) efficient expense control, along with steady capital deployment
activities, places it well ahead of its peers. The stock closed
at $13.08 on Dec 12, reflecting a strong year-to-date return of
51.9%. Going forward, with consistent improvement in the credit
quality and strong capital ratios, there are fair chances of
price appreciation. Therefore, continuing to hold the company's
shares in your portfolio should be rewarding.
However, given the tepid economic recovery, stringent regulatory
restrictions and the prevailing low interest-rate scenario, we
discourage further addition of its shares to your portfolio.
Justifying the Stance
KeyCorp' third-quarter 2013 earnings per share of 28 cents came
in ahead of the Zacks Consensus Estimate and the year-ago quarter
figure of 22 cents. Results were primarily driven by growth in
net interest income, partially offset by lower non-interest
income and a slight rise in operating expenses.
KeyCorp's expense reduction program - "Fit for Growth" - seems
impressive. Notably, the company has already surpassed the slated
expense reduction target of $200 million for 2013 in the third
Efficient capital deployment activities in the form of regular
share purchases and dividend hikes continue to boost investors'
confidence in the stock. Further, KeyCorp has also received the
Federal Reserve's approval to utilize the net after tax cash gain
of $72 million from the divesture of Victory Capital Management
to buy back additional shares.
However, we expect the pressure on net interest margin (NIM) to
persist in the near term due to the soft new loan demand.
Further, market dislocations over the last couple of years have
led to deterioration in the valuation of many of the asset
categories in KeyCorp's balance sheet. Hence, stability of the
balance sheet remains a major challenge for the company at this
In line with our analysis, the Zacks Consensus Estimate underwent
no revision over the last 30 days. While the Zacks Consensus
Estimate for 2013 was 94 cents, for 2014 it was $1.02. Hence,
KeyCorp currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked banks include
BofI Holding, Inc.
Fifth Third Bancorp
Wells Fargo & Company
). While BofI Holding carries a Zacks Rank #1 (Strong Buy), Fifth
Third and Wells Fargo have a Zacks Rank #2 (Buy).
BOFI HLDG INC (BOFI): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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