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KeyCorp (KEY) Q4 Earnings Beat, Revenues & Expenses Rise Y/Y

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KeyCorp’s (KEY - Free Report) fourth-quarter 2020 earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Also, the figure was 24.4% higher than the prior-year quarter number.

Results for the reported quarter benefited from a rise in revenues, robust loan and deposit balances, and drastically lower provisions. However, lower rates and a rise in operating expenses were the undermining factors.

Net income from continuing operations attributable to common shareholders was $549 million, up 25.1% year over year.

For 2020, earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.14 per share. However, the figure was 21.7% lower than the prior year’s reported number. Net income from continuing operations was $1.22 billion, down 24.1% year over year.

Revenues Improve & Expenses Increase

Total revenues in the reported quarter grew 12.7% year over year to $1.84 billion. Also, the figure surpassed the Zacks Consensus Estimate of $1.71 billion.

For the year, total revenues of $6.69 billion increased 5% year over year. The figure surpassed the Zacks Consensus Estimate of $6.58 billion.

Quarterly tax-equivalent net interest income increased 5.7% year over year to $1.04 billion. The rise was attributed to higher earning asset balances and loan fees, partially offset by lower net interest margin (NIM).

Taxable-equivalent NIM from continuing operations decreased 28 basis points (bps) year over year to 2.70%.

Non-interest income was $802 million, increasing 23.2% year over year. The rise was due to an increase in almost all fee income components except for service charges on deposit accounts, corporate services income and corporate-owned life insurance income.

Non-interest expenses rose 15.1% from the prior year to $1.13 billion. The increase was due to a rise in all cost components except for net occupancy expenses and costs related to intangible asset amortization.

At the fourth quarter end, average total deposits were $135.72 billion, up marginally from the prior quarter. Average total loans were $101.71 billion, down 3.1% on a sequential basis.

Credit Quality: Mixed Bag

Net loan charge-offs, as a percentage of average loans, increased 11 bps year over year to 0.53%. Allowance for loan and lease losses was $1.63 billion, surging 80.7%. Further, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.92%, up 17 bps.

However, provision for credit losses fell 81.7% year over year to $20 million.

Capital Ratios Mixed

KeyCorp's tangible common equity to tangible assets ratio was 7.9% as of Dec 31, 2020, down from 8.6% in the corresponding period of 2019. Also, Tier 1 risk-based capital ratio was 11.1%, up from 10.9% in the prior-year quarter.

Our Take

Solid loans and deposit balances along with a focus on fee income are likely to continue supporting KeyCorp’s revenues amid low interest rates. However, deteriorating asset quality and economic slowdown remain near-term concerns.

KeyCorp Price, Consensus and EPS Surprise

 

KeyCorp Price, Consensus and EPS Surprise

KeyCorp price-consensus-eps-surprise-chart | KeyCorp Quote

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

Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.

Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2020 adjusted earnings per share of 96 cents were 5% lower than the prior-year quarter’s level. The Zacks Consensus Estimate for earnings was 93 cents.

Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.

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