) third-quarter adjusted earnings per share came in at 28 cents.
This surpassed the Zacks Consensus Estimate and the year-ago
quarter figure of 22 cents.
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Better-than-expected results were primarily driven by growth in
net interest income, which was partially offset by a decrease in
non-interest income and a slight rise in operating expenses.
Moreover, continued improvement in asset quality and strong
capital ratios were the other highlights of the quarter.
After considering costs related to the 'Fit for Growth'
efficiency initiative as well as pension settlement charge, net
income from continuing operations attributable to common
shareholders came in at $229 million or 25 cents per share. This
was up from $211 million or 22 cents per share recorded in the
Behind the Headlines
KeyCorp's total revenue came in at $1.04 billion, declining 4.8%
from the prior-year quarter. However, it beat the Zacks Consensus
Estimate of $1.02 billion.
Tax-equivalent net interest income (NII) totaled $584 million,
nudging up 1.0% from $578 million in the prior-year quarter.
However, net interest margin (NIM) decreased 2 basis points (bps)
year over year to 3.11%. The decline in NIM was primarily due to
a fall in earning assets yields, partially offset by lower
Non-interest income declined 11.4% year over year to $459
million. This was primarily due to decrease in other income,
consumer mortgage income, service charges on deposit accounts as
well as operating lease income and other leasing gains. These
were partially offset by a rise in investment banking and debt
placement fees, corporate services income, cards and payments
income as well as net gains from principal investing.
Non-interest expense rose marginally from $ 712 million in the
prior-year quarter to $716 million. The increase was mainly due
to higher personnel expense, partially offset by a decrease in
Credit quality improved during the quarter. Nonperforming assets,
as a percentage of period-end portfolio loans, OREO assets and
other nonperforming assets were 1.08%, falling 31 bps year over
year. Moreover, net charge-offs, as a percentage of average
loans, decreased 58 bps year over year to 0.28%.
KeyCorp's allowance for loan and lease losses was 1.62% of
period-end loans as of Sep 30, 2013 and 1.73% as of Sep 30, 2012.
Moreover, provision for loan and lease losses came in at $28
million, down 74.3% year over year.
As of Sep 30, 2013, KeyCorp had total assets of $90.7 billion
compared with $87.0 billion as of Sep 30, 2012.
Average deposits came in at $65.4 billion, up 5.4% from $62.0
billion as of Sep 30, 2012. Further, average loans were $53.3
billion, up 5.1% from the year-ago quarter.
Capital ratios continued to remain strong during the quarter.
KeyCorp's tangible common equity to tangible assets ratio was
9.93% as of Sep 30, 2013, compared with 10.39% as of Sep 30,
2012. In addition, Tier 1 common equity ratio was 11.11%,
compared with 11.30% at the end of the prior-year quarter.
The company's estimated Basel III Tier 1 common ratio was 10.81%
at the end of the reported quarter compared with 10.56% in the
During the reported quarter, KeyCorp bought back shares worth
$198 million. This followed the Federal Reserve's approval of the
company's 2013 capital plan in March.
In July, KeyCorp completed the sale of Victory Capital Management
and Victory Capital Advisors to Crestview Partners - a private
equity firm, which resulted in an after-tax net gain of $92
We expect KeyCorp's business restructuring actions to continue
boosting its credit quality and liquidity. Moreover, we are
optimistic about the company's strong balance sheet and improved
market share. However, the sluggish economic recovery and
stringent regulatory restrictions remain major concerns.
KeyCorp currently carries a Zacks Rank #3 (Hold).
Among other major regional banks,
Fifth Third Bancorp
) are scheduled to report their results on Oct 17, while
State Street Corporation
) will do so on Oct 22.