KeyCorp’s ( KEY Quick Quote KEY - Free Report) rising loan balance is anticipated to continue supporting its financials in the quarters ahead. Moreover, a solid liquidity position, along with the impressive capital-deployment activities, bodes well for the company. However, elevated expenses and low interest rates remain near-term woes.
Looking at the fundamentals, the company’s deposits and loans witnessed a compound annual growth rate (CAGR) of 8.7% and 5.4%, respectively, over the last four years (2017-2020). Additionally, while KeyCorp’s tax-equivalent revenues declined in 2019, the same witnessed a CAGR of 2.1% over the four-year period ended 2020. Both loans and deposits are likely to keep gradually rising in the near term. This, along with management’s efforts to boost fee income and opportunistic acquisitions, will likely continue supporting revenues in the days to come.
KeyCorp’s balance-sheet position is solid. As of Dec 31, 2020, the company had a total debt of$14.7 billion, and cash and due balance of $1.1 billion. Its times interest earned ratio of 6.1 at the end of fourth-quarter 2020 improved sequentially. Though KeyCorp’s debt to total capital of 43.3% at the end of the fourth quarter increased sequentially, its earnings strength reflects that it is able to continue meeting debt obligations, even if the economic situation worsens.
Also, the company’s capital-deployment plans look encouraging. Following the Federal Reserve’s removal of some restrictions on the same, KeyCorp announced a new share-repurchase program of up to $900 million shares worth of shares for first three quarters of 2021, while maintaining its quarterly dividend of 18.5 cents per share. Thus, given the company’s solid capital base and liquidity positions, its efficient capital-deployment activities seem sustainable.
Furthermore, analysts seem to have a bullish stance for the stock. The Zacks Consensus Estimate for 2021 and 2022 earnings moved 3.3% and 2.2% upward, respectively, over the past 30 days.
Shares of this Zacks Rank #3 (Hold) company have rallied 60.9%, outperforming the
industry’s 56% gain over the past six months.
However, KeyCorp has been witnessing a contraction in the net interest margin (NIM) for the past few years mainly due to lower interest rates.Despite decent loan demand, NIM is expected to remain under pressure in the near term due to the Fed’s accommodative policy stance and no chance of rise in interest rates anytime soon.
Also, the company’s mounting expenses on account of investments in franchise and technological upgrades, along with its inorganic growth strategy, might deter bottom-line growth in the upcoming period. Operating expenses witnessed a CAGR of 7.7% over the six-year period ended 2020, despite the company’s $200-million cost-reduction program.
Stocks Worth Considering
A few better-ranked stocks from the finance space are mentioned below:
Capstar Financial Holdings Inc ( CSTR Quick Quote CSTR - Free Report) has recorded an upward earnings estimate revision of 5.6% for 2021 over the past 30 days. Its shares have surged 70.2% over the past six months. Currently, it sports a Zacks Rank #1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here Citizens Community Bancorp, Inc.’s ( CZWI Quick Quote CZWI - Free Report) ongoing-year earnings estimate has moved 7.6% north over the past 30 days. The company’s shares have appreciated 91% in six months’ time. At present, it flaunts a Zacks Rank of 1. Atlas Corp. ( ATCO Quick Quote ATCO - Free Report) has witnessed a marginal upward earnings estimate revision for the current year in the past 30 days. It currently sports a Zacks Rank of 1. The stock has rallied 51.3% over the past six months. These Stocks Are Poised to Soar Past the Pandemic
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