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KeyCorp (KEY) Q1 Earnings & Revenues Beat Estimates, Costs Up

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KeyCorp’s (KEY - Free Report) first-quarter 2021 earnings of 61 cents per share easily surpassed the Zacks Consensus Estimate of 49 cents. Also, the bottom line improved substantially from 12 cents earned in the prior-year quarter.

Results benefited from a rise in revenues, robust loan and deposit balances, and provision benefit. However, lower rates and a rise in operating expenses were the headwinds.

Net income from continuing operations attributable to common shareholders was $591 million, up significantly from $118 million recorded in the year-ago quarter.

Revenues Improve & Expenses Increase

Total revenues grew 19.4% year over year to $1.75 billion. Also, the top line beat the Zacks Consensus Estimate of $1.70 billion.

Net interest income (on tax-equivalent basis) increased 2.3% year over year to $1.01 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 40 basis points (bps) year over year to 2.61%.

Non-interest income was $738 million, surging 54.7%. The upswing was driven by increase in almost all fee income components except for service charges on deposit accounts, other income and corporate-owned life insurance income.

Non-interest expenses rose 15% from the prior year to $1.07 billion. The increase was mainly due to higher personnel costs.

At the first-quarter end, average total deposits were $137.4 billion, up 1.5% from the prior quarter. Average total loans were $100.7 billion, down 1%.

Credit Quality: Mixed Bag

Net loan charge-offs, as a percentage of average loans, increased 11 bps year over year to 0.46%. Allowance for loan and lease losses was $1.44 billion, up 5.8%.

However, provision for credit losses was a net benefit of $93 million against a provision of $359 million in the prior-year quarter. Provision benefit was mainly due to $207 million reserve release, which was largely driven by expected improvement in the economic outlook.

Further, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.78%, down 4 bps.

Capital Ratios Mixed

KeyCorp's tangible common equity to tangible assets ratio was 7.5% as of Mar 31, 2021, down from 8.3% in the corresponding period of 2020. Also, Tier 1 risk-based capital ratio was 11.2%, up from 10.2% in the prior-year quarter.

Share Repurchase Update

During the quarter, KeyCorp repurchased shares worth $135 million.

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 soft loan demand remain major 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

First Republic Bank (FRC - Free Report) delivered an earnings surprise of 16.2% in first-quarter 2021 on solid top-line strength. Earnings per share of $1.79 surpassed the Zacks Consensus Estimate of $1.54. Additionally, the bottom line climbed 53.1% from the year-ago quarter.

Citizens Financial Group (CFG - Free Report) has reported first-quarter 2021 adjusted earnings per share of $1.41, surpassing the Zacks Consensus Estimate of 97 cents. Also, the bottom line compares favorably with the year-ago quarter’s 9 cents.

Zions Bancorporation’s (ZION - Free Report) first quarter 2021 net earnings per share of $1.90 surpassed the Zacks Consensus Estimate of $1.15. Also, the bottom line marks a significant improvement from 4 cents earned in the year-ago quarter.

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