Risk-Reward Balances KeyCorp - Analyst Blog


Shutterstock photo

On Sep 10, 2013, we reiterated our long-term recommendation on KeyCorp. ( KEY ) at Neutral. Our decision was based on the company's robust second-quarter earnings and strong balance sheet position. However, sluggish economic recovery and a stringent regulatory landscape remain causes of concern.

Why Neutral?

KeyCorp's second-quarter adjusted earnings outpaced the Zacks Consensus Estimate. Results benefited from a rise in net interest income, partially offset by higher operating expenses and a fall in fee income. Moreover, continued improvement in asset quality and strong capital ratios were the other highlights for the quarter.

We view KeyCorp as an asset for yield-seeking investors. The company has been meaningfully deploying capital to boost investors' confidence. Further, KeyCorp has chalked out an expense reduction program with the target of generating cost savings of $200 million by the end of 2013.

The Zacks Consensus Estimate for 2013 increased by a penny to 88 cents per share over the last 60 days. For 2014, the Zacks Consensus Estimate advanced 3.1% to $1.00 per share over the same time frame. KeyCorp currently carries a Zacks Rank #3 (Hold).  

On the flip side, pressure on net interest margin remains a major concern for KeyCorp. Additionally, sluggish economic recovery and stringent regulations could negatively impact the company's financials going forward. Further, a more rigid capital requirement will likely hamper the company's flexibility with respect to its business investments.

Other Banks to Consider

Some better-performing banks include PrivateBancorp, Inc. ( PVTB ), First Interstate Bancsystem Inc. ( FIBK ) and East West Bancorp, Inc. ( EWBC ). All these stocks carry a Zacks Rank #1 (Strong Buy).

EAST WEST BC (EWBC): Free Stock Analysis Report

FIRST INTST MT (FIBK): Free Stock Analysis Report

KEYCORP NEW (KEY): Free Stock Analysis Report

PRIVATEBANCORP (PVTB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: EWBC , FIBK , KEY , PVTB

More from Zacks.com




Equity Research
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com