KEYCORP FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

KeyCorp’s Solid Financial Performance in Q1 2025

KeyCorp, a major U.S. financial services company, has reported strong financial results for the first quarter of 2025. The company’s net income from continuing operations attributable to common shareholders was $370 million, or $0.33 per diluted share. This represents a solid performance that builds on the company’s long-term strategic priorities.

Relationship-Focused Business Model Pays Off KeyCorp’s relationship-based business model and commitment to serving as the primary bank for its clients continues to serve the company well. This is evidenced by a 4% year-over-year increase in client deposits and 2% net new relationship household growth. The company’s Assets Under Management also grew to $61.1 billion, as new client enrollments added to the platform.

Maintaining Risk Discipline KeyCorp’s focus on maintaining risk discipline has positioned the company to perform well through various economic cycles. Net charge-offs remain at the low-end of the company’s long-term target range, and nonperforming loans are down 9% quarter-over-quarter. This disciplined approach helps the company navigate uncertain times.

Strong Performance in Capital Markets Activities Investment banking and debt placement fees had a record first quarter, driven by strong syndication and debt capital markets activity. This demonstrates the company’s ability to capitalize on opportunities in the capital markets to generate additional revenue streams.

Capital Position Remains Robust KeyCorp ended the first quarter with a Common Equity Tier 1 ratio of 11.8%, up approximately 150 basis points year-over-year. This strong capital position allows the company to continue supporting its existing and prospective clients, while also providing flexibility for future growth and shareholder returns.

Outlook for 2025 Looking ahead, KeyCorp provided guidance for the full year 2025 compared to 2024. The company expects average loans to decline by 2-5%, while ending loans are expected to be flat. Net interest income is projected to increase by around 20%, and adjusted noninterest income is expected to grow by 5% or more. Adjusted noninterest expense is anticipated to rise by 3-5%, and the net charge-off ratio is expected to be in the 40-45 basis point range. The effective tax rate is estimated to be 21-22%, with a taxable-equivalent effective rate of 23-24%.

Segment Performance KeyCorp’s two main business segments, Consumer Bank and Commercial Bank, both contributed to the strong quarterly results.

The Consumer Bank reported net income of $118 million, up from $41 million in the year-ago quarter. Taxable-equivalent net interest income increased by 21.8%, driven by higher deposit balances and lower funding costs. Provision for credit losses increased, reflecting changes in the economic outlook and higher net charge-offs.

The Commercial Bank reported net income of $321 million, compared to $205 million in the first quarter of 2024. Taxable-equivalent net interest income grew by $137 million, benefiting from the repositioning of the investment portfolio and an improved funding mix. Provision for credit losses decreased, as asset quality migration slowed, though the impact of economic uncertainty and higher charge-offs partially offset this.

Loan Portfolio and Asset Quality KeyCorp’s total loans outstanding from continuing operations were $104.8 billion at the end of the first quarter, up slightly from $104.3 billion at the end of 2024. The commercial loan portfolio grew by 1.7%, primarily driven by increases in commercial and industrial loans. The consumer loan portfolio declined by 2.1%, reflecting the intentional run-off of lower-yielding loans.

Asset quality metrics remained strong, with net charge-offs at the low-end of the company’s target range and nonperforming loans down 9% quarter-over-quarter. KeyCorp’s commercial real estate portfolio is well-diversified, with a focus on stable, recurring cash flows and adequate reserves to support the balance sheet through economic cycles.

Funding and Liquidity KeyCorp’s highly diversified deposit base, which totaled $150.7 billion at the end of the quarter, is the primary source of funding. Uninsured deposits represented 43% of total deposits, with a portion of these deposits collateralized by government-backed securities.

The company’s liquidity position remains strong, with a liquid asset portfolio that exceeds the amount estimated necessary to manage through an adverse liquidity event. KeyCorp maintains a Contingency Funding Plan and various liquidity programs to ensure it can access funding in a timely manner, even under stressed conditions.

Capital Management and Shareholder Returns KeyCorp’s capital levels remain robust, with all regulatory capital ratios well above the required minimums. The company’s Common Equity Tier 1 ratio of 11.8% provides ample capacity to support organic growth, pay dividends, and execute on its $1 billion share repurchase program authorized in the first quarter.

During the quarter, KeyCorp paid a quarterly dividend of $0.205 per common share. The company also announced plans to commence share repurchases in the second half of 2025, with the pace and magnitude dependent on various factors, including market conditions and regulatory requirements.

Conclusion KeyCorp’s solid first-quarter performance demonstrates the strength of its relationship-based business model, disciplined risk management, and diversified revenue streams. The company’s strong capital position and liquidity profile position it well to navigate the current economic environment and continue supporting its clients’ needs, while also delivering value to shareholders through dividends and share repurchases. With a positive outlook for 2025, KeyCorp appears poised to build on its recent successes.