As expected, the Federal Reserve has approved
) capital plan following the 2013 Comprehensive Capital Analysis
and Review (CCAR). Consequently, the board of directors at
KeyCorp announced a $426 million share buyback program.
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KeyCorp intends to complete the buyback of shares by the end of
the first quarter of 2014 through the open market or via
privately-negotiated transactions. The repurchased shares will be
held as treasury shares and are most likely to be reissued for a
variety of corporate purposes.
KeyCorp will also consider a potential dividend hike in May. The
company is looking forward to increase its dividend by 10% to 5.5
cents. The dividend hike, if approved, would become effective
from the second quarter of 2013.
Additionally, last month, the company announced its intention to
submit an updated capital plan to the Fed, requesting to utilize
the realized gains stemming from the conclusion of the sale of
Victory Capital Management and its broker-dealer subsidiary,
Victory Capital Advisers, to buyback shares. The divestment is
expected to conclude in the third quarter of the current year.
KeyCorp, along with many other financial institutions, had
submitted its capital plan to the Federal Reserve for stress
tests to secure approval for dividend increases and share
buybacks. Stress test was conducted to find out whether the banks
have enough capital to survive another financial crisis. 17 out
of 18 companies passed the test, where Ally Financial Inc. was
the one to fall short.
The Fed approved capital plans of 14 companies including KeyCorp,
while the plans of Ally Financial and
) were not approved.
JPMorgan Chase & Co
The Goldman Sachs Group, Inc.
) have been asked to re-submit the plans after making certain
KeyCorp's continuous efforts to enhance shareholders' value are
highly commendable. This reflects the company's strong
fundamentals and robust liquidity.
Keycorp currently retains a Zacks Rank #3 (Hold).