,100
1,168
(68)
2
4
26
27
Total exit loans in loan portfolio
2,084
$ 2,232
$ (148)
$ 5
$ 4
$ 41
$ 43
Discontinued
operations
–
education
lending
business (not included in exit loans above)
$ 2,295
$ 2,375
$ (80)
$ 8
$ 7
$ 11
$ 9
$ in millions; average balances
(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)
Credit amounts indicate recoveries exceeded charge-offs
$ in millions
Exit Loan Portfolio
Exit Loan Portfolio
24 |
 Three months ended
12-31-14
9-30-14
6-30-14
3-31-14
12-31-13
Tangible common equity to tangible assets at period end
Key shareholders’
equity (GAAP)
$
10,530
$
10,486
$
10,504
$
10,403
$
10,303
Less:
Intangible assets
(a)
1,090
1,105
1,008
1,012
1,014
Preferred Stock, Series A
(b)
282
282
282
282
282
Tangible common equity (non-GAAP)
$
9,158
$
9,099
$
9,214
$
9,109
$
9,007
Total assets (GAAP)
$
93,821
$
89,784
$
91,798
$
90,802
$
92,934
Less:
Intangible assets
(a)
1,090
1,105
1,008
1,012
1,014
Tangible assets (non-GAAP)
$
92,731
$
88,679
$
90,790
$
89,790
$
91,920
Tangible common equity to tangible assets ratio (non-GAAP)
9.88
%
10.26
%
10.15
%
10.14
%
9.80
%
Tier 1 common equity at period end
Key shareholders’
equity (GAAP)
$
10,530
$
10,486
$
10,504
$
10,403
$
10,303
Qualifying capital securities
340
340
339
339
339
Less:
Goodwill
1,057
1,051
979
979
979
Accumulated
other
comprehensive
income
(loss)
(c)
(395)
(366)
(328)
(367)
(394)
Other assets
(d)
89
110
86
84
89
Total Tier 1 capital (regulatory)
10,119
10,031
10,106
10,046
9,968
Less:
Qualifying capital securities
340
340
339
339
339
Preferred Stock, Series A
(b)
282
282
282
282
282
Total Tier 1 common equity (non-GAAP)
$
9,497
$
9,409
$
9,485
$
9,425
$
9,347
Net risk-weighted assets (regulatory)
(e)
$
84,976
$
83,547
$
84,287
$
83,637
$
83,328
Tier 1 common equity ratio (non-GAAP)
(e)
11.18
%
11.26
%
11.25
%
11.27
%
11.22
%
Pre-provision net revenue
Net interest income (GAAP)
$
582
$
575
$
573
$
563
$
583
Plus:
Taxable-equivalent adjustment
6
6
6
6
6
Noninterest income (GAAP)
490
417
455
435
453
Less:
Noninterest expense (GAAP)
704
704
689
662
712
Pre-provision net revenue from continuing operations (non-GAAP)
$
374
$
294
$
345
$
342
$
330
GAAP to Non-GAAP Reconciliation
$ in millions
25
a)
Three months ended December 31, 2014, September 30, 2014, June 30, 2014, March 31,
2014, and December 31, 2013 exclude $68 million, $72 million, $79 million,
$84 million, and $92 million of period-end purchased credit card receivable intangible assets, respectively
b)
Net of capital surplus
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 December 31, 2014, September 30, 2014, June 30, 2014, March 31, 2014, and
December 31, 2013
e)
12-31-14 amount is estimated |
 Three months ended
12-31-14
9-30-14
6-30-14
3-31-14
12-31-13
Average tangible common equity
Average Key shareholders’
equity (GAAP)
$
10,562
$
10,473
$
10,459
$
10,371
$
10,272
Less:
Intangible
assets
(average)
(a)
1,096
1,037
1,010
1,013
1,016
Preferred Stock, Series A (average)
291
291
291
291
291
Average tangible common equity (non-GAAP)
$
9,175
$
9,145
$
9,158
$
9,067
$
8,965
Return on average tangible common equity from continuing operations
Net
income
(loss)
from
continuing
operations
attributable
to
Key
common
shareholders (GAAP)
$
246
$
197
$
242
$
232
$
229
Average tangible common equity (non-GAAP)
9,175
9,145
9,158
9,067
8,965
Return on average tangible common equity from continuing operations
(non-GAAP) 10.64
%
8.55
%
10.60
%
10.38
%
10.13
%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
248
$
180
$
214
$
236
$
224
Average tangible common equity (non-GAAP)
9,175
9,145
9,158
9,067
8,965
Return on average tangible common equity consolidated (non-GAAP)
10.72
%
7.81
%
9.37
%
10.56
%
9.91
%
Cash efficiency ratio
Noninterest expense (GAAP)
$
704
$
704
$
689
$
662
$
712
Less:
Intangible asset amortization (GAAP)
10
10
9
10
10
Adjusted noninterest expense (non-GAAP)
$
694
$
694
$
680
$
652
$
702
Net interest income (GAAP)
$
582
$
575
$
573
$
563
$
583
Plus:
Taxable-equivalent adjustment
6
6
6
6
6
Noninterest income (GAAP)
490
417
455
435
453
Total taxable-equivalent revenue (non-GAAP)
$
1,078
$
998
$
1,034
$
1,004
$
1,042
Cash efficiency ratio (non-GAAP)
64.4
%
69.5
%
65.8
%
64.9
%
67.4
%
GAAP to Non-GAAP Reconciliation
(continued)
$ in millions
(a)
Three months ended December 31, 2014, September 30, 2014, June 30, 2014, March 31,
2014, and December 31, 2013 exclude $69 million, $76 million, $82 million,
$89 million, and $96 million of average purchased credit card receivable intangible assets, respectively
26 |
 KeyCorp & Subsidiaries
$ in billions
Quarter ended
December 31, 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
$
85.0 Adjustments from current regulatory rules to the
Regulatory Capital Rules: Loan commitments <1 year
1.1
Past Due Loans
.1
Mortgage servicing assets
(d)
.5
Deferred tax assets
(d)
.2
Other
1.2
Total risk-weighted assets anticipated under the Regulatory Capital
Rules
$
88.1 Common Equity Tier 1 ratio under the Regulatory Capital
Rules 10.7
%
(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) |