) reported its second quarter 2012 net income from continuing
operations of 23 cents per share, surpassing the Zacks Consensus
Estimate of 18 cents. The results also compared favorably with the
prior-quarter earnings of 21 cents.
Including discontinued operations, the company's net income for the
reported quarter came in at $231 million or 24 cents per share as
against $194 million or 20 cents in the prior quarter
Stable non-interest income, continued improvement in credit quality
and robust capital ratios were the primary highlights for the
quarter. However, dwindling net interest income and escalating
operating expenses slightly subdued the results.
Quarter in Detail
For the quarter under review, total revenue came in at $1.03
million, slipping 0.2% from the prior quarter. However, this
exceeded the Zacks Consensus Estimate of $1.00 billion.
Tax-equivalent net interest income totaled $544 million, declining
2.7% from $559 million in the prior quarter. Net interest margin
(NIM) also fell 10 basis points (bps) sequentially to 3.06%. The
decline in NIM was attributable to increased write-off of fees and
capitalized loan origination expenses from the early termination of
leveraged leases, coupled with reduced reinvestment yields.
However, declining cost of funds partially mitigated the effects of
the abovementioned factors.
Non-interest income surged 2.8% sequentially to $485 million. The
sequential upliftment was a result of elevated gains on leased
equipment, net gains from loan sales, partly mitigated by lower net
gains from principal investments.
Non-interest expense inched up 1.6% from the prior quarter to $714
million. The rise was mainly attributable to increased business
services and professional fees as well as higher provision for
losses on lending-related commitments.
Credit quality continued to display an improvement during the
quarter. Non-performing assets, as a percentage of period-end
portfolio loans, OREO assets as well as other non-performing assets
dipped 4 bps sequentially and 47 bps year-over-year to 1.51%. Also,
net charge-offs as a percentage of average loans fell 19 bps
sequentially and 48 bps year over year to 0.63%.
KeyCorp's allowance for loan and lease losses was $0.89 billion or
1.79% of period-end loans as of June 30, 2012, compared with $0.94
billion or 1.92% of period-end loans as of March 31, 2012 and $1.23
billion or 2.57% of period-end loans as of June 30, 2011.
However, provision for loan and lease losses came in at $21 million
compared with $42 million in the prior quarter and a credit of $8
million in the prior-year quarter.
Capital ratios continued to strengthen during the reported quarter.
KeyCorp's tangible common equity to tangible assets ratio was
10.44% as of June 30, 2012, compared with 10.26% as of March 31,
2012 and 9.67% as of June 30, 2011. In addition, Tier 1 common
equity ratio was 11.68%, compared with 11.55% at the end of the
prior quarter and 11.14% at the end of the prior-year quarter.
KeyCorp originated approximately $10.3 billion in new or renewed
lending commitments to consumers and businesses during the quarter
compared with $8.3 billion issued in the prior quarter.
During the quarter, KeyCorp bought back 0.5 million shares at an
average cost of $7.83 per share. The company also hiked its
quarterly dividend by 66.7% to $0.05 in the second quarter of 2012.
In July, KeyCorp completed the acquisition of 37 retail banking
branches in Buffalo and Rochester, NY from
First Niagara Financial Group
). The deposits and loans associated with these branches amounted
nearly $2.4 billion and $400 million, respectively.
M&T Bank Corporation
) second quarter 2012 earnings significantly surpassed the Zacks
Consensus Estimate. The results were aided by increased net
interest and non-interest income as well as lower operating
Mortgage banking revenues posted a decent improvement in the
quarter. Moreover, improved capital ratios reflected the company's
strong capital position. However, the mixed credit metrics were the
FIRST NIAGARA (FNFG): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis
NORTHERN TRUST (NTRS): Free Stock Analysis
To read this article on Zacks.com click here.
Northern Trust Corporation
), reported its second-quarter results below the Zacks Consensus
Estimate. On a sequential basis, the results were marked by higher
non-interest income and strong new business. Moreover, a decline in
non-interest expenses and improved credit quality were the
positives for the quarter. The fall in net interest income acted as
KeyCorp's extensive capital deployment activities will reinforce
investors' confidence in the stock. Moreover, the company's
business restructuring actions will likely continue to propel its
credit quality and liquidity.
Also, the company's strong capital position will facilitate
acquisitions in the near term. However, the prevailing unfavorable
economic scenario and the shrinking core portfolio of the company,
fueled by weak demand and high competition, are the major concerns.
KeyCorp currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Also, based on the fundamentals, we
maintain a long-term Neutral recommendation on the shares.