) second-quarter earnings from continuing operations came in at 27
cents per share, surpassing the Zacks Consensus Estimate of 25
cents. This marks the company's sixth consecutive earnings beat.
Moreover, this was up 28.6% from the year-ago figure of 21 cents.
Results benefited from lower expenses, a decline in provision for
loan and lease losses and higher non-interest income. However, the
pressure on net interest income as well as net interest margin
(NIM) persisted, given a still low interest rate scenario. Further,
continued improvement in asset quality, growth in loan and deposit
balances, strong capital ratios and improved credit quality were
other highlights of the quarter.
Net income from continuing operations attributable to common
shareholders came in at $242 million, up 25.4% year over year.
Keycorp - Quarterly EPS (BNRI) |
Behind the Headlines
KeyCorp's total revenue came in at $1.03 billion, up 1.9% from the
prior-year quarter. Further, it was 1.7% higher than the Zacks
Consensus Estimate $1.02 billion.
Tax-equivalent net interest income fell 1.2% from the prior-year
quarter to $579 million. Likewise, NIM from continuing operations
decreased 15 basis points (bps) year over year to 2.98%. The
decline in both NII and NIM was mainly due to a fall in earning
assets yields and loan fees, partially offset by loan growth,
maturity of higher-rate deposit certificates and a favorable mix of
Non-interest income grew 6.1% year over year to $455 million. The
rise was largely attributable to increase in investment banking and
debt-placement fees, net gains from principal investing and
operating lease income and other leasing gains, partially offset by
decrease in trust and investment services income, service charges
on deposit accounts and various other items.
Non-interest expense fell 3.1% from the prior-year quarter to $689
million. The decrease was mainly due to a fall in salaries and
employee benefits. .
As of Jun 30, 2014, average total deposits came in at $66.5
billion, up 2.5% year over year. Further, average total loans were
$55.6 billion, up 5.5% from Jun 30, 2013.
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 0.74%, down
56 bps year over year. Moreover, net loan charge-offs, as a
percentage of average loans, decreased 12 bps year over year to
KeyCorp's allowance for loan and lease losses was $814 million,
down 7.1% from the year-ago quarter. Further, provision for loan
and lease losses came in at $10 million, down 64.3% year over year.
Capital ratios were strong during the quarter. KeyCorp's tangible
common equity to tangible assets ratio was 10.15% as of Jun 30,
2014, compared with 9.96% as of Jun 30, 2013. In addition, Tier 1
common equity ratio was 11.33% versus 11.18% as of Jun 30, 2013.
Again, Tier 1 risk-based capital ratio was 12.07% versus 11.93% as
on Jun 30, 2013.
The company's estimated Basel III Tier 1 common ratio was 10.77% at
the end of the quarter. This exceeded the fully phased-in required
minimum Tier 1 common equity ratio of 7.00%.
Capital Deployment Activities
During the reported quarter, KeyCorp bought back shares worth $108
million and raised dividend by 18% to $0.065 per common share.
KeyCorp's 2014 capital plan includes buyback of up to $542 million
through first-quarter 2015.
Decline in expenses and efficient organic growth strategy should
continue supporting KeyCorp's long-term performance. Moreover, we
are optimistic about the company's strong balance sheet and capital
position. Nevertheless, the sluggish economic recovery, pressure on
top line and stringent regulatory restrictions remain major
At present, KeyCorp has a Zacks Rank #3 (Hold).
Performance of Other Major Banks
Among other major regional banks,
) posted second-quarter earnings per share of 80 cents, beating the
Zacks Consensus Estimate by 5.3%.
) reported second-quarter adjusted earnings per share of $1.24,
outpacing the Zacks Consensus Estimate of $1.08.
) is scheduled to report on Jul 24.
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