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KeyCorp's Q2 Earnings Beat Estimates, NII & Fee Income Rise Y/Y
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Key Takeaways
KEY's EPS rose 40% y/y in Q2, driven by strong revenue growth and higher average loan balances.
Net interest income jumped 27.9% while fee income climbed 10% y/y.
Expenses rose 7% and credit loss provisions increased 38%, partially offsetting gains.
KeyCorp’s (KEY - Free Report) second-quarter 2025 earnings per share from continuing operations of 35 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line reflected a 40% jump from the prior-year quarter’s actual.
Results benefited from a rise in net interest income (NII) and non-interest income. The average loan balance increased sequentially, which was another positive. However, higher expenses and a rise in provisions were undermining factors.
Net income from continuing operations attributable to common shareholders was $387 million, up 63.3% year over year.
KEY’s Revenues Improve, Expenses Rise
Total revenues increased 20.9% year over year to $1.83 billion. Moreover, the top line beat the Zacks Consensus Estimate of $1.80 billion.
NII (on a tax-equivalent or TE basis) increased 27.9% on a year-over-year basis to $1.15 billion. The net interest margin (NIM) (TE basis) from continuing operations expanded 62 basis points (bps) to 2.66%. Both metrics benefited from the lower deposit costs, reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, the repositioning of the available-for-sale portfolio in the third and fourth quarters of 2024, and an improved funding mix.
These benefits were partially offset by the impact of lower interest rates on variable-rate earning assets, and lower loan balances. Our estimate for NII (TE) and NIM was $1.14 billion and 2.62%, respectively.
Non-interest income was $690 million, up 10% year over year. The rise was driven by an increase in almost all the components of fee income, except for corporate-owned life insurance income, consumer mortgage income, operating lease income and other leasing gains, and other income. Our estimate for the metric was $673.3 million.
Non-interest expenses increased 7% year over year to $1.15 billion. The rise was due to an increase in almost all cost components, except for operating lease expenses and other expenses. We projected the metric to be $1.16 billion.
KeyCorp’s Loans Rise & Deposits Slip
At the end of the second quarter, average total loans were $105.72 billion, up 1.3% from the previous quarter. We had anticipated average total loans of $105.52 billion.
Average total deposits were $147.45 billion, down marginally from the prior-quarter end. The fall was due to a reduction in higher-cost commercial client balances and retail CDs. Our estimate for the metric was $150.58 billion.
KEY’s Credit Quality: A Mixed Bag
The provision for credit losses was $138 million, up 38% year over year. Our estimate for provision for credit losses was $120.2 million.
Net loan charge-offs, as a percentage of average total loans, rose 5 bps year over year to 0.39%.
However, the allowance for loan and lease losses was $1.45 billion, down 6.5% from the prior-year quarter. Non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets, and other non-performing assets, were 0.66%, down 2 bps year over year.
KeyCorp’s Capital Ratios Improve
KEY's tangible common equity to tangible assets ratio was 7.8% as of June 30, 2025, up from 5.2% in the corresponding period of 2024. The Tier 1 risk-based capital ratio was 13.4%, up from 12.2%. The Common Equity Tier 1 ratio was 11.7%, up from 10.5% as of June 30, 2024.
Our Take on KEY
Decent loan balances, balance sheet repositioning efforts, strategic buyouts and relatively higher interest rates will likely support KeyCorp’s revenues in the near term. Weakening asset quality amid a tough macroeconomic backdrop is concerning.
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
BNY Mellon’s results were primarily aided by increased fee revenues and NII. Growth in the assets under custody and/or administration and assets under management balances supported the results. Also, the company recorded a provision benefit in the quarter, which was a tailwind.
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2025 adjusted earnings per share of $1.54 surpassed the Zacks Consensus Estimate of $1.41. In the prior-year quarter, the company reported earnings per share of $1.33.
Wells Fargo’s results benefited from an improvement in non-interest income and lower provisions. However, a decline in NII and higher expenses were the undermining factors.
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KeyCorp's Q2 Earnings Beat Estimates, NII & Fee Income Rise Y/Y
Key Takeaways
KeyCorp’s (KEY - Free Report) second-quarter 2025 earnings per share from continuing operations of 35 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line reflected a 40% jump from the prior-year quarter’s actual.
Results benefited from a rise in net interest income (NII) and non-interest income. The average loan balance increased sequentially, which was another positive. However, higher expenses and a rise in provisions were undermining factors.
Net income from continuing operations attributable to common shareholders was $387 million, up 63.3% year over year.
KEY’s Revenues Improve, Expenses Rise
Total revenues increased 20.9% year over year to $1.83 billion. Moreover, the top line beat the Zacks Consensus Estimate of $1.80 billion.
NII (on a tax-equivalent or TE basis) increased 27.9% on a year-over-year basis to $1.15 billion. The net interest margin (NIM) (TE basis) from continuing operations expanded 62 basis points (bps) to 2.66%. Both metrics benefited from the lower deposit costs, reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, the repositioning of the available-for-sale portfolio in the third and fourth quarters of 2024, and an improved funding mix.
These benefits were partially offset by the impact of lower interest rates on variable-rate earning assets, and lower loan balances. Our estimate for NII (TE) and NIM was $1.14 billion and 2.62%, respectively.
Non-interest income was $690 million, up 10% year over year. The rise was driven by an increase in almost all the components of fee income, except for corporate-owned life insurance income, consumer mortgage income, operating lease income and other leasing gains, and other income. Our estimate for the metric was $673.3 million.
Non-interest expenses increased 7% year over year to $1.15 billion. The rise was due to an increase in almost all cost components, except for operating lease expenses and other expenses. We projected the metric to be $1.16 billion.
KeyCorp’s Loans Rise & Deposits Slip
At the end of the second quarter, average total loans were $105.72 billion, up 1.3% from the previous quarter. We had anticipated average total loans of $105.52 billion.
Average total deposits were $147.45 billion, down marginally from the prior-quarter end. The fall was due to a reduction in higher-cost commercial client balances and retail CDs. Our estimate for the metric was $150.58 billion.
KEY’s Credit Quality: A Mixed Bag
The provision for credit losses was $138 million, up 38% year over year. Our estimate for provision for credit losses was $120.2 million.
Net loan charge-offs, as a percentage of average total loans, rose 5 bps year over year to 0.39%.
However, the allowance for loan and lease losses was $1.45 billion, down 6.5% from the prior-year quarter. Non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets, and other non-performing assets, were 0.66%, down 2 bps year over year.
KeyCorp’s Capital Ratios Improve
KEY's tangible common equity to tangible assets ratio was 7.8% as of June 30, 2025, up from 5.2% in the corresponding period of 2024. The Tier 1 risk-based capital ratio was 13.4%, up from 12.2%. The Common Equity Tier 1 ratio was 11.7%, up from 10.5% as of June 30, 2024.
Our Take on KEY
Decent loan balances, balance sheet repositioning efforts, strategic buyouts and relatively higher interest rates will likely support KeyCorp’s revenues in the near term. Weakening asset quality amid a tough macroeconomic backdrop is concerning.
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
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
BNY Mellon’s results were primarily aided by increased fee revenues and NII. Growth in the assets under custody and/or administration and assets under management balances supported the results. Also, the company recorded a provision benefit in the quarter, which was a tailwind.
Wells Fargo & Company’s (WFC - Free Report) second-quarter 2025 adjusted earnings per share of $1.54 surpassed the Zacks Consensus Estimate of $1.41. In the prior-year quarter, the company reported earnings per share of $1.33.
Wells Fargo’s results benefited from an improvement in non-interest income and lower provisions. However, a decline in NII and higher expenses were the undermining factors.