KeyCorp’s (KEY - Free Report) third-quarter 2021 earnings of 65 cents per share handily surpassed the Zacks Consensus Estimate of 57 cents. The bottom line improved 58.5% from the prior-year quarter.
The stock rallied 1.1% during the pre-market trading, reflecting investors’ optimism over the better-than-expected results. The full-day trading session will display a clearer picture.
Results benefited from a rise in non-interest income, net interest income, and provision benefit. However, lower rates, a decline in loan balance and an increase in operating expenses were the undermining factors.
Net income from continuing operations attributable to common shareholders was $616 million, up 55.2% year over year.
Revenues Improve & Expenses Rise
Total revenues grew 8% year over year to $1.82 billion. The top line beat the Zacks Consensus Estimate of $1.76 billion.
Net interest income (on tax-equivalent basis) rose 1.9% to $1.03 billion. The increase was driven by higher earning asset balances and lower interest-bearing deposit costs, which were partly offset by lower net interest margin (NIM).
Taxable-equivalent NIM from continuing operations contracted 15 basis points (bps) to 2.47%.
Non-interest income was $797 million, growing 17%. The rise was mainly driven by increase in investment banking and debt placement fees, commercial mortgage servicing fees, service charges on deposit accounts, and corporate service income.
Non-interest expenses were up 7.2% to $1.11 billion. The increase was mainly due to higher personnel costs and marketing expenses.
At the third-quarter end, average total deposits were $146.9 billion, up 1.8% from the prior quarter. Average total loans were $100.1 billion, down modestly.
Credit Quality Improves
Net loan charge-offs, as a percentage of average loans, decreased 38 bps year over year to 0.11%. Allowance for loan and lease losses was $1.08 billion, down 37.3%.
Provision for credit losses was a net benefit of $107 million against a provision of $160 million in the prior-year quarter. Provision benefit was mainly due to $136 million reserve release, which was largely driven by continued improvement in the economic outlook.
Non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.61%, down 36 bps.
Capital Ratios Mixed
KeyCorp's tangible common equity to tangible assets ratio was 7.0% as of Sep 30, 2021, down from 7.8% in the corresponding period of 2020. Tier 1 risk-based capital ratio was 10.9%, on par with the prior-year quarter level.
Share Repurchase Update
During the quarter, KeyCorp repurchased shares worth $593 million. Of the total buyback, $468 million were related to the initial settlement of the accelerated share repurchase program and $125 million were purchased in the open market.
Our Take
Solid loans and deposit balances, along with a focus on fee income, are likely to continue supporting KeyCorp’s revenues. However, lower rates, and subdued demand for commercial and industrial loans are near-term concerns.
KeyCorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
State Street’s (STT - Free Report) third-quarter 2021 adjusted earnings of $2.00 per share outpaced the Zacks Consensus Estimate of $1.92. Also, the bottom line was 37.9% higher than the prior-year level.
Truist Financial’s (TFC - Free Report) third-quarter 2021 adjusted earnings of $1.42 per share easily surpassed the Zacks Consensus Estimate of $1.20. The bottom line jumped 46.4% from the prior-year quarter.
First Republic Bank delivered an earnings surprise of 4.4% in third-quarter 2021 on solid top-line strength. Earnings per share of $1.91 surpassed the Zacks Consensus Estimate of $1.83. The bottom line improved 18.6% from the year-ago quarter.
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KeyCorp’s (KEY - Free Report) third-quarter 2021 earnings of 65 cents per share handily surpassed the Zacks Consensus Estimate of 57 cents. The bottom line improved 58.5% from the prior-year quarter.
The stock rallied 1.1% during the pre-market trading, reflecting investors’ optimism over the better-than-expected results. The full-day trading session will display a clearer picture.
Results benefited from a rise in non-interest income, net interest income, and provision benefit. However, lower rates, a decline in loan balance and an increase in operating expenses were the undermining factors.
Net income from continuing operations attributable to common shareholders was $616 million, up 55.2% year over year.
Revenues Improve & Expenses Rise
Total revenues grew 8% year over year to $1.82 billion. The top line beat the Zacks Consensus Estimate of $1.76 billion.
Net interest income (on tax-equivalent basis) rose 1.9% to $1.03 billion. The increase was driven by higher earning asset balances and lower interest-bearing deposit costs, which were partly offset by lower net interest margin (NIM).
Taxable-equivalent NIM from continuing operations contracted 15 basis points (bps) to 2.47%.
Non-interest income was $797 million, growing 17%. The rise was mainly driven by increase in investment banking and debt placement fees, commercial mortgage servicing fees, service charges on deposit accounts, and corporate service income.
Non-interest expenses were up 7.2% to $1.11 billion. The increase was mainly due to higher personnel costs and marketing expenses.
At the third-quarter end, average total deposits were $146.9 billion, up 1.8% from the prior quarter. Average total loans were $100.1 billion, down modestly.
Credit Quality Improves
Net loan charge-offs, as a percentage of average loans, decreased 38 bps year over year to 0.11%. Allowance for loan and lease losses was $1.08 billion, down 37.3%.
Provision for credit losses was a net benefit of $107 million against a provision of $160 million in the prior-year quarter. Provision benefit was mainly due to $136 million reserve release, which was largely driven by continued improvement in the economic outlook.
Non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.61%, down 36 bps.
Capital Ratios Mixed
KeyCorp's tangible common equity to tangible assets ratio was 7.0% as of Sep 30, 2021, down from 7.8% in the corresponding period of 2020. Tier 1 risk-based capital ratio was 10.9%, on par with the prior-year quarter level.
Share Repurchase Update
During the quarter, KeyCorp repurchased shares worth $593 million. Of the total buyback, $468 million were related to the initial settlement of the accelerated share repurchase program and $125 million were purchased in the open market.
Our Take
Solid loans and deposit balances, along with a focus on fee income, are likely to continue supporting KeyCorp’s revenues. However, lower rates, and subdued demand for commercial and industrial loans are near-term concerns.
KeyCorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
State Street’s (STT - Free Report) third-quarter 2021 adjusted earnings of $2.00 per share outpaced the Zacks Consensus Estimate of $1.92. Also, the bottom line was 37.9% higher than the prior-year level.
Truist Financial’s (TFC - Free Report) third-quarter 2021 adjusted earnings of $1.42 per share easily surpassed the Zacks Consensus Estimate of $1.20. The bottom line jumped 46.4% from the prior-year quarter.
First Republic Bank delivered an earnings surprise of 4.4% in third-quarter 2021 on solid top-line strength. Earnings per share of $1.91 surpassed the Zacks Consensus Estimate of $1.83. The bottom line improved 18.6% from the year-ago quarter.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
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