KEYCORP REPORTS FOURTH QUARTER 2023 NET INCOME OF $30 MILLION, OR $.03 PER DILUTED COMMON SHARE
Fourth quarter 2023 net income reflects $209 million of after-tax expenses, or $.22 per share, from the following items: FDIC special assessment, efficiency related expenses, and a pension settlement charge
Strong capital position: Common Equity Tier 1 of 10.0%(a), above targeted range
Exceeded 2023 full year balance sheet optimization goal: $14 billion reduction in risk-weighted assets(b)
Solid credit quality: net charge-offs to average loans of 26 basis points
CLEVELAND, Jan. 18, 2024 /PRNewswire/ -- KeyCorp (NYSE: KEY) today announced net income from continuing operations attributable to Key common shareholders of $30 million, or $.03 per diluted common share, for the fourth quarter of 2023. This compared to $266 million, or $.29 per diluted common share, for the third quarter of 2023 and $356 million, or $.38 per diluted common share, for the fourth quarter of 2022. Included in the fourth quarter of 2023 are $209 million, or $.22 per diluted common share, of charges related to a FDIC special assessment, efficiency related expenses, and a pension settlement charge(c).
Comments from Chairman and CEO, Chris Gorman
"Underlying performance in the quarter was solid. Net interest income stabilized, expenses were well-controlled, credit costs remained low, and our capital position continued to improve. We also continued to invest in our differentiated fee-based businesses which we anticipate will gain traction as conditions improve in the capital markets.
I am proud of the work and dedication of our teammates in executing on our strategic priorities and steadfastly serving our clients while navigating a turbulent year. In 2023, we grew relationship deposits, improved balance sheet resiliency, exceeded our goal of reducing risk-weighted assets, maintained expense discipline, and benefited from our de-risked loan portfolio and distinctive underwrite-to-distribute model.
I am fully confident these actions will position Key to deliver sound, profitable growth, realize our earnings potential, and drive substantive value for all of our stakeholders in the years ahead."
(a) |
December 31, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
(b) |
December 31, 2023 figures are estimated. |
(c) |
See table on page 25 for more information on Selected Items Impacts to Earnings. |
Selected Financial Highlights |
|||||||
Dollars in millions, except per share data |
Change 4Q23 vs. |
||||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
|||
Income (loss) from continuing operations attributable to Key common shareholders |
$ 30 |
$ 266 |
$ 356 |
(88.7) % |
(91.6) % |
||
Income (loss) from continuing operations attributable to Key common shareholders per common share — assuming dilution |
.03 |
.29 |
.38 |
(89.7) |
(92.1) |
||
Return on average tangible common equity from continuing operations (a) |
1.46 % |
12.40 % |
18.07 % |
N/A |
N/A |
||
Return on average total assets from continuing operations |
.14 |
.62 |
.83 |
N/A |
N/A |
||
Common Equity Tier 1 ratio (b) |
10.0 |
9.8 |
9.1 |
N/A |
N/A |
||
Book value at period end |
$ 13.02 |
$ 11.65 |
$ 11.79 |
11.8 |
10.4 |
||
Net interest margin (TE) from continuing operations |
2.07 % |
2.01 % |
2.73 % |
N/A |
N/A |
||
(a) |
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(b) |
December 31, 2023 ratio is estimated. |
TE |
= Taxable Equivalent, N/A = Not Applicable |
INCOME STATEMENT HIGHLIGHTS |
||||||
Revenue |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Net interest income (TE) |
$ 928 |
$ 923 |
$ 1,227 |
.5 % |
(24.4) % |
|
Noninterest income |
610 |
643 |
671 |
(5.1) |
(9.1) |
|
Total revenue (TE) |
$ 1,538 |
$ 1,566 |
$ 1,898 |
(1.8) % |
(19.0) % |
|
TE = Taxable Equivalent |
Taxable-equivalent net interest income was $928 million for the fourth quarter of 2023 and the net interest margin was 2.07%. Compared to the fourth quarter of 2022, net interest income decreased $299 million, and the net interest margin decreased by 66 basis points. The decrease in net interest income and the net interest margin reflect the impact of higher interest rates, partly offset by a favorable earning asset mix. The higher interest rate environment drove the cost of interest-bearing deposits and borrowings higher, which outpaced the benefit from higher earning asset yields. Additionally, the balance sheet experienced a shift in funding mix from noninterest-bearing deposits to higher-cost interest-bearing deposits.
Compared to the third quarter of 2023, taxable-equivalent net interest income increased by $5 million, and the net interest margin increased by six basis points. The increases in net interest income and the net interest margin were driven by actions taken to manage Key's interest rate risk, elevated levels of liquidity, and an improved funding mix. The increase was partly offset by higher interest-bearing deposit costs, which exceeded the benefit from higher earning asset yields, and a planned reduction in loan balances, which benefited Key's net interest margin.
Noninterest Income |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Trust and investment services income |
$ 132 |
$ 130 |
$ 126 |
1.5 % |
4.8 % |
|
Investment banking and debt placement fees |
136 |
141 |
172 |
(3.5) |
(20.9) |
|
Cards and payments income |
84 |
90 |
85 |
(6.7) |
(1.2) |
|
Service charges on deposit accounts |
65 |
69 |
71 |
(5.8) |
(8.5) |
|
Corporate services income |
67 |
73 |
89 |
(8.2) |
(24.7) |
|
Commercial mortgage servicing fees |
48 |
46 |
42 |
4.3 |
14.3 |
|
Corporate-owned life insurance income |
36 |
35 |
33 |
2.9 |
9.1 |
|
Consumer mortgage income |
11 |
15 |
9 |
(26.7) |
22.2 |
|
Operating lease income and other leasing gains |
22 |
22 |
24 |
— |
(8.3) |
|
Other income |
9 |
22 |
20 |
(59.1) |
(55.0) |
|
Total noninterest income |
$ 610 |
$ 643 |
$ 671 |
(5.1) % |
(9.1) % |
|
Compared to the fourth quarter of 2022, noninterest income decreased by $61 million. The decrease was driven by a $36 million decline in investment banking and debt placement fees, driven by lower syndication fees and merger and acquisition advisory fees. Corporate services income also declined by $22 million, driven by lower customer derivatives trading activity and related revenue.
Compared to the third quarter of 2023, noninterest income decreased by $33 million, reflective of a $13 million decline in other income primarily driven by a gain on a loan sale in the prior quarter. Cards and payments income declined by $6 million and corporate services income declined by $6 million, reflecting lower customer derivatives trading revenue. Additionally, investment banking and debt placement fees declined by $5 million.
Noninterest Expense |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Personnel expense |
$ 674 |
$ 663 |
$ 674 |
1.7 % |
— % |
|
Net occupancy |
65 |
67 |
72 |
(3.0) |
(9.7) |
|
Computer processing |
92 |
89 |
82 |
3.4 |
12.2 |
|
Business services and professional fees |
44 |
38 |
60 |
15.8 |
(26.7) |
|
Equipment |
24 |
20 |
20 |
20.0 |
20.0 |
|
Operating lease expense |
18 |
18 |
22 |
— |
(18.2) |
|
Marketing |
31 |
28 |
31 |
10.7 |
— |
|
Other expense |
424 |
187 |
195 |
126.7 |
117.4 |
|
Total noninterest expense |
$ 1,372 |
$ 1,110 |
$ 1,156 |
23.6 % |
18.7 % |
|
Compared to the fourth quarter of 2022, noninterest expense increased $216 million. The increase in noninterest expense was driven by the following impacts in the fourth quarter of 2023: a $190 million charge related to the FDIC special assessment, $67 million from efficiency related expenses, and $18 million from a pension settlement charge. See the Selected Items Impact on Earnings table on page 25 for more information.
Compared to the third quarter of 2023, noninterest expense increased $262 million. The increase was driven by the FDIC special assessment, efficiency related expenses, and a pension settlement charge in the fourth quarter, which collectively totaled $275 million. See the Selected Items Impact on Earnings table on page 25 for more information. Personnel expense increased $11 million, primarily driven by an increase in severance as part of the previously discussed efficiency related expenses.
BALANCE SHEET HIGHLIGHTS |
||||||
Average Loans |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Commercial and industrial (a) |
$ 56,664 |
$ 59,187 |
$ 58,212 |
(4.3) % |
(2.7) % |
|
Other commercial loans |
21,942 |
22,371 |
22,720 |
(1.9) |
(3.4) |
|
Total consumer loans |
35,342 |
36,069 |
36,770 |
(2.0) |
(3.9) |
|
Total loans |
$ 113,948 |
$ 117,627 |
$ 117,702 |
(3.1) % |
(3.2) % |
|
(a) |
Commercial and industrial average loan balances include $210 million, $202 million, and $171 million of assets from commercial credit cards at December 31, 2023, September 30, 2023, and December 31, 2022, respectively. |
Average loans were $113.9 billion for the fourth quarter of 2023, a decrease of $3.8 billion compared to the fourth quarter of 2022, reflecting Key's planned balance sheet optimization efforts. The decline in average loans was driven by commercial and industrial loans which decreased $1.5 billion. Average consumer loans also decreased $1.4 billion, driven by a decline in home equity and consumer direct loans.
Compared to the third quarter of 2023, average loans decreased by $3.7 billion, driven by Key's planned balance sheet optimization efforts. Average commercial loans declined by $3.0 billion, reflective of a $2.5 billion decrease in commercial and industrial loans. Additionally, average consumer loans declined $727 million, driven by lower consumer mortgage and home equity loan balances.
Average Deposits |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Non-time deposits |
$ 130,750 |
$ 129,743 |
$ 139,558 |
.8 % |
(6.3) % |
|
Certificates of deposit ($100,000 or more) |
6,328 |
5,446 |
1,351 |
16.2 |
368.4 |
|
Other time deposits |
7,998 |
9,636 |
4,757 |
(17.0) |
68.1 |
|
Total deposits |
$ 145,076 |
$ 144,825 |
$ 145,666 |
.2 % |
(.4) % |
|
Cost of total deposits |
2.06 % |
1.88 % |
.51 % |
N/A |
N/A |
|
N/A = Not Applicable |
Average deposits totaled $145.1 billion for the fourth quarter of 2023, a decrease of $590 million compared to the year-ago quarter. The decrease was driven by changing client behavior reflective of higher interest rates.
Compared to the third quarter of 2023, average deposits increased by $251 million, driven by a seasonal increase in commercial deposit balances. The increase was partly offset by a decline in other time deposits, reflecting a decrease in wholesale deposit balances.
ASSET QUALITY |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Net loan charge-offs |
$ 76 |
$ 71 |
$ 41 |
7.0 % |
85.4 % |
|
Net loan charge-offs to average total loans |
.26 % |
.24 % |
.14 % |
N/A |
N/A |
|
Nonperforming loans at period end |
$ 574 |
$ 455 |
$ 387 |
26.2 |
48.3 |
|
Nonperforming assets at period end |
591 |
471 |
420 |
25.5 |
40.7 |
|
Allowance for loan and lease losses |
1,508 |
1,488 |
1,337 |
1.3 |
12.8 |
|
Allowance for credit losses |
1,804 |
1,778 |
1,562 |
1.5 |
15.5 |
|
Provision for credit losses |
102 |
81 |
265 |
25.9 |
(61.5) |
|
Allowance for loan and lease losses to nonperforming loans |
263 % |
327 % |
345 % |
N/A |
N/A |
|
Allowance for credit losses to nonperforming loans |
314 |
391 |
404 |
N/A |
N/A |
|
N/A = Not Applicable |
Key's provision for credit losses was $102 million, compared to $265 million in the fourth quarter of 2022 and $81 million in the third quarter of 2023. The decline from the year-ago period reflects a more stable economic outlook and the impact of current balance sheet optimization efforts. The increase from the prior quarter reflects credit migration partially offset by lower loan balances.
Net loan charge-offs for the fourth quarter of 2023 totaled $76 million, or 0.26% of average total loans. These results compare to $41 million, or 0.14%, for the fourth quarter of 2022 and $71 million, or 0.24%, for the third quarter of 2023. Key's allowance for credit losses was $1.8 billion, or 1.60% of total period-end loans at December 31, 2023, compared to 1.31% at December 31, 2022, and 1.54% at September 30, 2023.
At December 31, 2023, Key's nonperforming loans totaled $574 million, which represented 0.51% of period-end portfolio loans. These results compare to 0.32% at December 31, 2022, and 0.39% at September 30, 2023. Nonperforming assets at December 31, 2023, totaled $591 million, and represented 0.52% of period-end portfolio loans and OREO and other nonperforming assets. These results compare to 0.35% at December 31, 2022, and 0.41% at September 30, 2023.
CAPITAL
Key's estimated risk-based capital ratios, included in the following table, continued to exceed all "well-capitalized" regulatory benchmarks at December 31, 2023.
Capital Ratios |
|||
12/31/2023 |
9/30/2023 |
12/31/2022 |
|
Common Equity Tier 1 (a) |
10.0 % |
9.8 % |
9.1 % |
Tier 1 risk-based capital (a) |
11.7 |
11.4 |
10.6 |
Total risk-based capital (a) |
14.1 |
13.8 |
12.8 |
Tangible common equity to tangible assets (b) |
5.1 |
4.4 |
4.4 |
Leverage (a) |
9.0 |
8.9 |
8.9 |
(a) |
December 31, 2023 ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
(b) |
The table entitled "GAAP to Non-GAAP Reconciliations" in the attached financial supplement presents the computations of certain financial measures related to "tangible common equity." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
Key's regulatory capital position remained strong in the fourth quarter of 2023. As shown in the preceding table, at December 31, 2023, Key's estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.0% and 11.7%, respectively. Key's tangible common equity ratio was 5.1% at December 31, 2023.
Key elected the CECL phase-in option provided by regulatory guidance which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over three years beginning in 2022. Effective for the first quarter 2022, Key is now in the three-year transition period. On a fully phased-in basis, Key's Common Equity Tier 1 ratio would be reduced by nine basis points.
Summary of Changes in Common Shares Outstanding |
|||||||
In thousands |
Change 4Q23 vs. |
||||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
|||
Shares outstanding at beginning of period |
936,161 |
935,733 |
932,938 |
— % |
.3 % |
||
Return of shares under employee compensation plans |
(2) |
(10) |
(2) |
80.0 |
— |
||
Shares issued under employee compensation plans (net of cancellations) |
405 |
438 |
389 |
(7.5) |
4.1 |
||
Shares outstanding at end of period |
936,564 |
936,161 |
933,325 |
— % |
.3 % |
||
Key declared a dividend of $.205 per common share for the first quarter of 2024.
LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business segment to Key's taxable-equivalent revenue from continuing operations and income (loss) from continuing operations attributable to Key for the periods presented. For more detailed financial information pertaining to each business segment, see the tables at the end of this release.
Major Business Segments |
|||||||
Dollars in millions |
Change 4Q23 vs. |
||||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
|||
Revenue from continuing operations (TE) |
|||||||
Consumer Bank |
$ 786 |
$ 791 |
$ 860 |
(.6) % |
(8.6) % |
||
Commercial Bank |
794 |
790 |
894 |
.5 |
(11.2) |
||
Other (a) |
(42) |
(15) |
144 |
(180.0) |
(129.2) |
||
Total |
$ 1,538 |
$ 1,566 |
$ 1,898 |
(1.8) % |
(19.0) % |
||
Income (loss) from continuing operations attributable to Key |
|||||||
Consumer Bank |
$ 1 |
$ 76 |
$ 38 |
(98.7) % |
(97.4) % |
||
Commercial Bank |
143 |
226 |
225 |
(36.7) |
(36.4) |
||
Other (a) |
(79) |
0 |
131 |
N/M |
(160.3) |
||
Total |
$ 65 |
$ 302 |
$ 394 |
(78.5) % |
(83.5) % |
||
(a) |
Other includes other segments that consists of corporate treasury, our principal investing unit, and various exit portfolios as well as reconciling items which primarily represents the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations. |
TE = Taxable Equivalent |
Consumer Bank |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Summary of operations |
||||||
Net interest income (TE) |
$ 558 |
$ 548 |
$ 634 |
1.8 % |
(12.0) % |
|
Noninterest income |
228 |
243 |
226 |
(6.2) |
.9 |
|
Total revenue (TE) |
786 |
791 |
860 |
(.6) |
(8.6) |
|
Provision for credit losses |
5 |
14 |
105 |
(64.3) |
(95.2) |
|
Noninterest expense |
780 |
677 |
705 |
15.2 |
10.6 |
|
Income (loss) before income taxes (TE) |
1 |
100 |
50 |
(99.0) |
(98.0) |
|
Allocated income taxes (benefit) and TE adjustments |
0 |
24 |
12 |
(100.0) |
(100.0) |
|
Net income (loss) attributable to Key |
$ 1 |
$ 76 |
$ 38 |
(98.7) % |
(97.4) % |
|
Average balances |
||||||
Loans and leases |
$ 41,381 |
$ 42,250 |
$ 43,149 |
(2.1) % |
(4.1) % |
|
Total assets |
44,178 |
45,078 |
46,235 |
(2.0) |
(4.4) |
|
Deposits |
84,856 |
83,863 |
87,369 |
1.2 |
(2.9) |
|
Assets under management at period end |
$ 54,859 |
$ 52,516 |
$ 51,282 |
4.5 % |
7.0 % |
|
TE = Taxable Equivalent |
Additional Consumer Bank Data |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Noninterest income |
||||||
Trust and investment services income |
$ 105 |
$ 105 |
$ 97 |
— % |
8.2 % |
|
Service charges on deposit accounts |
37 |
40 |
40 |
(7.5) |
(7.5) |
|
Cards and payments income |
62 |
66 |
62 |
(6.1) |
— |
|
Consumer mortgage income |
11 |
16 |
9 |
(31.3) |
22.2 |
|
Other noninterest income |
13 |
16 |
18 |
(18.8) |
(27.8) |
|
Total noninterest income |
$ 228 |
$ 243 |
$ 226 |
(6.2) % |
.9 % |
|
Average deposit balances |
||||||
Money market deposits |
$ 29,752 |
$ 28,775 |
$ 29,694 |
3.4 % |
.2 % |
|
Demand deposits |
23,072 |
23,202 |
24,956 |
(.6) |
(7.5) |
|
Savings deposits |
5,241 |
5,681 |
7,439 |
(7.7) |
(29.5) |
|
Certificates of deposit ($100,000 or more) |
5,899 |
5,003 |
1,227 |
17.9 |
380.8 |
|
Other time deposits |
4,366 |
3,751 |
1,762 |
16.4 |
147.8 |
|
Noninterest-bearing deposits |
16,526 |
17,451 |
22,291 |
(5.3) |
(25.9) |
|
Total deposits |
$ 84,856 |
$ 83,863 |
$ 87,369 |
1.2 % |
(2.9) % |
|
Other data |
||||||
Branches |
959 |
959 |
972 |
|||
Automated teller machines |
1,217 |
1,249 |
1,265 |
|||
Consumer Bank Summary of Operations (4Q23 vs. 4Q22)
- Key's Consumer Bank recorded net income attributable to Key of $1 million for the fourth quarter of 2023, compared to $38 million for the year-ago quarter
- Taxable-equivalent net interest income decreased by $76 million, or 12.0%, compared to the fourth quarter of 2022, reflecting higher interest-bearing deposit costs
- Average loans and leases decreased $1.8 billion, or 4.1%, from the fourth quarter of 2022, driven by lower home equity and consumer direct loans
- Average deposits decreased $2.5 billion, or 2.9%, from the fourth quarter of 2022, reflecting changing client behavior due to higher interest rates
- Provision for credit losses decreased $100 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook
- Noninterest income increased $2 million from the year-ago quarter, driven by an increase in trust and investment services and consumer mortgage income
- Noninterest expense increased $75 million from the year-ago quarter, primarily reflective of a FDIC special assessment charge
Commercial Bank |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Summary of operations |
||||||
Net interest income (TE) |
$ 444 |
$ 430 |
$ 486 |
3.3 % |
(8.6) % |
|
Noninterest income |
350 |
360 |
408 |
(2.8) |
(14.2) |
|
Total revenue (TE) |
794 |
790 |
894 |
.5 |
(11.2) |
|
Provision for credit losses |
96 |
68 |
165 |
41.2 |
(41.8) |
|
Noninterest expense |
525 |
431 |
459 |
21.8 |
14.4 |
|
Income (loss) before income taxes (TE) |
173 |
291 |
270 |
(40.5) |
(35.9) |
|
Allocated income taxes and TE adjustments |
30 |
65 |
45 |
(53.8) |
(33.3) |
|
Net income (loss) attributable to Key |
$ 143 |
$ 226 |
$ 225 |
(36.7) % |
(36.4) % |
|
Average balances |
||||||
Loans and leases |
$ 72,088 |
$ 74,951 |
$ 74,100 |
(3.8) % |
(2.7) % |
|
Loans held for sale |
635 |
1,268 |
1,377 |
(49.9) |
(53.9) |
|
Total assets |
81,393 |
85,274 |
84,615 |
(4.6) |
(3.8) |
|
Deposits |
56,897 |
54,896 |
54,385 |
3.6 % |
4.6 % |
|
TE = Taxable Equivalent |
Additional Commercial Bank Data |
||||||
Dollars in millions |
Change 4Q23 vs. |
|||||
4Q23 |
3Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Noninterest income |
||||||
Trust and investment services income |
$ 27 |
$ 24 |
$ 30 |
12.5 % |
(10.0) % |
|
Investment banking and debt placement fees |
135 |
141 |
172 |
(4.3) |
(21.5) |
|
Cards and payments income |
19 |
17 |
19 |
11.8 |
— |
|
Service charges on deposit accounts |
27 |
28 |
30 |
(3.6) |
(10.0) |
|
Corporate services income |
61 |
64 |
81 |
(4.7) |
(24.7) |
|
Commercial mortgage servicing fees |
49 |
45 |
42 |
8.9 |
16.7 |
|
Operating lease income and other leasing gains |
21 |
22 |
23 |
(4.5) |
(8.7) |
|
Other noninterest income |
11 |
19 |
11 |
(42.1) |
— |
|
Total noninterest income |
$ 350 |
$ 360 |
$ 408 |
(2.8) % |
(14.2) % |
|
Commercial Bank Summary of Operations (4Q23 vs. 4Q22)
- Key's Commercial Bank recorded net income attributable to Key of $143 million for the fourth quarter of 2023 compared to $225 million for the year-ago quarter
- Taxable-equivalent net interest income decreased by $42 million, or 8.6%, compared to the fourth quarter of 2022, primarily reflecting higher interest-bearing deposit costs and a shift in funding mix to higher-cost deposits
- Average loan and lease balances, decreased $2.0 billion, or 2.7%, compared to the fourth quarter of 2022 driven by a decline in commercial and industrial loans as we de-emphasized non-relationship business
- Average deposit balances increased $2.5 billion compared to the fourth quarter of 2022, driven by our focus on growing deposits across our commercial businesses
- Provision for credit losses decreased $69 million compared to the fourth quarter of 2022, driven by planned balance sheet optimization efforts and a more stable economic outlook
- Noninterest income decreased $58 million from the year-ago quarter, primarily driven by a decline in investment banking and debt placement fees, reflecting lower syndication and merger and acquisition advisory revenues, as well as a decline in corporate services income
- Noninterest expense increased $66 million from the fourth quarter of 2022, primarily due to the FDIC special assessment charge
KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $188 billion at December 31, 2023.
Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,200 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as "goal," "objective," "plan," "expect," "assume," "anticipate," "intend," "project," "believe," "estimate," or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Forward-looking statements, by their nature, are subject to assumptions, risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause Key's actual results to differ from those described in the forward-looking statements can be found in KeyCorp's Form 10-K for the year ended December 31, 2022, Form 10-Q for the quarter ended March 31, 2023, as well as in KeyCorp's subsequent SEC filings, all of which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available on Key's website (www.key.com/ir) and on the SEC's website (www.sec.gov). These factors may include, among others, deterioration of commercial real estate market fundamentals, adverse changes in credit quality trends, declining asset prices, a worsening of the U.S. economy due to financial, political, or other shocks, the extensive regulation of the U.S. financial services industry, the soundness of other financial institutions and the impact of changes in the interest rate environment. Any forward-looking statements made by us or on our behalf speak only as of the date they are made and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. |
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss quarterly results and currently anticipated earnings trends and to answer analysts' questions can be accessed through the Investor Relations section at https://www.key.com/ir at 9:00 a.m. ET, on January 18, 2024. A replay of the call will be available through January 28, 2024.
For up-to-date company information, media contacts, and facts and figures about Key's lines of business, visit our Media Newsroom at https://www.key.com/newsroom.
KeyCorp
Fourth Quarter 2023
Financial Supplement
Basis of Presentation
Use of Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Key's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document, the financial supplement, or conference call slides related to this document, all of which can be found on Key's website (www.key.com/ir).
Annualized Data
Certain returns, yields, performance ratios, or quarterly growth rates are presented on an "annualized" basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts.
Taxable Equivalent
Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at the federal statutory rate. This adjustment puts all earning assets, most notably tax-exempt municipal securities, and certain lease assets, on a common basis that facilitates comparison of results to results of peers.
Earnings Per Share Equivalent
Certain income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total consolidated earnings per share performance excluding the impact of such items. When the impact of certain income or expense items is disclosed separately, the after-tax amount is computed using the marginal tax rate, with this then being the amount used to calculate the earnings per share equivalent.
Financial Highlights |
|||||
(Dollars in millions, except per share amounts) |
|||||
Three months ended |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
|||
Summary of operations |
|||||
Net interest income (TE) |
$ 928 |
$ 923 |
$ 1,227 |
||
Noninterest income |
610 |
643 |
671 |
||
Total revenue (TE) |
1,538 |
1,566 |
1,898 |
||
Provision for credit losses |
102 |
81 |
265 |
||
Noninterest expense |
1,372 |
1,110 |
1,156 |
||
Income (loss) from continuing operations attributable to Key |
65 |
302 |
394 |
||
Income (loss) from discontinued operations, net of taxes |
— |
1 |
— |
||
Net income (loss) attributable to Key |
65 |
303 |
394 |
||
Income (loss) from continuing operations attributable to Key common shareholders |
30 |
266 |
356 |
||
Income (loss) from discontinued operations, net of taxes |
— |
1 |
— |
||
Net income (loss) attributable to Key common shareholders |
30 |
267 |
356 |
||
Per common share |
|||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ .03 |
$ .29 |
$ .38 |
||
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
||
Net income (loss) attributable to Key common shareholders (a) |
.03 |
.29 |
.38 |
||
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.03 |
.29 |
.38 |
||
Income (loss) from discontinued operations, net of taxes — assuming dilution |
— |
— |
— |
||
Net income (loss) attributable to Key common shareholders — assuming dilution (a) |
.03 |
.29 |
.38 |
||
Cash dividends declared |
.205 |
.205 |
.205 |
||
Book value at period end |
13.02 |
11.65 |
11.79 |
||
Tangible book value at period end |
10.02 |
8.65 |
8.75 |
||
Market price at period end |
14.40 |
10.76 |
17.42 |
||
Performance ratios |
|||||
From continuing operations: |
|||||
Return on average total assets |
.14 % |
.62 % |
.83 % |
||
Return on average common equity |
1.08 |
9.31 |
13.24 |
||
Return on average tangible common equity (b) |
1.46 |
12.40 |
18.07 |
||
Net interest margin (TE) |
2.07 |
2.01 |
2.73 |
||
Cash efficiency ratio (b) |
88.6 |
70.3 |
60.3 |
||
From consolidated operations: |
|||||
Return on average total assets |
.14 % |
.62 % |
.82 % |
||
Return on average common equity |
1.08 |
9.35 |
13.24 |
||
Return on average tangible common equity (b) |
1.46 |
12.45 |
18.07 |
||
Net interest margin (TE) |
2.07 |
2.01 |
2.73 |
||
Loan to deposit (c) |
77.9 |
80.8 |
84.7 |
||
Capital ratios at period end |
|||||
Key shareholders' equity to assets |
7.8 % |
7.1 % |
7.1 % |
||
Key common shareholders' equity to assets |
6.5 |
5.8 |
5.8 |
||
Tangible common equity to tangible assets (b) |
5.1 |
4.4 |
4.4 |
||
Common Equity Tier 1 (d) |
10.0 |
9.8 |
9.1 |
||
Tier 1 risk-based capital (d) |
11.7 |
11.4 |
10.6 |
||
Total risk-based capital (d) |
14.1 |
13.8 |
12.8 |
||
Leverage (d) |
9.0 |
8.9 |
8.9 |
||
Asset quality — from continuing operations |
|||||
Net loan charge-offs |
$ 76 |
$ 71 |
$ 41 |
||
Net loan charge-offs to average loans |
.26 % |
.24 % |
.14 % |
||
Allowance for loan and lease losses |
$ 1,508 |
$ 1,488 |
$ 1,337 |
||
Allowance for credit losses |
1,804 |
1,778 |
1,562 |
||
Allowance for loan and lease losses to period-end loans |
1.34 % |
1.29 % |
1.12 % |
||
Allowance for credit losses to period-end loans |
1.60 |
1.54 |
1.31 |
||
Allowance for loan and lease losses to nonperforming loans |
263 |
327 |
345 |
||
Allowance for credit losses to nonperforming loans |
314 |
391 |
404 |
||
Nonperforming loans at period-end |
$ 574 |
$ 455 |
$ 387 |
||
Nonperforming assets at period-end |
591 |
471 |
420 |
||
Nonperforming loans to period-end portfolio loans |
.51 % |
.39 % |
.32 % |
||
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
.52 |
.41 |
.35 |
||
Trust assets |
|||||
Assets under management |
$ 54,859 |
$ 52,516 |
$ 51,282 |
||
Other data |
|||||
Average full-time equivalent employees |
17,129 |
17,666 |
18,210 |
||
Branches |
959 |
959 |
972 |
||
Taxable-equivalent adjustment |
$ 7 |
$ 8 |
$ 7 |
||
Financial Highlights (continued) |
|||
(Dollars in millions, except per share amounts) |
|||
Twelve months ended |
|||
12/31/2023 |
12/31/2022 |
||
Summary of operations |
|||
Net interest income (TE) |
$ 3,943 |
$ 4,554 |
|
Noninterest income |
2,470 |
2,718 |
|
Total revenue (TE) |
6,413 |
7,272 |
|
Provision for credit losses |
489 |
502 |
|
Noninterest expense |
4,734 |
4,410 |
|
Income (loss) from continuing operations attributable to Key |
964 |
1,911 |
|
Income (loss) from discontinued operations, net of taxes |
3 |
6 |
|
Net income (loss) attributable to Key |
967 |
1,917 |
|
Income (loss) from continuing operations attributable to Key common shareholders |
821 |
1,793 |
|
Income (loss) from discontinued operations, net of taxes |
3 |
6 |
|
Net income (loss) attributable to Key common shareholders |
824 |
1,799 |
|
Per common share |
|||
Income (loss) from continuing operations attributable to Key common shareholders |
$ .88 |
$ 1.94 |
|
Income (loss) from discontinued operations, net of taxes |
— |
.01 |
|
Net income (loss) attributable to Key common shareholders (a) |
.89 |
1.94 |
|
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution |
.88 |
1.92 |
|
Income (loss) from discontinued operations, net of taxes — assuming dilution |
— |
.01 |
|
Net income (loss) attributable to Key common shareholders — assuming dilution (a) |
.88 |
1.93 |
|
Cash dividends paid |
.82 |
.79 |
|
Performance ratios |
|||
From continuing operations: |
|||
Return on average total assets |
.50 % |
1.03 % |
|
Return on average common equity |
7.21 |
14.21 |
|
Return on average tangible common equity (b) |
9.60 |
18.34 |
|
Net interest margin (TE) |
2.17 |
2.64 |
|
Cash efficiency ratio (b) |
73.2 |
67.5 |
|
From consolidated operations: |
|||
Return on average total assets |
.50 % |
1.03 % |
|
Return on average common equity |
7.24 |
14.26 |
|
Return on average tangible common equity (b) |
9.63 |
18.40 |
|
Net interest margin (TE) |
2.17 |
2.63 |
|
Asset quality — from continuing operations |
|||
Net loan charge-offs |
$ 244 |
$ 161 |
|
Net loan charge-offs to average total loans |
.21 % |
.14 % |
|
Other data |
|||
Average full-time equivalent employees |
17,692 |
17,660 |
|
Taxable-equivalent adjustment |
30 |
27 |
|
(a) |
Earnings per share may not foot due to rounding. |
(b) |
The following table entitled "GAAP to Non-GAAP Reconciliations" presents the computations of certain financial measures related to "tangible common equity" and "cash efficiency." The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons. |
(c) |
Represents period-end consolidated total loans and loans held for sale divided by period-end consolidated total deposits. |
(d) |
December 31, 2023, ratio is estimated and reflects Key's election to adopt the CECL optional transition provision. |
GAAP to Non-GAAP Reconciliations
(Dollars in millions)
The table below presents certain non-GAAP financial measures related to "tangible common equity," "return on average tangible common equity," "pre-provision net revenue," and "cash efficiency ratio."
The tangible common equity ratio and the return on average tangible common equity ratio have been a focus for some investors, and management believes these ratios may assist investors in analyzing Key's capital position without regard to the effects of intangible assets and preferred stock.
The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for credit losses makes it easier to analyze the results by presenting them on a more comparable basis.
The cash efficiency ratio is a ratio of two non-GAAP performance measures. As such, there is no directly comparable GAAP performance measure. The cash efficiency ratio performance measure removes the impact of Key's intangible asset amortization from the calculation. Management believes this ratio provides greater consistency and comparability between Key's results and those of its peer banks. Additionally, this ratio is used by analysts and investors as they develop earnings forecasts and peer bank analysis.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.
Three months ended |
Twelve months ended |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
||
Tangible common equity to tangible assets at period-end |
||||||
Key shareholders' equity (GAAP) |
$ 14,637 |
$ 13,356 |
$ 13,454 |
|||
Less: Intangible assets (a) |
2,806 |
2,816 |
2,844 |
|||
Preferred Stock (b) |
2,446 |
2,446 |
2,446 |
|||
Tangible common equity (non-GAAP) |
$ 9,385 |
$ 8,094 |
$ 8,164 |
|||
Total assets (GAAP) |
$ 188,281 |
$ 187,851 |
$ 189,813 |
|||
Less: Intangible assets (a) |
2,806 |
2,816 |
2,844 |
|||
Tangible assets (non-GAAP) |
$ 185,475 |
$ 185,035 |
$ 186,969 |
|||
Tangible common equity to tangible assets ratio (non-GAAP) |
5.06 % |
4.37 % |
4.37 % |
|||
Pre-provision net revenue |
||||||
Net interest income (GAAP) |
$ 921 |
$ 915 |
$ 1,220 |
$ 3,913 |
$ 4,527 |
|
Plus: Taxable-equivalent adjustment |
7 |
8 |
7 |
30 |
27 |
|
Noninterest income |
610 |
643 |
671 |
2,470 |
2,718 |
|
Less: Noninterest expense |
1,372 |
1,110 |
1,156 |
4,734 |
4,410 |
|
Pre-provision net revenue from continuing operations (non-GAAP) |
$ 166 |
$ 456 |
$ 742 |
$ 1,679 |
$ 2,862 |
|
Average tangible common equity |
||||||
Average Key shareholders' equity (GAAP) |
$ 13,471 |
$ 13,831 |
$ 13,168 |
$ 13,881 |
$ 14,730 |
|
Less: Intangible assets (average) (c) |
2,811 |
2,821 |
2,851 |
2,826 |
2,839 |
|
Preferred stock (average) |
2,500 |
2,500 |
2,500 |
2,500 |
2,114 |
|
Average tangible common equity (non-GAAP) |
$ 8,160 |
$ 8,510 |
$ 7,817 |
$ 8,555 |
$ 9,777 |
|
Return on average tangible common equity from continuing operations |
||||||
Net income (loss) from continuing operations attributable to Key common shareholders (GAAP) |
$ 30 |
$ 266 |
$ 356 |
$ 821 |
$ 1,793 |
|
Average tangible common equity (non-GAAP) |
8,160 |
8,510 |
7,817 |
8,555 |
9,777 |
|
Return on average tangible common equity from continuing operations (non-GAAP) |
1.46 % |
12.40 % |
18.07 % |
9.60 % |
18.34 % |
|
Return on average tangible common equity consolidated |
||||||
Net income (loss) attributable to Key common shareholders (GAAP) |
$ 30 |
$ 267 |
$ 356 |
$ 824 |
$ 1,799 |
|
Average tangible common equity (non-GAAP) |
8,160 |
8,510 |
7,817 |
8,555 |
9,777 |
|
Return on average tangible common equity consolidated (non-GAAP) |
1.46 % |
12.45 % |
18.07 % |
9.63 % |
18.40 % |
|
GAAP to Non-GAAP Reconciliations (continued) |
||||||
(Dollars in millions) |
||||||
Three months ended |
Twelve months ended |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
||
Cash efficiency ratio |
||||||
Noninterest expense (GAAP) |
$ 1,372 |
$ 1,110 |
$ 1,156 |
$ 4,734 |
$ 4,410 |
|
Less: Intangible asset amortization |
10 |
9 |
12 |
39 |
47 |
|
Adjusted noninterest expense (non-GAAP) |
$ 1,362 |
$ 1,101 |
$ 1,144 |
$ 4,695 |
$ 4,363 |
|
Net interest income (GAAP) |
$ 921 |
$ 915 |
$ 1,220 |
$ 3,913 |
$ 4,527 |
|
Plus: Taxable-equivalent adjustment |
7 |
8 |
7 |
30 |
27 |
|
Net interest income TE |
928 |
923 |
1,227 |
3,943 |
4,554 |
|
Noninterest income |
610 |
643 |
671 |
2,470 |
2,718 |
|
Total taxable-equivalent revenue (non-GAAP) |
$ 1,538 |
$ 1,566 |
$ 1,898 |
$ 6,413 |
$ 7,272 |
|
Cash efficiency ratio (non-GAAP) |
88.6 % |
70.3 % |
60.3 % |
73.2 % |
60.0 % |
|
(a) |
For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, intangible assets exclude $1 million, $1 million, and $2 million, respectively, of period-end purchased credit card receivables. |
(b) |
Net of capital surplus. |
(c) |
For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, average intangible assets exclude $1 million, $1 million, and $2 million, respectively, of average purchased credit card receivables. |
GAAP = U.S. generally accepted accounting principles |
Consolidated Balance Sheets |
|||||
(Dollars in millions) |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
|||
Assets |
|||||
Loans |
$ 112,606 |
$ 115,544 |
$ 119,394 |
||
Loans held for sale |
483 |
730 |
963 |
||
Securities available for sale |
37,185 |
35,839 |
39,117 |
||
Held-to-maturity securities |
8,575 |
8,853 |
8,710 |
||
Trading account assets |
1,142 |
1,325 |
829 |
||
Short-term investments |
10,817 |
7,871 |
2,432 |
||
Other investments |
1,244 |
1,356 |
1,308 |
||
Total earning assets |
172,052 |
171,518 |
172,753 |
||
Allowance for loan and lease losses |
(1,508) |
(1,488) |
(1,337) |
||
Cash and due from banks |
941 |
766 |
887 |
||
Premises and equipment |
661 |
649 |
636 |
||
Goodwill |
2,752 |
2,752 |
2,752 |
||
Other intangible assets |
55 |
65 |
94 |
||
Corporate-owned life insurance |
4,383 |
4,381 |
4,369 |
||
Accrued income and other assets |
8,601 |
8,843 |
9,223 |
||
Discontinued assets |
344 |
365 |
436 |
||
Total assets |
$ 188,281 |
$ 187,851 |
$ 189,813 |
||
Liabilities |
|||||
Deposits in domestic offices: |
|||||
Interest-bearing deposits |
$ 114,859 |
$ 112,581 |
$ 101,761 |
||
Noninterest-bearing deposits |
30,728 |
31,710 |
40,834 |
||
Total deposits |
145,587 |
144,291 |
142,595 |
||
Federal funds purchased and securities sold under repurchase agreements |
38 |
43 |
4,077 |
||
Bank notes and other short-term borrowings |
3,053 |
3,470 |
5,386 |
||
Accrued expense and other liabilities |
5,412 |
5,388 |
4,994 |
||
Long-term debt |
19,554 |
21,303 |
19,307 |
||
Total liabilities |
173,644 |
174,495 |
176,359 |
||
Equity |
|||||
Preferred stock |
2,500 |
2,500 |
2,500 |
||
Common shares |
1,257 |
1,257 |
1,257 |
||
Capital surplus |
6,281 |
6,254 |
6,286 |
||
Retained earnings |
15,672 |
15,835 |
15,616 |
||
Treasury stock, at cost |
(5,844) |
(5,851) |
(5,910) |
||
Accumulated other comprehensive income (loss) |
(5,229) |
(6,639) |
(6,295) |
||
Key shareholders' equity |
14,637 |
13,356 |
13,454 |
||
Total liabilities and equity |
$ 188,281 |
$ 187,851 |
$ 189,813 |
||
Common shares outstanding (000) |
936,564 |
936,161 |
933,325 |
||
Consolidated Statements of Income |
||||||||
(Dollars in millions, except per share amounts) |
||||||||
Three months ended |
Twelve months ended |
|||||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
||||
Interest income |
||||||||
Loans |
$ 1,574 |
$ 1,593 |
$ 1,347 |
$ 6,219 |
$ 4,241 |
|||
Loans held for sale |
12 |
19 |
20 |
61 |
56 |
|||
Securities available for sale |
213 |
192 |
195 |
793 |
752 |
|||
Held-to-maturity securities |
78 |
79 |
64 |
312 |
213 |
|||
Trading account assets |
13 |
15 |
10 |
55 |
31 |
|||
Short-term investments |
138 |
123 |
48 |
414 |
97 |
|||
Other investments |
22 |
22 |
11 |
73 |
22 |
|||
Total interest income |
2,050 |
2,043 |
1,695 |
7,927 |
5,412 |
|||
Interest expense |
||||||||
Deposits |
754 |
687 |
186 |
2,322 |
279 |
|||
Federal funds purchased and securities sold under repurchase agreements |
— |
9 |
16 |
79 |
41 |
|||
Bank notes and other short-term borrowings |
45 |
81 |
54 |
308 |
90 |
|||
Long-term debt |
330 |
351 |
219 |
1,305 |
475 |
|||
Total interest expense |
1,129 |
1,128 |
475 |
4,014 |
885 |
|||
Net interest income |
921 |
915 |
1,220 |
3,913 |
4,527 |
|||
Provision for credit losses |
102 |
81 |
265 |
489 |
502 |
|||
Net interest income after provision for credit losses |
819 |
834 |
955 |
3,424 |
4,025 |
|||
Noninterest income |
||||||||
Trust and investment services income |
132 |
130 |
126 |
516 |
526 |
|||
Investment banking and debt placement fees |
136 |
141 |
172 |
542 |
638 |
|||
Cards and payments income |
84 |
90 |
85 |
340 |
341 |
|||
Service charges on deposit accounts |
65 |
69 |
71 |
270 |
350 |
|||
Corporate services income |
67 |
73 |
89 |
302 |
372 |
|||
Commercial mortgage servicing fees |
48 |
46 |
42 |
190 |
167 |
|||
Corporate-owned life insurance income |
36 |
35 |
33 |
132 |
132 |
|||
Consumer mortgage income |
11 |
15 |
9 |
51 |
58 |
|||
Operating lease income and other leasing gains |
22 |
22 |
24 |
92 |
103 |
|||
Other income |
9 |
22 |
20 |
35 |
31 |
|||
Total noninterest income |
610 |
643 |
671 |
2,470 |
2,718 |
|||
Noninterest expense |
||||||||
Personnel |
674 |
663 |
674 |
2,660 |
2,566 |
|||
Net occupancy |
65 |
67 |
72 |
267 |
295 |
|||
Computer processing |
92 |
89 |
82 |
368 |
314 |
|||
Business services and professional fees |
44 |
38 |
60 |
168 |
212 |
|||
Equipment |
24 |
20 |
20 |
88 |
92 |
|||
Operating lease expense |
18 |
18 |
22 |
77 |
101 |
|||
Marketing |
31 |
28 |
31 |
109 |
123 |
|||
Other expense |
424 |
187 |
195 |
997 |
707 |
|||
Total noninterest expense |
1,372 |
1,110 |
1,156 |
4,734 |
4,410 |
|||
Income (loss) from continuing operations before income taxes |
57 |
367 |
470 |
1,160 |
2,333 |
|||
Income taxes |
(8) |
65 |
76 |
196 |
422 |
|||
Income (loss) from continuing operations |
65 |
302 |
394 |
964 |
1,911 |
|||
Income (loss) from discontinued operations, net of taxes |
— |
1 |
— |
3 |
6 |
|||
Net income (loss) |
65 |
303 |
394 |
967 |
1,917 |
|||
Net income (loss) attributable to Key |
$ 65 |
$ 303 |
$ 394 |
$ 967 |
$ 1,917 |
|||
Income (loss) from continuing operations attributable to Key common shareholders |
$ 30 |
$ 266 |
$ 356 |
$ 821 |
$ 1,793 |
|||
Net income (loss) attributable to Key common shareholders |
30 |
267 |
356 |
824 |
1,799 |
|||
Per common share |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ .03 |
$ .29 |
$ .38 |
$ .88 |
$ 1.94 |
|||
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
.01 |
|||
Net income (loss) attributable to Key common shareholders (a) |
.03 |
.29 |
.38 |
.89 |
1.94 |
|||
Per common share — assuming dilution |
||||||||
Income (loss) from continuing operations attributable to Key common shareholders |
$ .03 |
$ .29 |
$ .38 |
$ .88 |
$ 1.92 |
|||
Income (loss) from discontinued operations, net of taxes |
— |
— |
— |
— |
.01 |
|||
Net income (loss) attributable to Key common shareholders (a) |
.03 |
.29 |
.38 |
.88 |
1.93 |
|||
Cash dividends declared per common share |
$ .205 |
$ .205 |
$ .205 |
$ .820 |
$ .790 |
|||
Weighted-average common shares outstanding (000) |
927,517 |
927,131 |
924,974 |
927,217 |
924,363 |
|||
Effect of common share options and other stock awards |
6,529 |
4,613 |
8,750 |
5,542 |
8,696 |
|||
Weighted-average common shares and potential common shares outstanding (000) (b) |
934,046 |
931,744 |
933,724 |
932,759 |
933,059 |
|||
(a) |
Earnings per share may not foot due to rounding. |
(b) |
Assumes conversion of common share options and other stock awards, as applicable. |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
||||||||||||
(Dollars in millions) |
||||||||||||
Fourth Quarter 2023 |
Third Quarter 2023 |
Fourth Quarter 2022 |
||||||||||
Average |
Yield/ |
Average |
Yield/ |
Average |
Yield/ |
|||||||
Balance |
Interest (a) |
Rate (a) |
Balance |
Interest (a) |
Rate (a) |
Balance |
Interest (a) |
Rate (a) |
||||
Assets |
||||||||||||
Loans: (b), (c) |
||||||||||||
Commercial and industrial (d) |
$ 56,664 |
$ 870 |
6.09 % |
$ 59,187 |
$ 886 |
5.94 % |
$ 58,212 |
$ 712 |
4.85 % |
|||
Real estate — commercial mortgage |
15,346 |
234 |
6.05 |
15,844 |
238 |
5.97 |
16,445 |
208 |
5.01 |
|||
Real estate — construction |
3,028 |
54 |
7.05 |
2,820 |
48 |
6.77 |
2,450 |
35 |
5.70 |
|||
Commercial lease financing |
3,568 |
30 |
3.34 |
3,707 |
30 |
3.25 |
3,825 |
26 |
2.71 |
|||
Total commercial loans |
78,606 |
1,188 |
6.00 |
81,558 |
1,202 |
5.85 |
80,932 |
981 |
4.81 |
|||
Real estate — residential mortgage |
21,113 |
174 |
3.30 |
21,459 |
176 |
3.28 |
21,128 |
164 |
3.11 |
|||
Home equity loans |
7,227 |
108 |
5.93 |
7,418 |
110 |
5.87 |
7,890 |
103 |
5.18 |
|||
Consumer direct loans |
5,987 |
75 |
4.97 |
6,169 |
77 |
4.96 |
6,713 |
75 |
4.45 |
|||
Credit cards |
987 |
36 |
14.47 |
991 |
35 |
14.16 |
993 |
31 |
12.61 |
|||
Consumer indirect loans |
28 |
— |
— |
32 |
1 |
3.77 |
46 |
— |
— |
|||
Total consumer loans |
35,342 |
393 |
4.43 |
36,069 |
399 |
4.40 |
36,770 |
373 |
4.05 |
|||
Total loans |
113,948 |
1,581 |
5.51 |
117,627 |
1,601 |
5.41 |
117,702 |
1,354 |
4.57 |
|||
Loans held for sale |
695 |
12 |
6.85 |
1,356 |
19 |
5.73 |
1,421 |
20 |
5.63 |
|||
Securities available for sale (b), (e) |
35,576 |
213 |
1.99 |
37,271 |
192 |
1.76 |
39,149 |
195 |
1.70 |
|||
Held-to-maturity securities (b) |
8,714 |
78 |
3.56 |
9,020 |
79 |
3.50 |
8,278 |
64 |
3.07 |
|||
Trading account assets |
1,104 |
13 |
4.93 |
1,203 |
15 |
4.97 |
863 |
10 |
4.57 |
|||
Short-term investments |
9,571 |
138 |
5.72 |
8,416 |
123 |
5.79 |
3,159 |
48 |
6.02 |
|||
Other investments (e) |
1,297 |
22 |
6.91 |
1,395 |
22 |
6.35 |
1,294 |
11 |
3.15 |
|||
Total earning assets |
170,905 |
2,057 |
4.60 |
176,288 |
2,051 |
4.47 |
171,866 |
1,702 |
3.79 |
|||
Allowance for loan and lease losses |
(1,484) |
(1,477) |
(1,145) |
|||||||||
Accrued income and other assets |
17,471 |
17,530 |
18,421 |
|||||||||
Discontinued assets |
351 |
374 |
447 |
|||||||||
Total assets |
$ 187,243 |
$ 192,715 |
$ 189,589 |
|||||||||
Liabilities |
||||||||||||
Money market deposits |
$ 36,648 |
$ 251 |
2.72 % |
$ 35,243 |
$ 213 |
2.40 % |
$ 34,921 |
$ 35 |
.40 % |
|||
Demand deposits |
56,963 |
348 |
2.42 |
55,837 |
315 |
2.24 |
50,877 |
119 |
.93 |
|||
Savings deposits |
5,492 |
1 |
.05 |
5,966 |
1 |
.05 |
7,795 |
1 |
.03 |
|||
Certificates of deposit ($100,000 or more) |
6,328 |
67 |
4.23 |
5,446 |
55 |
4.01 |
1,351 |
3 |
.93 |
|||
Other time deposits |
7,998 |
87 |
4.29 |
9,636 |
103 |
4.25 |
4,757 |
28 |
2.33 |
|||
Total interest-bearing deposits |
113,429 |
754 |
2.63 |
112,128 |
687 |
2.43 |
99,701 |
186 |
.74 |
|||
Federal funds purchased and securities sold under repurchase agreements |
56 |
— |
2.29 |
710 |
9 |
5.04 |
1,752 |
16 |
3.52 |
|||
Bank notes and other short-term borrowings |
3,199 |
45 |
5.62 |
5,819 |
81 |
5.54 |
5,420 |
54 |
3.94 |
|||
Long-term debt (f), (g) |
19,921 |
330 |
6.64 |
21,584 |
351 |
6.50 |
18,351 |
219 |
4.77 |
|||
Total interest-bearing liabilities |
136,605 |
1,129 |
3.29 |
140,241 |
1,128 |
3.20 |
125,224 |
475 |
1.50 |
|||
Noninterest-bearing deposits |
31,647 |
32,697 |
45,965 |
|||||||||
Accrued expense and other liabilities |
5,169 |
5,572 |
4,785 |
|||||||||
Discontinued liabilities (g) |
351 |
374 |
447 |
|||||||||
Total liabilities |
$ 173,772 |
$ 178,884 |
$ 176,421 |
|||||||||
Equity |
||||||||||||
Key shareholders' equity |
$ 13,471 |
$ 13,831 |
$ 13,168 |
|||||||||
Noncontrolling interests |
— |
— |
— |
|||||||||
Total equity |
13,471 |
13,831 |
13,168 |
|||||||||
Total liabilities and equity |
$ 187,243 |
$ 192,715 |
$ 189,589 |
|||||||||
Interest rate spread (TE) |
1.31 % |
1.27 % |
2.28 % |
|||||||||
Net interest income (TE) and net interest margin (TE) |
$ 928 |
2.07 % |
$ 923 |
2.01 % |
$ 1,227 |
2.73 % |
||||||
TE adjustment (b) |
7 |
8 |
7 |
|||||||||
Net interest income, GAAP basis |
$ 921 |
$ 915 |
$ 1,220 |
|||||||||
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial and industrial average balances include $210 million, $202 million, and $171 million of assets from commercial credit cards for the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Consolidated Average Balance Sheets, and Net Interest Income and Yields/Rates From Continuing Operations |
||||||||
(Dollars in millions) |
||||||||
Twelve months ended December 31, 2023 |
Twelve months ended December 31, 2022 |
|||||||
Average |
Yield/ |
Average |
Yield/ |
|||||
Balance |
Interest (a) |
Rate (a) |
Balance |
Interest (a) |
Rate (a) |
|||
Assets |
||||||||
Loans: (b), (c) |
||||||||
Commercial and industrial (d) |
$ 59,379 |
$ 3,444 |
5.80 % |
$ 54,970 |
$ 2,148 |
3.91 % |
||
Real estate — commercial mortgage |
15,968 |
931 |
5.83 |
15,572 |
633 |
4.07 |
||
Real estate — construction |
2,755 |
185 |
6.71 |
2,229 |
99 |
4.44 |
||
Commercial lease financing |
3,703 |
116 |
3.13 |
3,869 |
98 |
2.54 |
||
Total commercial loans |
81,805 |
4,676 |
5.72 |
76,640 |
2,978 |
3.89 |
||
Real estate — residential mortgage |
21,428 |
699 |
3.26 |
19,036 |
559 |
2.94 |
||
Home equity loans |
7,522 |
433 |
5.76 |
8,115 |
347 |
4.28 |
||
Consumer direct loans |
6,228 |
304 |
4.88 |
6,490 |
277 |
4.27 |
||
Credit cards |
986 |
136 |
13.88 |
959 |
107 |
11.23 |
||
Consumer indirect loans |
35 |
1 |
0.71 |
62 |
— |
— |
||
Total consumer loans |
36,199 |
1,573 |
4.35 |
34,662 |
1,290 |
3.72 |
||
Total loans |
118,004 |
6,249 |
5.30 |
111,302 |
4,268 |
3.84 |
||
Loans held for sale |
1,012 |
61 |
6.06 |
1,278 |
56 |
4.41 |
||
Securities available for sale (b), (e) |
37,718 |
793 |
1.80 |
42,325 |
752 |
1.62 |
||
Held-to-maturity securities (b) |
9,008 |
312 |
3.46 |
7,676 |
213 |
2.77 |
||
Trading account assets |
1,138 |
55 |
4.85 |
850 |
31 |
3.61 |
||
Short-term investments |
7,349 |
414 |
5.63 |
4,264 |
97 |
2.28 |
||
Other investments (e) |
1,392 |
73 |
5.28 |
952 |
22 |
2.26 |
||
Total earning assets |
175,621 |
7,957 |
4.37 |
168,647 |
5,439 |
3.15 |
||
Allowance for loan and lease losses |
(1,419) |
(1,101) |
||||||
Accrued income and other assets |
17,425 |
18,340 |
||||||
Discontinued assets |
384 |
492 |
||||||
Total assets |
$ 192,011 |
$ 186,378 |
||||||
Liabilities |
||||||||
Money market deposits |
$ 34,539 |
$ 666 |
1.93 % |
$ 35,966 |
$ 52 |
.14 % |
||
Other demand deposits |
54,711 |
1,102 |
2.01 |
49,707 |
182 |
.37 |
||
Savings deposits |
6,343 |
3 |
.04 |
7,798 |
1 |
.01 |
||
Certificates of deposit ($100,000 or more) |
4,517 |
171 |
3.79 |
1,455 |
8 |
.56 |
||
Other time deposits |
9,277 |
380 |
4.10 |
2,892 |
36 |
1.25 |
||
Total interest-bearing deposits |
109,387 |
2,322 |
2.12 |
97,818 |
279 |
.29 |
||
Federal funds purchased and securities sold under repurchase agreements |
1,647 |
79 |
4.81 |
2,107 |
41 |
1.93 |
||
Bank notes and other short-term borrowings |
5,890 |
308 |
5.24 |
2,963 |
90 |
3.02 |
||
Long-term debt (f), (g) |
20,983 |
1,305 |
6.22 |
14,915 |
475 |
3.19 |
||
Total interest-bearing liabilities |
137,907 |
4,014 |
2.91 |
117,803 |
885 |
.75 |
||
Noninterest-bearing deposits |
34,672 |
49,044 |
||||||
Accrued expense and other liabilities |
5,167 |
4,309 |
||||||
Discontinued liabilities (g) |
384 |
492 |
||||||
Total liabilities |
$ 178,130 |
$ 171,648 |
||||||
Equity |
||||||||
Key shareholders' equity |
$ 13,881 |
$ 14,730 |
||||||
Noncontrolling interests |
— |
— |
||||||
Total equity |
13,881 |
14,730 |
||||||
Total liabilities and equity |
$ 192,011 |
$ 186,378 |
||||||
Interest rate spread (TE) |
1.46 % |
2.40 % |
||||||
Net interest income (TE) and net interest margin (TE) |
$ 3,943 |
2.17 % |
$ 4,554 |
2.64 % |
||||
TE adjustment (b) |
30 |
27 |
||||||
Net interest income, GAAP basis |
$ 3,913 |
$ 4,527 |
||||||
(a) |
Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (g) below, calculated using a matched funds transfer pricing methodology. |
(b) |
Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21% for the twelve months ended December 31, 2023, and December 31, 2022, respectively. |
(c) |
For purposes of these computations, nonaccrual loans are included in average loan balances. |
(d) |
Commercial and industrial average balances include $196 million and $157 million of assets from commercial credit cards for the twelve months ended December 31, 2023, and December 31, 2022, respectively. |
(e) |
Yield is calculated on the basis of amortized cost. |
(f) |
Rate calculation excludes basis adjustments related to fair value hedges. |
(g) |
A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying Key's matched funds transfer pricing methodology to discontinued operations. |
TE = Taxable Equivalent, GAAP = U.S. generally accepted accounting principles |
Noninterest Expense |
||||||
(Dollars in millions) |
||||||
Three months ended |
Twelve months ended |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
||
Personnel (a) |
$ 674 |
$ 663 |
$ 674 |
$ 2,660 |
$ 2,566 |
|
Net occupancy |
65 |
67 |
72 |
267 |
295 |
|
Computer processing |
92 |
89 |
82 |
368 |
314 |
|
Business services and professional fees |
44 |
38 |
60 |
168 |
212 |
|
Equipment |
24 |
20 |
20 |
88 |
92 |
|
Operating lease expense |
18 |
18 |
22 |
77 |
101 |
|
Marketing |
31 |
28 |
31 |
109 |
123 |
|
Other expense |
424 |
187 |
195 |
997 |
707 |
|
Total noninterest expense |
$ 1,372 |
$ 1,110 |
$ 1,156 |
$ 4,734 |
$ 4,410 |
|
Average full-time equivalent employees (b) |
17,129 |
17,666 |
18,210 |
17,692 |
17,660 |
|
(a) |
Additional detail provided in Personnel Expense table below. |
(b) |
The number of average full-time equivalent employees has not been adjusted for discontinued operations. |
Personnel Expense |
|||||||
(Dollars in millions) |
|||||||
Three months ended |
Twelve months ended |
||||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
|||
Salaries and contract labor |
$ 399 |
$ 415 |
$ 407 |
$ 1,649 |
$ 1,500 |
||
Incentive and stock-based compensation |
139 |
141 |
171 |
525 |
693 |
||
Employee benefits |
97 |
106 |
94 |
405 |
363 |
||
Severance |
39 |
1 |
2 |
81 |
10 |
||
Total personnel expense |
$ 674 |
$ 663 |
$ 674 |
$ 2,660 |
$ 2,566 |
||
Loan Composition |
||||||
(Dollars in millions) |
||||||
Change 12/31/2023 vs. |
||||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
9/30/2023 |
12/31/2022 |
||
Commercial and industrial (a) |
$ 55,815 |
$ 57,606 |
$ 59,647 |
(3.1) % |
(6.4) % |
|
Commercial real estate: |
||||||
Commercial mortgage |
15,187 |
15,549 |
16,352 |
(2.3) |
(7.1) |
|
Construction |
3,066 |
2,982 |
2,530 |
2.8 |
21.2 |
|
Total commercial real estate loans |
18,253 |
18,531 |
18,882 |
(1.5) |
(3.3) |
|
Commercial lease financing (b) |
3,523 |
3,681 |
3,936 |
(4.3) |
(10.5) |
|
Total commercial loans |
77,591 |
79,818 |
82,465 |
(2.8) |
(5.9) |
|
Residential — prime loans: |
||||||
Real estate — residential mortgage |
20,958 |
21,309 |
21,401 |
(1.6) |
(2.1) |
|
Home equity loans |
7,139 |
7,324 |
7,951 |
(2.5) |
(10.2) |
|
Total residential — prime loans |
28,097 |
28,633 |
29,352 |
(1.9) |
(4.3) |
|
Consumer direct loans |
5,890 |
6,074 |
6,508 |
(3.0) |
(9.5) |
|
Credit cards |
1,002 |
988 |
1,026 |
1.4 |
(2.3) |
|
Consumer indirect loans |
26 |
31 |
43 |
(16.1) |
(39.5) |
|
Total consumer loans |
35,015 |
35,726 |
36,929 |
(2.0) |
(5.2) |
|
Total loans (c), (d) |
$ 112,606 |
$ 115,544 |
$ 119,394 |
(2.5) % |
(5.7) % |
|
(a) |
Loan balances include $207 million, $207 million, and $172 million of commercial credit card balances at December 31, 2023, September 30, 2023, and December 31, 2022, respectively. |
(b) |
Commercial lease financing includes receivables held as collateral for a secured borrowing of $7 million, $4 million, and $8 million at December 31, 2023, September 30, 2023, and December 31, 2022, respectively. Principal reductions are based on the cash payments received from these related receivables. |
(c) |
Total loans exclude loans of $339 million at December 31, 2023, $360 million at September 30, 2023, and $434 million at December 31, 2022, related to the discontinued operations of the education lending business. |
(d) |
Accrued interest of $522 million, $519 million, and $417 million at December 31, 2023, September 30, 2023, and December 31, 2022, respectively, presented in "other assets" on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table. |
Loans Held for Sale Composition |
||||||
(Dollars in millions) |
||||||
Change 12/31/2023 vs. |
||||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
9/30/2023 |
12/31/2022 |
||
Commercial and industrial |
$ 50 |
$ 47 |
$ 477 |
6.4 % |
(89.5) % |
|
Real estate — commercial mortgage |
382 |
571 |
427 |
(33.1) |
(10.5) |
|
Commercial lease financing |
— |
— |
35 |
— |
(100.0) |
|
Real estate — residential mortgage |
51 |
112 |
24 |
(54.5) |
112.5 |
|
Total loans held for sale |
$ 483 |
$ 730 |
$ 963 |
(33.8) % |
(49.8) % |
|
N/M = Not Meaningful |
Summary of Changes in Loans Held for Sale |
|||||
(Dollars in millions) |
|||||
4Q23 |
3Q23 |
2Q23 |
1Q23 |
4Q22 |
|
Balance at beginning of period |
$ 730 |
$ 1,130 |
$ 1,211 |
$ 963 |
$ 1,048 |
New originations |
1,879 |
3,035 |
1,798 |
1,779 |
3,158 |
Transfers from (to) held to maturity, net |
(31) |
(94) |
(52) |
(13) |
(48) |
Loan sales |
(2,095) |
(3,312) |
(1,798) |
(1,518) |
(3,124) |
Loan draws (payments), net |
— |
(29) |
(28) |
— |
(71) |
Valuation and other adjustments |
— |
— |
(1) |
— |
— |
Balance at end of period |
$ 483 |
$ 730 |
$ 1,130 |
$ 1,211 |
$ 963 |
Summary of Loan and Lease Loss Experience From Continuing Operations |
||||||
(Dollars in millions) |
||||||
Three months ended |
Twelve months ended |
|||||
12/31/2023 |
9/30/2023 |
12/31/2022 |
12/31/2023 |
12/31/2022 |
||
Average loans outstanding |
$ 113,948 |
$ 117,627 |
$ 117,702 |
$ 118,004 |
$ 111,302 |
|
Allowance for loan and lease losses at the beginning of the period |
1,488 |
1,480 |
1,144 |
1,337 |
1,061 |
|
Loans charged off: |
||||||
Commercial and industrial |
49 |
62 |
35 |
188 |
153 |
|
Real estate — commercial mortgage |
24 |
1 |
13 |
39 |
23 |
|
Real estate — construction |
— |
— |
— |
— |
— |
|
Total commercial real estate loans |
24 |
1 |
13 |
39 |
23 |
|
Commercial lease financing |
— |
— |
— |
— |
2 |
|
Total commercial loans |
73 |
63 |
48 |
227 |
178 |
|
Real estate — residential mortgage |
— |
— |
— |
1 |
(2) |
|
Home equity loans |
(2) |
1 |
— |
2 |
1 |
|
Consumer direct loans |
14 |
14 |
9 |
50 |
34 |
|
Credit cards |
10 |
9 |
8 |
37 |
30 |
|
Consumer indirect loans |
— |
— |
2 |
1 |
4 |
|
Total consumer loans |
22 |
24 |
19 |
91 |
67 |
|
Total loans charged off |
95 |
87 |
67 |
318 |
245 |
|
Recoveries: |
||||||
Commercial and industrial |
11 |
10 |
18 |
44 |
50 |
|
Real estate — commercial mortgage |
1 |
— |
1 |
2 |
5 |
|
Real estate — construction |
1 |
— |
— |
1 |
1 |
|
Total commercial real estate loans |
2 |
— |
1 |
3 |
6 |
|
Commercial lease financing |
1 |
1 |
2 |
5 |
4 |
|
Total commercial loans |
14 |
11 |
21 |
52 |
60 |
|
Real estate — residential mortgage |
1 |
1 |
3 |
4 |
5 |
|
Home equity loans |
— |
1 |
— |
3 |
3 |
|
Consumer direct loans |
1 |
2 |
1 |
7 |
8 |
|
Credit cards |
3 |
1 |
1 |
7 |
6 |
|
Consumer indirect loans |
— |
— |
— |
1 |
2 |
|
Total consumer loans |
5 |
5 |
5 |
22 |
24 |
|
Total recoveries |
19 |
16 |
26 |
74 |
84 |
|
Net loan charge-offs |
(76) |
(71) |
(41) |
(244) |
(161) |
|
Provision (credit) for loan and lease losses |
96 |
79 |
234 |
415 |
437 |
|
Allowance for loan and lease losses at end of period |
$ 1,508 |
$ 1,488 |
$ 1,337 |
$ 1,508 |
$ 1,337 |
|
Liability for credit losses on lending-related commitments at beginning of period |
$ 290 |
$ 291 |
$ 194 |
$ 225 |
$ 160 |
|
Provision (credit) for losses on lending-related commitments |
6 |
2 |
31 |
74 |
65 |
|
Other |
— |
(3) |
— |
(3) |
— |
|
Liability for credit losses on lending-related commitments at end of period (a) |
$ 296 |
$ 290 |
$ 225 |
$ 296 |
$ 225 |
|
Total allowance for credit losses at end of period |
$ 1,804 |
$ 1,778 |
$ 1,562 |
$ 1,804 |
$ 1,562 |
|
Net loan charge-offs to average total loans |
.26 % |
.24 % |
.14 % |
.21 % |
.14 % |
|
Allowance for loan and lease losses to period-end loans |
1.34 |
1.29 |
1.12 |
1.34 |
1.12 |
|
Allowance for credit losses to period-end loans |
1.60 |
1.54 |
1.31 |
1.60 |
1.31 |
|
Allowance for loan and lease losses to nonperforming loans |
263 |
327 |
345 |
263 |
346 |
|
Allowance for credit losses to nonperforming loans |
314 |
391 |
404 |
314 |
404 |
|
Discontinued operations — education lending business: |
||||||
Loans charged off |
$ 1 |
$ — |
$ 2 |
$ 4 |
$ 6 |
|
Recoveries |
— |
— |
— |
1 |
2 |
|
Net loan charge-offs |
$ (1) |
$ — |
$ (2) |
$ (3) |
$ (4) |
|
(a) |
Included in "Accrued expense and other liabilities" on the balance sheet. |
Asset Quality Statistics From Continuing Operations |
|||||
(Dollars in millions) |
|||||
4Q23 |
3Q23 |
2Q23 |
1Q23 |
4Q22 |
|
Net loan charge-offs |
$ 76 |
$ 71 |
$ 52 |
$ 45 |
$ 41 |
Net loan charge-offs to average total loans |
.26 % |
.24 % |
.17 % |
.15 % |
.14 % |
Allowance for loan and lease losses |
$ 1,508 |
$ 1,488 |
$ 1,480 |
$ 1,380 |
$ 1,337 |
Allowance for credit losses (a) |
1,804 |
1,778 |
1,771 |
1,656 |
1,562 |
Allowance for loan and lease losses to period-end loans |
1.34 % |
1.29 % |
1.24 % |
1.15 % |
1.12 % |
Allowance for credit losses to period-end loans |
1.60 |
1.54 |
1.49 |
1.38 |
1.31 |
Allowance for loan and lease losses to nonperforming loans |
263 |
327 |
343 |
332 |
345 |
Allowance for credit losses to nonperforming loans |
314 |
391 |
411 |
398 |
404 |
Nonperforming loans at period end |
$ 574 |
$ 455 |
$ 431 |
$ 416 |
$ 387 |
Nonperforming assets at period end |
591 |
471 |
462 |
447 |
420 |
Nonperforming loans to period-end portfolio loans |
.51 % |
.39 % |
.36 % |
.35 % |
.32 % |
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
.52 |
.41 |
.39 |
.37 |
.35 |
(a) |
Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments. |
Summary of Nonperforming Assets and Past Due Loans From Continuing Operations |
|||||
(Dollars in millions) |
|||||
12/31/2023 |
9/30/2023 |
6/30/2023 |
3/31/2023 |
12/31/2022 |
|
Commercial and industrial |
$ 297 |
$ 214 |
$ 188 |
$ 170 |
$ 174 |
Real estate — commercial mortgage |
100 |
63 |
65 |
59 |
21 |
Real estate — construction |
— |
— |
— |
— |
— |
Total commercial real estate loans |
100 |
63 |
65 |
59 |
21 |
Commercial lease financing |
— |
1 |
1 |
1 |
1 |
Total commercial loans |
397 |
278 |
254 |
230 |
196 |
Real estate — residential mortgage |
71 |
72 |
73 |
75 |
77 |
Home equity loans |
97 |
97 |
97 |
104 |
107 |
Consumer direct loans |
3 |
3 |
3 |
3 |
3 |
Credit cards |
5 |
4 |
3 |
3 |
3 |
Consumer indirect loans |
1 |
1 |
1 |
1 |
1 |
Total consumer loans |
177 |
177 |
177 |
186 |
191 |
Total nonperforming loans (a) |
574 |
455 |
431 |
416 |
387 |
OREO |
17 |
16 |
15 |
13 |
13 |
Nonperforming loans held for sale |
— |
— |
16 |
18 |
20 |
Other nonperforming assets |
— |
— |
— |
— |
— |
Total nonperforming assets |
$ 591 |
$ 471 |
$ 462 |
$ 447 |
$ 420 |
Accruing loans past due 90 days or more |
107 |
52 |
73 |
55 |
60 |
Accruing loans past due 30 through 89 days |
222 |
178 |
139 |
164 |
180 |
Nonperforming assets from discontinued operations — education lending business |
3 |
2 |
2 |
3 |
3 |
Nonperforming loans to period-end portfolio loans |
.51 % |
.39 % |
.36 % |
.35 % |
.32 % |
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets |
.52 |
.41 |
.39 |
.37 |
.35 |
(a) |
On January 1, 2023, Key adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. In connection with the adoption of this guidance, nonperforming loans for periods after January 1, 2023, include certain loans which were modified for borrowers experiencing financial difficulty. Amounts prior to January 1, 2023, include nonperforming troubled debt restructurings (TDRs), for which accounting guidance was eliminated upon adoption of ASU 2022-02. |
Summary of Changes in Nonperforming Loans From Continuing Operations |
|||||
(Dollars in millions) |
|||||
4Q23 |
3Q23 |
2Q23 |
1Q23 |
4Q22 |
|
Balance at beginning of period |
$ 455 |
$ 431 |
$ 416 |
$ 387 |
$ 390 |
Loans placed on nonaccrual status |
297 |
159 |
169 |
143 |
113 |
Charge-offs |
(95) |
(87) |
(76) |
(60) |
(67) |
Loans sold |
(9) |
(4) |
(23) |
(2) |
(4) |
Payments |
(56) |
(25) |
(20) |
(31) |
(22) |
Transfers to OREO |
(2) |
(3) |
(2) |
(2) |
(1) |
Loans returned to accrual status |
(16) |
(16) |
(33) |
(19) |
(22) |
Balance at end of period |
$ 574 |
$ 455 |
$ 431 |
$ 416 |
$ 387 |
Line of Business Results |
||||||||
(Dollars in millions) |
||||||||
Change 4Q23 vs. |
||||||||
4Q23 |
3Q23 |
2Q23 |
1Q23 |
4Q22 |
3Q23 |
4Q22 |
||
Consumer Bank |
||||||||
Summary of operations |
||||||||
Total revenue (TE) |
$ 786 |
$ 791 |
$ 803 |
$ 840 |
$ 860 |
(.6) % |
(8.6) % |
|
Provision for credit losses |
5 |
14 |
32 |
60 |
105 |
(64.3) |
(95.2) |
|
Noninterest expense |
780 |
677 |
663 |
663 |
705 |
15.2 |
10.6 |
|
Net income (loss) attributable to Key |
1 |
76 |
82 |
89 |
38 |
(98.7) |
(97.4) |
|
Average loans and leases |
41,381 |
42,250 |
42,934 |
43,086 |
43,149 |
(2.1) |
(4.1) |
|
Average deposits |
84,856 |
83,863 |
82,498 |
84,637 |
87,369 |
1.2 |
(2.9) |
|
Net loan charge-offs |
40 |
36 |
32 |
24 |
21 |
11.1 |
90.5 |
|
Net loan charge-offs to average total loans |
.38 % |
.34 % |
.30 % |
.23 % |
.19 % |
11.8 |
100.0 |
|
Nonperforming assets at period end |
$ 190 |
$ 190 |
$ 193 |
$ 196 |
$ 202 |
— |
(5.9) |
|
Return on average allocated equity |
0.11 % |
8.48 % |
9.04 % |
9.87 % |
4.51 % |
(98.7) |
(97.6) |
|
Commercial Bank |
||||||||
Summary of operations |
||||||||
Total revenue (TE) |
$ 794 |
$ 790 |
$ 805 |
$ 844 |
$ 894 |
.5 % |
(11.2) % |
|
Provision for credit losses |
96 |
68 |
134 |
80 |
165 |
41.2 |
(41.8) |
|
Noninterest expense |
525 |
431 |
405 |
442 |
459 |
21.8 |
14.4 |
|
Net income (loss) attributable to Key |
143 |
226 |
214 |
255 |
225 |
(36.7) |
(36.4) |
|
Average loans and leases |
72,088 |
74,951 |
77,277 |
76,306 |
74,100 |
(3.8) |
(2.7) |
|
Average loans held for sale |
635 |
1,268 |
1,014 |
876 |
1,377 |
(49.9) |
(53.9) |
|
Average deposits |
56,897 |
54,896 |
51,420 |
52,219 |
54,385 |
3.6 |
4.6 |
|
Net loan charge-offs |
35 |
35 |
20 |
21 |
25 |
— |
40.0 |
|
Net loan charge-offs to average total loans |
.19 % |
.19 % |
.10 % |
.11 % |
.13 % |
— |
46.2 |
|
Nonperforming assets at period end |
$ 401 |
$ 281 |
$ 269 |
$ 251 |
$ 218 |
42.7 |
83.9 |
|
Return on average allocated equity |
5.64 % |
8.64 % |
8.17 % |
10.04 % |
9.36 % |
(34.7) |
(39.7) |
|
TE = Taxable Equivalent |
|
Selected Items Impact on Earnings(a) |
||||
(Dollars in millions, except per share amounts) |
||||
Pretax(b) |
After-tax at marginal rate(b) |
|||
Quarter to date results |
Amount |
Net Income |
EPS(c) |
|
Three months ended December 31, 2023 |
||||
Efficiency related expenses(d) |
$ (67) |
$ (51) |
$ (0.05) |
|
Pension settlement (other expense) |
(18) |
(14) |
(0.02) |
|
FDIC special assessment (other expense) |
(190) |
(144) |
(0.15) |
|
Total selected items |
(275) |
(209) |
(0.22) |
|
Three months ended September 30, 2023 |
||||
None |
— |
— |
— |
|
Three months ended June 30, 2023 |
||||
None |
— |
— |
— |
|
Three months ended March 31, 2023 |
||||
Efficiency related expenses(e) |
(64) |
(49) |
(0.05) |
|
Year to date results |
||||
Twelve months ended December 31, 2023 |
||||
Efficiency related expenses |
(131) |
(100) |
(0.10) |
|
Pension settlement (other expense) |
(18) |
(14) |
(0.02) |
|
FDIC special assessment (other expense) |
(190) |
(144) |
(0.15) |
|
Total selected items |
$ (339) |
$ (258) |
$ (0.27) |
|
(a) |
Includes items impacting results or trends during the period but are not considered non-GAAP adjustments. |
(b) |
Favorable (unfavorable) impact |
(c) |
Impact to EPS reflected on a fully diluted basis |
(d) |
Efficiency related expenses for the three months ended December 31, 2023, consist primarily of $39 million of severance recorded in personnel expense and $24 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense. |
(e) |
Efficiency related expenses for the three months ended March 31, 2023, consist primarily of $31 million of severance recorded in personnel expense and $28 million of corporate real estate related rationalization and other contract termination or renegotiation costs recorded in other expense. |
SOURCE KeyCorp
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