KeyCorp (KEY)

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KeyCorp (KEY)

June 11, 2013 11:30 am ET


Beth E. Mooney - Chairman, Chief Executive Officer, President, Member of Executive Council, Chairman of Executive Committee and Chairman of Enterprise Risk Management Committee

Christopher Marrott Gorman - Vice Chairman of Keybank National Association and President of Key Corporate Bank


Ken A. Zerbe - Morgan Stanley, Research Division


Ken A. Zerbe - Morgan Stanley, Research Division

All right. Welcome, everyone. Thanks for coming. Our next presentation is KeyCorp. We have Beth Mooney, Chairman, Chief Executive Officer from Key. And with that, I'd just kick right over to Beth.

Beth E. Mooney

Thank you, Ken. We appreciate the opportunity to be a part of your conference again this year. And joining me on stage, as well as with Ken, obviously, is -- I'm joined by Chris Gorman, who is the present of our Corporate Bank, as well as our new Chief Financial Officer, Don Kimble, who many of you know. Don officially joined us 1 week ago but he brings 25 years of experience in the financial services industry. And I have to say, we're extremely proud to have him on our team. And also in the audience today is Vern Patterson, the Head of our Investor Relations.

Turning to Slide 2 is our forward-looking disclosure statement and our non-GAAP financial measures. It will cover our presentation today, as well as the Q&A session of our remarks.

But I'd like to start on Slide 3, if I may. Over the past several years, we've made significant progress in repositioning our businesses, de-risking our company and pursuing a strategy that not only differentiates us in the market price, but also enables us to grow and increase shareholder value. Specifically, we've done several things. We've become a core-funded company. We significantly improved our credit quality, and we sharpened our focus around targeted client segments, including industry verticals within our Corporate Bank, which you'll hear more about from Chris Gorman when he gives his remarks.

We also have a clear focus on acquiring new clients and expanding existing relationships. And we've seen the inflection point in our loan portfolios growth, as well as growth in our fee-based businesses. We've made investments in our geographic footprint, payment product offering and our human capital. The result has been improved profitability and a stronger growth trajectory.

As we focus forward, we are committed to operating and capital efficiency. This includes improving our efficiency ratio by growing revenue and reducing and variabilizing our cost structure. And I'm going to comment more on that shortly, and I have a slide in our presentation that will cover our efficiency initiative. And we're going to continue to be strong stewards of our capital and focus on maintaining our revenue momentum through executing on our relationship-based strategy.

Moving now to Slide 4, in addition to the execution of our strategies, we also actively manage our portfolio of businesses. In some cases, like payments, online and mobile, we are making investments to ensure that we can fulfill client needs with great products and in the channels that they want to use them. For example, we recently rolled out our new mobile deposit remote capture product, and we are currently developing more enhanced mobile commercial card capabilities. We're also looking for ways to serve our existing clients and acquire new ones. As you know, in 2012, we reentered the credit card business as a self-issuer by acquiring a portfolio of current and former KeyBanc clients. And in the spirit of operating efficiently, we did this by entering a third-party arrangement for back-office processing to drive more favorable client economics. We believe that owning the client creates the opportunity for upside. In fact, new card production is up 92% in the first quarter compared to the prior year.

Last year, we also acquired 37 branches in Western New York, and that acquisition continues to go well as we are exceeding all of our client and employee metrics at this time. And sometimes, evaluating our portfolio of businesses means it's time to exit as we did with our recently announced sale of Victory Capital Management. This is a business that, over the last several years, has repositioned itself to become an advisor-driven institutional money manager. As such, there is very little connection to the rest of Key and to our relationship strategy.

Given the prospect of continuing to make needed investments in that platform, we determined that it wasn't the best use of our capital and that we're better owners for the businesses than Key. We expect this transaction to close in the third quarter.

And our business also need constant fine-tuning. For example, we take a hard look at our physical network, given the low interest rate environment and the accelerating change in customer presences and customer behavior. And as previously announced, we will be consolidating, relocating or closing approximately 5% of our branch network, as well as rationalizing our ATM network and enhancing our alternative channels.

And lastly, we've continued to build out a commercial real estate business. We recently announced our acquisition of commercial mortgage servicing business from Bank of America and Berkadia. These moves position us to be the third largest servicer of commercial and multifamily loans and the fifth largest special servicer of CMBS in the United States.

And at this time, I'm going to ask Chris Gorman to further discuss these enhancements to our commercial real estate platform, as well as how he is actively managing the Corporate Bank and share with you how our unique value proposition translates into real opportunities for Key and for its clients. Chris?

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