On Jun 13, 2013, we reiterated our long-term recommendation on
) at Neutral. Our decision rests on its continuous capital
deployment activities, strong balance sheet and solid
first-quarter 2013 earnings. However, we remain concerned about
the persistent slow economic recovery and a stringent regulatory
Why the Neutral Stance?
KeyCorp's first-quarter adjusted earnings came in at 22 cents per
share. This was marginally ahead of the Zacks Consensus Estimate
and the year-ago earnings of 20 cents. Results were driven by a
rise in net interest income and almost stable operating expenses,
partially offset by a fall in fee income. Moreover, continued
improvement in asset quality and strong capital ratios were the
other highlights for the quarter.
Following the earnings release, the Zacks Consensus Estimate went
down by 1.1% to 86 cents per share over the last 60 days.
However, for 2014, the Zacks Consensus Estimate remained stable
at 97 cents over the same time frame. The company currently has a
Zacks Rank #3 (Hold).
On May 16, 2013, KeyCorp announced a dividend hike of 10% to 5.5
cents per share, following the approval of its capital plan by
the Federal Reserve. Alongside, the company announced a $426
million share repurchase program to be executed by Mar 2014.
Moreover, management at KeyCorp chalked out an expense reduction
program with an aim to rationalize the cost structure. The
company intends to reduce its expenses by $150-$200 million by
the end of 2013.
Further, KeyCorp maintains a sound capital position along with an
improving credit quality. All these factors are expected to fuel
the company's growth going forward.
On the flip side, pressure on NIM remains a primary concern for
KeyCorp. Also, 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.
Additionally, the sluggish economic recovery and stringent
regulatory landscape could negatively impact the company and its
financials going forward.
Other Banks to Consider
Some better performing banks include
Enterprise Financial Services Corp
Old Second Bancorp Inc
Tower Financial Corporation
). All these carry a Zacks Rank #1 (Strong Buy).
ENTERPRISE FINL (EFSC): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
OLD SECOND BCP (OSBC): Free Stock Analysis
TOWER FINANCIAL (TOFC): Free Stock Analysis
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