Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - KEYCORP /NEW/ | d868844d8k.htm |
 KeyCorp
Credit Suisse Financial Services Forum
February 11, 2015
Don Kimble
Chief Financial Officer
Exhibit 99.1
Dennis Devine
Co-President,
Key Community Bank
|
 FORWARD-LOOKING STATEMENTS AND ADDITIONAL
INFORMATION DISCLOSURE
2
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. |
 2014
Highlights 2014
shareholder
payout
of
82%
(a)
Repurchased $496 MM of common shares in
2014
(a)
Increased quarterly common share dividend by
18% during 2014
Maintaining peer-leading capital position
EPS up 12%; generated positive operating leverage
Total average loans up 5% from prior year
Noninterest income up 2% with positive trends in
several fee-based businesses
Expenses well-controlled, down 2% from prior year
Positive
Operating
Leverage
Strong Risk
Management
Disciplined
Capital
Management
Note: Graphs not to scale
Average Loans ($)
Net Charge-offs ($)
Asset quality remains strong, with NCOs below
targeted range
New business originations are higher quality than
overall book
Remaining disciplined with structure and
relationship focus
2013
2014
Down 33%
Total up 5%
CF&A up 11%
2013
2014
2013
2014
Our relationship strategy has translated into measurable results
20 bps
32 bps
NCOs to average loans
3
Tier
1
Common
Equity
(b)
11.2%
12/31/14
(a)
Shareholder payout defined as repurchase of common shares and cash dividends paid
as a percentage of net income attributable to Key; shareholder payout and
common share repurchase amounts include repurchases to offset issuances of common shares under our employee compensation plans
(b)
12-31-14 ratio is estimated
11.2%
12/31/13 |
 Driving
Positive Operating Leverage Executing action plans across our organization to
improve efficiency Revenue Growth
Expense Savings
Acquiring and expanding relationships to grow revenue in our
businesses
•
New
vertical
and
expertise:
technology
•
New
product
launches:
Hassle-Free,
purchase
card,
prepaid card
•
Adding bankers
•
Enhanced sales management process
Retail
sales / FTE / day
21%
Improving Productivity
Strengthening Products and Capabilities
Corporate Bank
expanded
relationships
8%
Continuous improvement efforts enable identification and
execution of expense savings
Occupancy
Right-sizing
Operational Efficiencies
•
Optimizing branch count:
continued net reduction
•
Reducing non-branch square
footage:
plans to reduce 15% of
non-branch
square footage by 2016
•
FTE
remixing:
support,
sales
and
service
•
Business
realignment:
exit
of
Victory
and
international
leasing, reduction of fixed income trading platform
•
Lean
Six
Sigma:
end-to-end
process
improvements
Total FTE:
6%
4
2013
2014
2013
2014
Notes: Graphs not to scale
Retail sales / FTE / day excludes Key Investment Services and mortgage
2013
2014 |
 5
Maintaining a Moderate Risk Profile
Enterprise-wide risk management approach drives quality
Targeted, Relationship-based Approach
Strong Asset Quality
•
Target specific segments and sectors where we
have expertise
•
Execute rigorous and disciplined sales approach
•
Clearly defined and well understood risk appetite
and tolerances
•
Risk management principles applied actively
Key
Peer median
(a)
(a)
Source:
SNL;
Peers
include
BBT,
CMA,
FITB,
FHN,
HBAN,
MTB,
PBCT,
PNC,
RF,
STI,
USB
and
ZION
Over the past 17 quarters,
Key has been lower than
peer median
Key NPAs
NPAs down
41% from 4Q12
Peer Median
(a)
NPAs, % of period-end assets
Key NPAs, % of period-end assets
$ in millions
Nonperforming Assets
Net Charge-offs to Average Loans
0.0%
1.0%
2.0%
3.0%
4.0%
$735
$531
$436
0.00%
0.50%
1.00%
1.50%
$0
$200
$400
$600
$800
4Q12
4Q13
4Q14 |
 •
Quarterly
common
share
dividend:
increased
18%
in
2Q14
Disciplined Capital Management
Strong Capital Position
Peer-leading Return
Capital
Priorities
Organic
Growth
Dividends
Share
Repurchases
Opportunistic
Growth
Disciplined in how we manage, invest, deploy and return our strong capital
position (a)
Non-GAAP measure: 12-31-14 ratio is estimated; see slides 33-34
for reconciliations (b)
Shareholder payout defined as repurchase of common shares and cash dividends paid
as a percentage of net income attributable to Key; shareholder payout and
common share repurchase amounts include repurchases to offset issuances of common
shares under our employee compensation plans; peer group payout ratio
calculations and estimations based upon 2013 and 2014 CCAR submissions and
generally available industry data 10.7% under Basel III Regulatory Capital
Rules 2014
payout
of
82%:
estimated
to
be
among
the
highest
in
our
peer group for the second consecutive year
Tier 1 Common Equity
(a)
Book Value per Share
Shareholder Payout
(b)
Up
10%
from
4Q12
6
$.055
$.065
1Q14
2Q14
•
Share
repurchases:
repurchased
$496
MM
shares
in
2014
$485 MM
$496 MM
2013
2014
11.36%
11.22%
11.18%
4Q12
4Q13
4Q14
$10.78
$11.25
$11.91
4Q12
4Q13
4Q14 |
 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
•
Relatively stable with 2014
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
7
Guidance
ranges:
relatively
stable:
+/-
2%;
low
single-digit:
<5%;
mid-single
digit:
4%
-
6%;
low
double-digit:
10%
-
13%
FY 2014
FY 2015 |
 A
local relationship bank serving retail, private banking and business clients
Key’s Community Bank Franchise
Key Community Bank
Key 2014 Revenue
Business
Description
Provides deposit, investment,
and loan products to clients
through our ~1,000 branches
and 1,200+ ATMs spanning
12 states
Offers financial, estate and
retirement planning, asset
management, and trust
capabilities to support
banking, insurance, charitable
giving, and other needs
Offers deposit, investment,
commercial lending, cash
management, equipment
finance, employee benefit
programs, and access to
capital markets
Retail and
Business
Banking
Private
Banking
Commercial
Banking
Community Bank
Other
Corporate Bank
•
Individuals and
families
•
Small businesses
(client revenue
< $10 MM)
•
High net worth
individuals and
families
•
Business
relationships
•
Businesses with
client revenue of
approx. $10 MM
to $500 MM
Clients
8
54%
40%
6% |
 Leveraging our Model and Geographic Diversity
Local leadership and local delivery
Consistent client experience and relationship strategy
Consistent sales management process
Western Markets
Eastern Markets
Foundational to Strategy and Delivery
•
Deposits: $16 B
•
Branches: 382
•
Demographic: younger with high growth potential
•
Strong consumer lending
•
Healthcare, technology and consumer/retail industry expertise
supports high growth markets
•
Deposits: $31 B
•
Branches: 612
•
Demographic: mature population with established wealth
•
Strong wealth management presence
•
Industrial/manufacturing and healthcare expertise aligns with
market opportunity
Notes: Deposits and branch count as of 4Q14
Delivering
a
consistent
strategy
across
our
franchise
while
also
leveraging
market-
specific opportunities
Collaboration to deliver all of Key
Growth orientation
Moderate risk appetite
9
Denotes MSA’s with greater than $3B in market deposits, branches capped at $250MM and Key has a
Top 5 market share (i.e., Akron, Albany, Anchorage, Boise, Buffalo, Burlington,
Canton, Cleveland, Dayton, Denver, Portland (ME), Salt Lake City, Seattle, South Bend, Syracuse and
Toledo); source: FDIC Summary of Deposits Annual Survey, June 30, 2014
|
 Community Bank: Retail Priorities
10
Acquiring and expanding relationships
with a compelling value proposition
Optimizing channels and
investing in our digital future
Driving Positive Operating Leverage
I
II
III |
 Driving Positive Operating Leverage
11
Improving productivity and efficiency
Delivering a Consistent, Productive and Efficient Model Across the Franchise
Channel optimization
(branches and digital)
Enhanced playbooks
and relationship
review guides
New coaching
structure and
expectations
Investment in and
alignment of
Licensed RM resources
Active performance
management
Reorganization and
realignment
Positive Momentum
23
districts
9
Staffing Mix
Retail FTE
December ’12 –
‘14
Sales Productivity
Retail sales/FTE/Day
Core Deposits per Branch
Consumer Loans per Branch
Total,
(17)%
Client-facing,
+16%
Notes: Sales productivity excludes Key Investment Services and mortgage
Deposit and loan figures represent Key’s consumer segment; core
deposits exclude CDs (1,233)
+391
4Q12
4Q13
4Q14
4Q12
4Q13
4Q14
2012
2013
2014
Utilizing Lean Six
Sigma
Goals and staffing
tied to market
opportunity
Higher
differentiation for
performance
2014 up 40%
from 2012
4Q14 up 15%
from 4Q12
4Q14 up 19%
from 4Q12 |
 Hassle-Free Checking
•
•
Key Investment Services
•
12
Acquiring and Expanding Relationships
Well-designed and delivered products build engaged client relationships
What We Provide
Recent Investments and New Products
Expanding
Relationships
Credit Card
•
•
Credit card penetration:
to 19%, from
15% in 1Q13
Clients with a full relationship have higher
revenue and a lower attrition rate
# of Needs Fulfilled (Checking, Savings, Borrowing)
Checking
Savings/
Investments
Borrowing
1
2
3
Targeting full relationship potential with
three primary client needs
Avg. annual revenue per client
Avg. attrition rate
Client revenue
3x higher
1.8x
Growth in new
checking accounts
4Q14 vs. 4Q13
II
Ease
Value
Expertise
29%
higher than
the industry
standard
(a)
Investment
revenue per $ of
retail deposits
(a)
1
2
3
Early results: solid demand and sales volume with new,
high-quality clients
Drives client acquisition, opportunity for expansion
Strengthens core payments relationship offering
Strong sales growth
Investment in people and sales tools, including a new
book management system and retirement planning
platform
Source: Bank Insurance & Securities Association (BISA) Quarterly Productivity and Performance
Report; data represents trailing twelve months as of 3Q14; retail deposits exclude public
funds |
 13
Optimizing Channels
Multi-channel delivery, with investment in digital channels and redefined support
of branches, aligns with changing client preferences
Direct, positive impact
•
•
Realigning Physical Network
Consolidating branches, aligned with changing
client behavior and market dynamics
Changing Client Behavior
Branch count
down 9% from
4Q12
Online and mobile transactions now exceed branch
transactions by 2x
Branch transactions
Online/mobile transactions
4 yr. CAGR: +12%
4 yr. CAGR: (3)%
•
Mobile payments
•
Online targeting and sales
•
Account opening tools
•
Rewards platform
•
Financial analytics
•
Alerts and notifications
•
Enhanced security and
interface
Branches Remain
Important to Clients
Investments Have Shifted
to Digital Channels
Providing real-time solutions
III
Multi-channel Offering
2010
2011
2012
2013
2014
1,088
1,028
994
4Q12
4Q13
4Q14
Deepen personal and
commercial client
relationships across our
franchise
#1 sales generator |
 Community Bank: Focused Forward
14
Acquiring and expanding relationships
with a compelling value proposition
Optimizing channels and
investing in our digital future
Driving Positive Operating Leverage
Expenses well-controlled:
down 6% from 2012
Core deposits:
up 10% from 2012
Online and mobile
originations:
up 43% from 2012
Revenue per FTE:
up 10% from 2012
Notes:
New client acquisition:
up 37% from 2012
I
II
III
Branches
Digital
(58)%
93%
Investments:
2014 vs. 2012
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
Revenue, expense and deposit figures represent Key’s consumer segment;
expense excludes overhead; core deposits exclude CDs New client growth defined as
consumer new households and excludes in-organic growth from the acquisition of
HSBC branches in Western New York Branch investment includes expansion,
remodels, ATMs, maintenance and security; digital investment includes planning,
design and building costs Online and mobile originations include new account
openings of loan and deposit products |
 Appendix
15 |
 Cross-business collaboration provides additional opportunities across the
franchise Business Model: Aligned and Targeted
Traditional Bank Products
Capital Markets Capabilities
Deposits & payments
Loans
Equipment
finance
Derivatives & foreign
exchange
Equity research
M&A /
financial sponsors /
leveraged finance
Investment grade &
high-yield debt
Loan syndications
Public finance
$3
$50
$1,500
$2,000
Commercial client revenue size ($ MM)
$25
$100
$250
$500
Community Bank
Corporate Bank
Consumer
Energy Healthcare Industrial
Public Sector Real
Estate Technology Targeted
industries 16
Local delivery of broad product set and industry expertise
Differentiated platform with depth and maturity
Competitive advantage
Equity capital markets
Wealth management &
private banking
Commercial mortgage
banking |
 Progress on Targets for Success
(a)
(b)
(c)
17
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%
Excludes intangible asset amortization; non-GAAP measure: see slides 33-34
for reconciliation Represents period-end consolidated total loans and
loans held for sale divided by period-end consolidated total deposits (excluding deposits in foreign office)
Continuing operations, unless otherwise noted |
 18
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 slides 33-34 for reconciliation
Balance
Sheet
Growth
(a),
(b)
Capital
(c)
Asset
Quality
(a)
Financial
Performance
(a)
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
Metrics
4Q14
3Q14
2Q14
1Q14
4Q13 |
 19
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 |
 20
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
(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
Note: Transaction deposits include noninterest-bearing, as well as NOW and
MMDA |
 21
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
$589
$588
3.01%
2.94%
2.00%
2.50%
3.00%
3.50%
4.00%
$500
$540
$580
$620
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14 |
 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
Size of swap
portfolio
Modeled asset
sensitivity
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
$18 B
Balance sheet has relatively short duration and is
more impacted by the short-end of the curve
22
Actively managing a naturally asset sensitive balance sheet
(a)
Excludes deposits in foreign office
(b)
Preliminary estimate
4Q14
4Q14
AFS: $13 B
HTM: $5 B
$10
$17
$5
$5
~3%
0%
~8%
$5
4Q14
$15 B
Swaps
($ 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% |
 23
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
(a)
Investment Banking & Debt Placement: Record Qtr.
$ in millions; continuing operations
Investment Banking & Debt Placement Fees:
Trailing Twelve Months
$0
$100
$200
$300
$400
23%
26%
13%
9%
11%
2%
3%
13%
Trust & Investment Services
Investment Banking & Debt Placement
Deposit Service Charges
Cards & Payments
Corporate Services
Mortgage Fees
Operating Lease Income
Other
$150
$225
$300
$375
$450
$525
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
$397 |
 24
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
$704
$15
$20
Pension settlement
Efficiency charges
All remaining expense
Pacific Crest
$712
$704
(a)
Non-GAAP measure: see slides 33-34 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%
2.3%
3.5%
(b)
.8%
$8
$3
1.0%
$400
$500
$600
$700
$800
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
$520
$545
$570
$595
$620
$645
$670
$695
$720
4Q13
3Q14
4Q14
688
22
2
663
15
20
6
676
3
17
8
60%
65%
70%
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
Cash efficiency ratio,
excluding efficiency
and pension charges |
 25
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 slides 33-34for reconciliation
(b)
Assumes implied forward curve
2-3 year outlook: 60%
Long-term, committed to moving below 60%
(b)
50%
55%
60%
65%
70%
4Q14
Business
Growth, Expense Savings
Net of Investments
Rising Rate Benefit
Long-term Target: <60% |
 26
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
2.12%
.00%
1.00%
2.00%
3.00%
4.00%
5.00%
$0.0
$5.0
$10.0
$15.0
$20.0
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
18%
20%
10%
14%
18%
22%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14 |
 27
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 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 |
 28
Asset Quality Trends
Quarterly Change in Criticized Outstandings
(a)
Delinquencies to Period-end Total Loans
(a)
Loan and lease outstandings
(b)
From continuing operations
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
.00%
.25%
.50%
.75%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
.58%
.41%
.13%
.17%
90+ days delinquent
30 –
89 days delinquent
(11)%
(3)%
(12)%
(10)%
(8)%
(6)%
(4)%
(2)%
0%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14 |
 Credit Quality by Portfolio
Credit Quality
$ in millions
29
N/M = Not meaningful
(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
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 |
 Oil
& Gas Longstanding history, expertise and relationships
30
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
$1.1 B |
 Vintage (% of Loans)
Loan
Balances
Average Loan
Size ($)
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
31 |
 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
32
$2,984
$2,147
$0
$1,000
$2,000
$3,000
$4,000
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14 |
 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
33
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
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
34
Return on average tangible common equity from continuing operations |
 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)
(b)
(c)
(d)
Table may not foot due to rounding
35
Common Equity Tier 1 Under the Regulatory Capital
Rules (estimated)
(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
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 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” Item is
included in the 10%/15% exceptions bucket calculation and is risk-weighted at 250% |