) fourth-quarter adjusted earnings were 28 cents per share,
outpacing the Zacks Consensus Estimate of 24 cents on the back of
prudent expense management. Moreover, this was up 20.0% from the
year-ago quarter figure of 20 cents.
Better-than-expected results were mainly driven by growth in
non-interest income, a fall in provision for loan and lease
losses as well as lower-than-expected operating expenses. These
were partially offset by a decrease in net interest income.
Further, continued improvement in asset quality, growth in loan
and deposit balances and strong capital ratios were the other
After considering costs related to the 'Fit for Growth'
efficiency initiative and the pension settlement charge, net
income from continuing operations attributable to common
shareholders came in at $229 million, up 20.5% year over year.
For full-year 2013, adjusted net income from continuing
operations attributable to common shareholders came in at $964
million or $1.01 per share. This was up from $813 million or 86
cents per share in 2012. Earnings per share surpassed the Zacks
Consensus Estimate of 94 cents.
Behind the Headlines
KeyCorp's total revenue came in at $1.04 billion, down 0.4% from
the prior-year quarter. However, it beat the Zacks Consensus
Estimate of $1.03 billion.
For 2013, total revenue came in at $4.11 billion, dipping 0.7%
from the prior year. However, it surpassed the Zacks Consensus
Estimate of $4.08 billion.
Tax-equivalent net interest income (NII) fell 3.0% from the
prior-year quarter to $589 million. Likewise, net interest margin
(NIM) decreased 36 basis points (bps) year over year to 3.01%.
The decline in both NII and NIM was mainly due to a fall in
earning assets yields and rise in deposit levels, partially
offset by maturity of higher-rate certificates of deposit and a
favorable mix of lower-cost deposits.
Non-interest income grew 3.2% year over year to $453 million. The
rise was largely attributable to significant increase in mortgage
servicing fees, net gains from principal investing and other
income, partially offset by decrease in consumer mortgage income
and investment banking and debt placement fees.
Non-interest expense fell 3.0% from $734 million in the
prior-year quarter to $712 million. The decrease was mainly due
to lower personnel expense.
As of Dec 31, 2013, average deposits came in at $67.8 billion, up
7.5% from $63.1 billion as of Dec 31, 2012. Further, average
loans were $53.6 billion, up 3.4% from Dec 31, 2012.
Credit quality continued to improve during the quarter.
Nonperforming assets, as a percentage of period-end portfolio
loans, OREO assets and other nonperforming assets were 0.97%,
down 42 bps year over year. Moreover, net charge-offs, as a
percentage of average loans, decreased 17 bps year over year to
KeyCorp's allowance for loan and lease losses was $848 million,
down 4.5% from the year-ago quarter. Further, provision for loan
and lease losses came in at $17 million, down 66.7% year over
Though capital ratios deteriorated during 2013, these continued
to remain strong. KeyCorp's tangible common equity to tangible
assets ratio was 9.80% as of Dec 31, 2013, compared with 10.15%
as of Dec 31, 2012. In addition, Tier 1 common equity ratio was
11.23% against 11.36% as of Dec 31, 2012.
The company's estimated Basel III Tier 1 common ratio was 10.63%
at the end of the reported quarter. This exceeded the fully
phased-in required minimum Tier 1 common equity ratio of 7.00%.
During the reported quarter, KeyCorp bought back 7.7 million
shares worth $99 million. This followed the Federal Reserve's
approval of the company's 2013 capital plan in March. In 2013,
the company repurchased share worth $474 million.
Performance of Other Major Banks
Earnings per share of both
SunTrust Banks, Inc.
) beat the Zacks Consensus Estimate. Better-than-expected results
were driven by disciplined expense management and a significant
decline in provision for credit losses.
Another major bank,
State Street Corp.
) is scheduled to announce results on Jan 24.
We expect KeyCorp's business restructuring action to continue
boosting its credit quality and liquidity. Moreover, we are
optimistic about the company's strong balance sheet and improved
market share. Nevertheless, the sluggish economic recovery,
pressure on top line and stringent regulatory restrictions remain
At present, KeyCorp has a Zacks Rank #3 (Hold).
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