We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
KeyCorp (KEY) Down as Q3 Earnings Lag Estimates on Provisions
Read MoreHide Full Article
KeyCorp’s (KEY - Free Report) third-quarter 2022 earnings from continuing operations of 55 cents per share lagged the Zacks Consensus Estimate of 59 cents. The bottom line also declined 15.4% from the prior-year quarter. Our estimate for the metric was 60 cents per share.
Shares of KEY lost almost 3% in pre-market market trading on lower-than-expected quarterly performance. Higher provisions and weak fee income performance weighed on investor sentiments.
A rise in net interest income (NII) driven by robust average loan growth and higher interest rates supported KEY’s results. Also, a slight decline in expenses was a tailwind. However, a fall in non-interest income due to a tough operating backdrop and higher provisions were the undermining factors.
Net income from continuing operations attributable to common shareholders was $513 million, down 16.7% year over year. We had projected the same to be $558.7 million.
Revenues Rise, Expenses Dip Modestly
Total revenues rose 3.5% year over year to $1.89 billion. The top line also marginally beat the Zacks Consensus Estimate of $1.88 billion. Our estimate for the metric was $1.86 billion.
NII (on a tax-equivalent basis) grew 17.4% to $1.2 billion. The increase was mainly driven by higher earning asset balances, a rise in rates and a favorable balance sheet mix. Our estimate for NII was same as the reported number.
Taxable-equivalent net interest margin from continuing operations increased 27 basis points (bps) to 2.74%.Our estimate for NIM was 2.71%.
Non-interest income was $683 million, falling 14.3%. The decline was mainly due to lower consumer mortgage income, cards and payments income, investment banking and debt placement fees and other income.
Non-interest expenses decreased marginally to $1.11 billion. We had projected the metric to be $1.10 billion.
At the third-quarter end, average total deposits were $144.2 billion, down 2.2% from the prior quarter. Average total loans were $114.4 billion, up 4.8%. The growth was primarily driven by robust strength in commercial loan portfolios.
Credit Quality Deteriorating
Net loan charge-offs, as a percentage of average loans, rose 5 bps year over year to 0.15%. Provision for credit losses was $109 million against a benefit of $107 million in the prior-year quarter. This mainly reflected the uncertain economic outlook and loan growth.
Allowance for loan and lease losses was $1.14 billion, up 5.5%.
Non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned properties assets and other non-performing assets were 0.36%, down 25 bps.
Capital Ratios Deteriorates
KeyCorp's tangible common equity to tangible assets ratio was 4.3% as of Sep 30, 2022, down from 7% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 10.6%, down from 10.9%.
Common Equity Tier 1 ratio was 9.1%, down from 9.6% as of Sep 30, 2021.
Share Repurchase Update
KeyCorp’s board of directors approved an extension of the remaining $790 million existing share repurchase program through the third quarter of 2023.
Our Take
Solid loans and deposit balances, along with higher interest rates, are likely to continue supporting KeyCorp’s revenues. However, elevated expenses and weakness in the mortgage business remain near-term concerns.
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
Results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates drove the increase in NII, which was a major positive for TFC.
M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.83 in third-quarter 2022, which lagged the Zacks Consensus Estimate of $4.21. The bottom line compares favorably with $3.76 per share reported in the year-ago period.
The results were adversely impacted by an increase in credit costs, higher expenses and a fall in non-interest income. Yet, a rise in net interest income (NII) on net interest margin expansion, higher rates and balance sheet strength offered some support.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
KeyCorp (KEY) Down as Q3 Earnings Lag Estimates on Provisions
KeyCorp’s (KEY - Free Report) third-quarter 2022 earnings from continuing operations of 55 cents per share lagged the Zacks Consensus Estimate of 59 cents. The bottom line also declined 15.4% from the prior-year quarter. Our estimate for the metric was 60 cents per share.
Shares of KEY lost almost 3% in pre-market market trading on lower-than-expected quarterly performance. Higher provisions and weak fee income performance weighed on investor sentiments.
A rise in net interest income (NII) driven by robust average loan growth and higher interest rates supported KEY’s results. Also, a slight decline in expenses was a tailwind. However, a fall in non-interest income due to a tough operating backdrop and higher provisions were the undermining factors.
Net income from continuing operations attributable to common shareholders was $513 million, down 16.7% year over year. We had projected the same to be $558.7 million.
Revenues Rise, Expenses Dip Modestly
Total revenues rose 3.5% year over year to $1.89 billion. The top line also marginally beat the Zacks Consensus Estimate of $1.88 billion. Our estimate for the metric was $1.86 billion.
NII (on a tax-equivalent basis) grew 17.4% to $1.2 billion. The increase was mainly driven by higher earning asset balances, a rise in rates and a favorable balance sheet mix. Our estimate for NII was same as the reported number.
Taxable-equivalent net interest margin from continuing operations increased 27 basis points (bps) to 2.74%.Our estimate for NIM was 2.71%.
Non-interest income was $683 million, falling 14.3%. The decline was mainly due to lower consumer mortgage income, cards and payments income, investment banking and debt placement fees and other income.
Non-interest expenses decreased marginally to $1.11 billion. We had projected the metric to be $1.10 billion.
At the third-quarter end, average total deposits were $144.2 billion, down 2.2% from the prior quarter. Average total loans were $114.4 billion, up 4.8%. The growth was primarily driven by robust strength in commercial loan portfolios.
Credit Quality Deteriorating
Net loan charge-offs, as a percentage of average loans, rose 5 bps year over year to 0.15%. Provision for credit losses was $109 million against a benefit of $107 million in the prior-year quarter. This mainly reflected the uncertain economic outlook and loan growth.
Allowance for loan and lease losses was $1.14 billion, up 5.5%.
Non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned properties assets and other non-performing assets were 0.36%, down 25 bps.
Capital Ratios Deteriorates
KeyCorp's tangible common equity to tangible assets ratio was 4.3% as of Sep 30, 2022, down from 7% in the corresponding period of 2021. Tier 1 risk-based capital ratio was 10.6%, down from 10.9%.
Common Equity Tier 1 ratio was 9.1%, down from 9.6% as of Sep 30, 2021.
Share Repurchase Update
KeyCorp’s board of directors approved an extension of the remaining $790 million existing share repurchase program through the third quarter of 2023.
Our Take
Solid loans and deposit balances, along with higher interest rates, are likely to continue supporting KeyCorp’s revenues. However, elevated expenses and weakness in the mortgage business remain near-term concerns.
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 Major Banks
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
Results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates drove the increase in NII, which was a major positive for TFC.
M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.83 in third-quarter 2022, which lagged the Zacks Consensus Estimate of $4.21. The bottom line compares favorably with $3.76 per share reported in the year-ago period.
The results were adversely impacted by an increase in credit costs, higher expenses and a fall in non-interest income. Yet, a rise in net interest income (NII) on net interest margin expansion, higher rates and balance sheet strength offered some support.