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KeyCorp (KEY) Lowers Q4 Fee Income Guidance, Stock Dips 3.7%
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Shares of KeyCorp (KEY - Free Report) lost 3.7% after the company updated its fourth-quarter 2023 outlook for fee income. Per a presentation at the Goldman Sachs 2023 U.S. Financial Services Conference, KEY expects its fourth-quarter non-interest income to decline 5-8% from the prior quarter’s reported figure.
Previously, the bank expected non-interest income to increase 1-3%.
While KEY changed its fourth-quarter outlook for non-interest income, the guidance for net interest income (NII) remains unchanged.
KEY expects fourth-quarter NII to be relatively stable sequentially.
Likewise, deposits are expected to be stable than the previous quarter. Loans are projected to decline 1-3% sequentially.
For 2023, management expects the average loan balance to be up 6-9% year over year, whereas average deposits are expected to be flat or down 2%.
NII (tax-equivalent) is anticipated to decline 12-14% on a year-over-year basis in 2023 and non-interest income is expected to fall 7-9%.
Notably, KeyCorp’s business restructuring efforts have been impressive so far. In 2022, the company acquired GradFin, which strengthened its digital offering capabilities. In 2021, it acquired a B2B-focused digital platform, XUP Payments and a data analytics-driven consultancy firm, AQN Strategies LLC.
In 2019, KEY acquired Laurel Road Bank’s digital lending operation and further expanded its operation with the launch of Laurel Road for Doctors. These, along with several past buyouts/expansion initiatives, are expected to strengthen the bank’s product suites and market share.
Also, as the demand for digital banking services continues to rise, the company has been consolidating its branch network, with management looking for opportunities to right-size its footprint. Driven by such initiatives, KEY’s fee income is expected to improve in the long term, thus supporting top-line growth.
So far this year, shares of KeyCorp have lost 25.7% against the industry’s growth of 2.5%.
At the conference, banks like JPMorgan (JPM - Free Report) and Truist Financial Corporation (TFC - Free Report) affirmed their previously stated guidance.
JPM expects the 2023 NII to be $88.5 billion, driven by higher rates and slower-than-expected deposit repricing across both consumers and wholesale.
Further, the company believes that the current NII run rate will slow down substantially as competition for deposits increases. Over the medium term, annual NII is anticipated to be near $80 billion.
Moreover, JPM projects adjusted expenses of $84 billion in 2023.
JPM also provided an outlook for trading and investment banking (IB) at the conference. The bank said that it expects its markets revenues in the fourth quarter of 2023 to be flattish year over year. IB fees are expected to record healthy year-over-year growth.
TFC expects tax-equivalent revenues in the fourth quarter of 2023 to be flat or decline 1% sequentially. The NII is likely to remain under some pressure due to the smaller balance sheet and modest margin compression.
Sequential improvement in non-interest income is expected in the quarter.
For 2023, TFC expects adjusted tax-equivalent revenues to increase 1.5% year over year.
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KeyCorp (KEY) Lowers Q4 Fee Income Guidance, Stock Dips 3.7%
Shares of KeyCorp (KEY - Free Report) lost 3.7% after the company updated its fourth-quarter 2023 outlook for fee income. Per a presentation at the Goldman Sachs 2023 U.S. Financial Services Conference, KEY expects its fourth-quarter non-interest income to decline 5-8% from the prior quarter’s reported figure.
Previously, the bank expected non-interest income to increase 1-3%.
While KEY changed its fourth-quarter outlook for non-interest income, the guidance for net interest income (NII) remains unchanged.
KEY expects fourth-quarter NII to be relatively stable sequentially.
Likewise, deposits are expected to be stable than the previous quarter. Loans are projected to decline 1-3% sequentially.
For 2023, management expects the average loan balance to be up 6-9% year over year, whereas average deposits are expected to be flat or down 2%.
NII (tax-equivalent) is anticipated to decline 12-14% on a year-over-year basis in 2023 and non-interest income is expected to fall 7-9%.
Notably, KeyCorp’s business restructuring efforts have been impressive so far. In 2022, the company acquired GradFin, which strengthened its digital offering capabilities. In 2021, it acquired a B2B-focused digital platform, XUP Payments and a data analytics-driven consultancy firm, AQN Strategies LLC.
In 2019, KEY acquired Laurel Road Bank’s digital lending operation and further expanded its operation with the launch of Laurel Road for Doctors. These, along with several past buyouts/expansion initiatives, are expected to strengthen the bank’s product suites and market share.
Also, as the demand for digital banking services continues to rise, the company has been consolidating its branch network, with management looking for opportunities to right-size its footprint. Driven by such initiatives, KEY’s fee income is expected to improve in the long term, thus supporting top-line growth.
So far this year, shares of KeyCorp have lost 25.7% against the industry’s growth of 2.5%.
Image Source: Zacks Investment Research
Currently, KEY carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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At the conference, banks like JPMorgan (JPM - Free Report) and Truist Financial Corporation (TFC - Free Report) affirmed their previously stated guidance.
JPM expects the 2023 NII to be $88.5 billion, driven by higher rates and slower-than-expected deposit repricing across both consumers and wholesale.
Further, the company believes that the current NII run rate will slow down substantially as competition for deposits increases. Over the medium term, annual NII is anticipated to be near $80 billion.
Moreover, JPM projects adjusted expenses of $84 billion in 2023.
JPM also provided an outlook for trading and investment banking (IB) at the conference. The bank said that it expects its markets revenues in the fourth quarter of 2023 to be flattish year over year. IB fees are expected to record healthy year-over-year growth.
TFC expects tax-equivalent revenues in the fourth quarter of 2023 to be flat or decline 1% sequentially. The NII is likely to remain under some pressure due to the smaller balance sheet and modest margin compression.
Sequential improvement in non-interest income is expected in the quarter.
For 2023, TFC expects adjusted tax-equivalent revenues to increase 1.5% year over year.