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Modest Loan Growth, IB to Support KeyCorp (KEY) Q3 Earnings
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KeyCorp (KEY - Free Report) is scheduled to announce third-quarter 2021 results on Oct 21, before the opening bell. Unlike the past quarters, the overall lending scenario improved somewhat in the to-be-reported quarter.
Per the latest Federal Reserve data, consumer loans, which account for nearly 30% of KeyCorp’s average loan balance, recorded a rise. This seems to be driven by a rise in consumer confidence as economic growth remains robust. On the other hand, commercial and industrial loan balances (accounting for almost 50% of its average loan balances) continued to witness a decline.
The Zacks Consensus Estimate for average earning assets of $165.3 billion suggests a 1.6% rise sequentially.
Additionally, steepening of the yield curve during the quarter and modest improvement in the lending scenario are likely to have offered some support to KeyCorp’s net interest income (NII) despite the near-zero interest rate environment. The consensus estimate for NII (on a fully tax-equivalent basis) of $1.02 billion indicates stable performance sequentially.
Other Factors at Play
Non-Interest Income: Similar to the past few quarters, deal-making continued at a solid pace in the third quarter on the back of resumption of normal business activities, excess liquidity levels, companies’ appetite for strengthening scale and market share, lower interest rates and solid economic recovery. The IPO markets witnessed similar momentum, which along with a steady rise in follow-up equity issuances, is likely to have offered support to equity underwriting fees. Bond issuance volumes were also modest. These are expected to have aided KeyCorp’s investment banking (IB) business.
On the other hand, trading business continued to normalize in the third quarter. Thus, the consensus estimate for KeyCorp’s IB and capital markets income of $223 million indicates an increase of 2.8% sequentially.
Steadily rising deposit balance during the quarter is expected to have supported the company’s service charge on deposits. The consensus estimate of $85 million indicates a 2.4% improvement on a sequential basis.
The Zacks Consensus Estimate for trust and investment services income of $134 million suggests a modest rise from the prior quarter. On the other hand, the consensus estimate for cards and payments income of $111 million indicates a 1.8% fall from the quarter-ago level.
Low mortgage rates continued to fuel demand for mortgages during the quarter leading to a rise in new originations. Yet, the origination boom in 2020 driven by the historically low rates makes comparison tough for the quarter. A gradual slowdown in refinancing activities and faster prepayments also weighed on the mortgage banking business. The Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $22.5 million and $36 million, suggesting a decrease of 13.5% and 18.2%, respectively, from the prior quarter.
Thus, the consensus estimate for total non-interest income of $752 million indicates a marginal rise on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses helped it save costs in the past. The trend is expected to have continued in the third quarter.
As the demand for digital banking services continues to rise, KeyCorp identified nearly 70 branches for consolidation by 2021-end. While 54 branches were already consolidated in the second quarter, 14 more branch closures had been planned for the third quarter. This is also likely to have resulted in lower costs.
Asset Quality: Driven by improving macroeconomic backdrop and stable credit market conditions, KeyCorp is likely to have released reserves in the third quarter (similar to the prior quarter). This might have supported the company’s earnings in the to-be-reported quarter.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for KeyCorp this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for KeyCorp is +0.56%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for earnings of 57 cents per share has been revised 3.6% north over the past 30 days. The figure suggests a 39% rise from the prior-year quarter’s reported number. The consensus estimate for revenues of $1.76 billion indicates 4.9% growth.
Other Banks Worth Considering
Here are some other bank stocks that you may want to take a look as these have the right combination of elements to post an earnings beat this earnings season.
The Earnings ESP for Citizens Financial Group, Inc. (CFG - Free Report) is +1.15% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly numbers on Oct 20.
Bank OZK (OZK - Free Report) is slated to report quarterly results on Oct 21. The company currently has an Earnings ESP of +6.70% and a Zacks Rank of 2 (Buy).
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Modest Loan Growth, IB to Support KeyCorp (KEY) Q3 Earnings
KeyCorp (KEY - Free Report) is scheduled to announce third-quarter 2021 results on Oct 21, before the opening bell. Unlike the past quarters, the overall lending scenario improved somewhat in the to-be-reported quarter.
Per the latest Federal Reserve data, consumer loans, which account for nearly 30% of KeyCorp’s average loan balance, recorded a rise. This seems to be driven by a rise in consumer confidence as economic growth remains robust. On the other hand, commercial and industrial loan balances (accounting for almost 50% of its average loan balances) continued to witness a decline.
The Zacks Consensus Estimate for average earning assets of $165.3 billion suggests a 1.6% rise sequentially.
Additionally, steepening of the yield curve during the quarter and modest improvement in the lending scenario are likely to have offered some support to KeyCorp’s net interest income (NII) despite the near-zero interest rate environment. The consensus estimate for NII (on a fully tax-equivalent basis) of $1.02 billion indicates stable performance sequentially.
Other Factors at Play
Non-Interest Income: Similar to the past few quarters, deal-making continued at a solid pace in the third quarter on the back of resumption of normal business activities, excess liquidity levels, companies’ appetite for strengthening scale and market share, lower interest rates and solid economic recovery. The IPO markets witnessed similar momentum, which along with a steady rise in follow-up equity issuances, is likely to have offered support to equity underwriting fees. Bond issuance volumes were also modest. These are expected to have aided KeyCorp’s investment banking (IB) business.
On the other hand, trading business continued to normalize in the third quarter. Thus, the consensus estimate for KeyCorp’s IB and capital markets income of $223 million indicates an increase of 2.8% sequentially.
Steadily rising deposit balance during the quarter is expected to have supported the company’s service charge on deposits. The consensus estimate of $85 million indicates a 2.4% improvement on a sequential basis.
The Zacks Consensus Estimate for trust and investment services income of $134 million suggests a modest rise from the prior quarter. On the other hand, the consensus estimate for cards and payments income of $111 million indicates a 1.8% fall from the quarter-ago level.
Low mortgage rates continued to fuel demand for mortgages during the quarter leading to a rise in new originations. Yet, the origination boom in 2020 driven by the historically low rates makes comparison tough for the quarter. A gradual slowdown in refinancing activities and faster prepayments also weighed on the mortgage banking business. The Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $22.5 million and $36 million, suggesting a decrease of 13.5% and 18.2%, respectively, from the prior quarter.
Thus, the consensus estimate for total non-interest income of $752 million indicates a marginal rise on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses helped it save costs in the past. The trend is expected to have continued in the third quarter.
As the demand for digital banking services continues to rise, KeyCorp identified nearly 70 branches for consolidation by 2021-end. While 54 branches were already consolidated in the second quarter, 14 more branch closures had been planned for the third quarter. This is also likely to have resulted in lower costs.
Asset Quality: Driven by improving macroeconomic backdrop and stable credit market conditions, KeyCorp is likely to have released reserves in the third quarter (similar to the prior quarter). This might have supported the company’s earnings in the to-be-reported quarter.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for KeyCorp this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for KeyCorp is +0.56%.
Zacks Rank: The company currently carries a Zacks Rank #3.
KeyCorp Price and EPS Surprise
KeyCorp price-eps-surprise | KeyCorp Quote
The Zacks Consensus Estimate for earnings of 57 cents per share has been revised 3.6% north over the past 30 days. The figure suggests a 39% rise from the prior-year quarter’s reported number. The consensus estimate for revenues of $1.76 billion indicates 4.9% growth.
Other Banks Worth Considering
Here are some other bank stocks that you may want to take a look as these have the right combination of elements to post an earnings beat this earnings season.
The Earnings ESP for Citizens Financial Group, Inc. (CFG - Free Report) is +1.15% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly numbers on Oct 20.
BankUnited (BKU - Free Report) is scheduled to release earnings on Oct 21. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.90%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank OZK (OZK - Free Report) is slated to report quarterly results on Oct 21. The company currently has an Earnings ESP of +6.70% and a Zacks Rank of 2 (Buy).