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Subdued NII & Fee Income to Hurt KeyCorp (KEY) Q1 Earnings
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KeyCorp (KEY - Free Report) is scheduled to report first-quarter 2022 results on Apr 21, before the opening bell. The overall lending scenario was impressive in the to-be-reported quarter.
Per the Federal Reserve’s latest data, consumer loans, which account for roughly 30% of KeyCorp’s average loan balances, recorded a rise in the quarter. Also, commercial and industrial loan balances (accounting for almost 50% of KEY’s average loan balances) witnessed an improvement.
The Zacks Consensus Estimate for average earning assets is pegged at $169.7 billion, suggesting a marginal rise on a sequential basis.
Though the Federal Reserve increased the interest rates by 25 basis points (bps) in mid-March, there is likely to be very less impact of the same on KeyCorp’s net interest margin (NIM) and net interest income (NII) in the quarter. Yet, robust loan growth is expected to have offered some support.
The consensus estimate for NII (on a fully tax-equivalent basis) is $1.01 billion, reflecting a decline of 2.4% from the previous quarter’s reported number.
Other Factors at Play
Non-Interest Income: Unlike the past several quarters, deal-making came to a grinding halt in March as the ongoing Russia-Ukraine conflict and raging inflation numbers weighed on business sentiments globally. Similarly, the IPOs and follow-up equity issuances dried up as equity market performance turned disappointing. On the other hand, bond issuances are likely to have been decent. Thus, KeyCorp’s investment banking (IB) business performance is expected to have been subdued in the to-be-reported quarter.
Yet, heightened volatility and client activity in the capital markets seem to have had a positive impact on trading activities in the quarter. The consensus estimate for KeyCorp’s IB and capital markets income of $206 million indicates a 36.2% plunge sequentially.
Also, unlike the last several quarters, deposit balance is not expected to have grown much during the first quarter. This is likely to have hurt revenues from KEY’s service charges on deposit accounts. The Zacks Consensus Estimate of $87 million for the same implies a 3.3% decline on a sequential basis.
Similarly, rising mortgage rates and inflation weighed on mortgage originations and refinancing activities during the quarter, hurting KeyCorp’s mortgage banking business. Thus, the Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $21.33 million and $45 million, suggesting a sequential decrease of 14.7% and 6.3%, respectively.
Further, rising inflation and uncertainty over economic growth, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. Thus, this might have negatively impacted KEY’s card business. The Zacks Consensus Estimate for cards and payments income of $81 million suggests a 5.8% fall from the prior quarter.
The Zacks Consensus Estimate for trust and investment services income of $132 million suggests a 2.2% decline from the prior quarter.
The consensus estimate for KeyCorp’s total non-interest income of $738 million indicates a decrease of 18.8% on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses have helped it save costs in the past. Nonetheless, as the company continues to invest in franchise, technological upgrades and inorganic growth strategy, expenses are expected to have witnessed an uptrend in the first quarter.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, KeyCorp is expected to have built reserves in the first quarter.
What the Zacks Model Predicts
Our proven model does not predict an earnings beat for KeyCorp this time around. This is because it does not have 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 -2.08%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s first-quarter earnings is pegged at 48 cents per share, which has been revised 2% lower over the past seven days. The figure suggests a 21.3% fall from the prior-year quarter’s reported number.
The consensus estimate for sales of $1.76 billion indicates a year-over-year rise of 0.7%.
Bank Stocks Worth Considering
Here are a few bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Associated Banc-Corp (ASB - Free Report) is +0.81% and it carries a Zacks Rank #2 (Buy), at present. The company is slated to report first-quarter 2022 results on Apr 21.
Over the past seven days, ASB’s Zacks Consensus Estimate for quarterly earnings has moved 2.6% lower.
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Subdued NII & Fee Income to Hurt KeyCorp (KEY) Q1 Earnings
KeyCorp (KEY - Free Report) is scheduled to report first-quarter 2022 results on Apr 21, before the opening bell. The overall lending scenario was impressive in the to-be-reported quarter.
Per the Federal Reserve’s latest data, consumer loans, which account for roughly 30% of KeyCorp’s average loan balances, recorded a rise in the quarter. Also, commercial and industrial loan balances (accounting for almost 50% of KEY’s average loan balances) witnessed an improvement.
The Zacks Consensus Estimate for average earning assets is pegged at $169.7 billion, suggesting a marginal rise on a sequential basis.
Though the Federal Reserve increased the interest rates by 25 basis points (bps) in mid-March, there is likely to be very less impact of the same on KeyCorp’s net interest margin (NIM) and net interest income (NII) in the quarter. Yet, robust loan growth is expected to have offered some support.
The consensus estimate for NII (on a fully tax-equivalent basis) is $1.01 billion, reflecting a decline of 2.4% from the previous quarter’s reported number.
Other Factors at Play
Non-Interest Income: Unlike the past several quarters, deal-making came to a grinding halt in March as the ongoing Russia-Ukraine conflict and raging inflation numbers weighed on business sentiments globally. Similarly, the IPOs and follow-up equity issuances dried up as equity market performance turned disappointing. On the other hand, bond issuances are likely to have been decent. Thus, KeyCorp’s investment banking (IB) business performance is expected to have been subdued in the to-be-reported quarter.
Yet, heightened volatility and client activity in the capital markets seem to have had a positive impact on trading activities in the quarter. The consensus estimate for KeyCorp’s IB and capital markets income of $206 million indicates a 36.2% plunge sequentially.
Also, unlike the last several quarters, deposit balance is not expected to have grown much during the first quarter. This is likely to have hurt revenues from KEY’s service charges on deposit accounts. The Zacks Consensus Estimate of $87 million for the same implies a 3.3% decline on a sequential basis.
Similarly, rising mortgage rates and inflation weighed on mortgage originations and refinancing activities during the quarter, hurting KeyCorp’s mortgage banking business. Thus, the Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $21.33 million and $45 million, suggesting a sequential decrease of 14.7% and 6.3%, respectively.
Further, rising inflation and uncertainty over economic growth, mainly due to the ongoing geopolitical concerns, are likely to have hurt consumer sentiments. Thus, this might have negatively impacted KEY’s card business. The Zacks Consensus Estimate for cards and payments income of $81 million suggests a 5.8% fall from the prior quarter.
The Zacks Consensus Estimate for trust and investment services income of $132 million suggests a 2.2% decline from the prior quarter.
The consensus estimate for KeyCorp’s total non-interest income of $738 million indicates a decrease of 18.8% on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses have helped it save costs in the past. Nonetheless, as the company continues to invest in franchise, technological upgrades and inorganic growth strategy, expenses are expected to have witnessed an uptrend in the first quarter.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, KeyCorp is expected to have built reserves in the first quarter.
What the Zacks Model Predicts
Our proven model does not predict an earnings beat for KeyCorp this time around. This is because it does not have 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 -2.08%.
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 the company’s first-quarter earnings is pegged at 48 cents per share, which has been revised 2% lower over the past seven days. The figure suggests a 21.3% fall from the prior-year quarter’s reported number.
The consensus estimate for sales of $1.76 billion indicates a year-over-year rise of 0.7%.
Bank Stocks Worth Considering
Here are a few bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Associated Banc-Corp (ASB - Free Report) is +0.81% and it carries a Zacks Rank #2 (Buy), at present. The company is slated to report first-quarter 2022 results on Apr 21.
Over the past seven days, ASB’s Zacks Consensus Estimate for quarterly earnings has moved 2.6% lower.
M&T Bank Corporation (MTB - Free Report) is scheduled to release first-quarter 2022 earnings on Apr 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +5.43%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MTB’s quarterly earnings estimates have moved marginally lower over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.