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KEY Q2 Earnings Beat as NII & Fee Income Grow Y/Y & Provisions Dip
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Key Takeaways
KeyCorp beat Q2 earnings estimates as NII and non-interest income increased y/y.
KEY benefited from higher loan balances and lower credit loss provisions, though expenses increased.
KEY's credit quality was mixed and capital ratios declined. The company repurchased $341 million in shares.
KeyCorp’s (KEY - Free Report) second-quarter 2026 earnings from continuing operations of 44 cents per share outpaced the Zacks Consensus Estimate of 42 cents. The bottom line reflected a 25.7% rise from the prior-year quarter.
Results primarily benefited from higher net interest income (NII) and non-interest income. Higher average loan balances, along with lower provisions, were other tailwinds. However, higher expenses hurt the results to some extent.
Net income from continuing operations attributable to common shareholders was $472 million, up from $387 million in the prior-year quarter.
KEY’s Revenues Improve, Expenses Rise
Total revenues (taxable-equivalent or TE) increased 6.7% year over year to $1.96 billion. However, the top line missed the Zacks Consensus Estimate of $1.98 billion.
NII (TE basis) jumped 9.4% from the prior-year quarter to $1.26 billion. The net interest margin (TE basis) from continuing operations expanded 23 basis points (bps) to 2.89%. Both metrics benefited from lower deposit costs as a result of declining interest rates and proactive deposit beta management, the reinvestment of proceeds from maturing low-yielding investment securities and fixed-rate swaps into higher-yielding investments, and a shift in the balance sheet composition to a more favorable mix of higher-yielding commercial and industrial loans, partially offset by the impact of lower interest rates on repricing earning assets.
Non-interest income was $706 million, up 2.3% year over year. The rise was mainly driven by higher trust and investment services income, cards and payments income, service charges on deposit accounts, corporate services income, corporate-owned life insurance income, consumer mortgage income, and other income.
Non-interest expenses increased 5.5% year over year to $1.22 billion. The rise was due to an increase in personnel expenses, computer processing costs and equipment costs.
At the end of the second quarter, average total loans were $110.07 billion, up 2.2% from the previous quarter. Average total deposits were $147.58 billion, up marginally sequentially.
KEY’s Credit Quality: A Mixed Bag
The provision for credit losses was $92 million, down 33.3% from the prior-year quarter.
However, net loan charge-offs, as a percentage of average total loans, increased 3 bps year over year to 0.42%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets and other non-performing assets, were 0.74%, up 8 bps.
The allowance for loan and lease losses was $1.45 billion, stable year over year.
KeyCorp’s Capital Ratios Deteriorate
KEY's tangible common equity to tangible assets ratio was 7.7% as of June 30, 2026, down from 7.8% in the corresponding period of 2025.
The Tier 1 risk-based capital ratio was 12.8%, down from 13.4%. The Common Equity Tier 1 ratio was 11.2%, down from 11.7% as of June 30, 2025.
Update on KEY’s Share Repurchases
In the reported quarter, KeyCorp repurchased shares worth $341 million.
Our Take on KEY
In April, KeyCorp entered a definitive agreement to acquire Clearwater Corporate Finance LLP’s UK business, marking its entry into Western Europe. The acquisition is expected to expand KEY’s middle-market investment banking advisory capabilities and strengthen its cross-border merger and acquisition platform.
Along with this, robust loan balances, balance sheet repositioning efforts and stabilizing funding costs will likely support the company’s top-line growth in the near term. However, weak asset quality amid a tough macroeconomic backdrop is concerning.
Bank of America’s (BAC - Free Report) second-quarter 2026 earnings of $1.21 per share handily surpassed the Zacks Consensus Estimate of $1.13. The bottom line grew 34.4% year over year.
BAC recorded an improvement in trading numbers for the 17th straight quarter. The company’s investment banking (IB) performance was solid this time as well. These, along with higher NII, drove Bank of America’s total revenues. While provisions declined in the quarter on a year-over-year basis, non-interest expenses increased, which hurt the results to some extent.
JPMorgan (JPM - Free Report) posted second-quarter 2026 adjusted earnings of $6.14 per share, which beat the Zacks Consensus Estimate of $5.59 by 9.8%. The bottom line rose 17.2% from $5.24 reported a year ago.
Strong Markets and IB activity powered core growth, while NII got support from decent loan demand. Lower provisions also offered support. However, an increase in operating expenses was the undermining factor for JPMorgan.
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KEY Q2 Earnings Beat as NII & Fee Income Grow Y/Y & Provisions Dip
Key Takeaways
KeyCorp’s (KEY - Free Report) second-quarter 2026 earnings from continuing operations of 44 cents per share outpaced the Zacks Consensus Estimate of 42 cents. The bottom line reflected a 25.7% rise from the prior-year quarter.
Results primarily benefited from higher net interest income (NII) and non-interest income. Higher average loan balances, along with lower provisions, were other tailwinds. However, higher expenses hurt the results to some extent.
Net income from continuing operations attributable to common shareholders was $472 million, up from $387 million in the prior-year quarter.
KEY’s Revenues Improve, Expenses Rise
Total revenues (taxable-equivalent or TE) increased 6.7% year over year to $1.96 billion. However, the top line missed the Zacks Consensus Estimate of $1.98 billion.
NII (TE basis) jumped 9.4% from the prior-year quarter to $1.26 billion. The net interest margin (TE basis) from continuing operations expanded 23 basis points (bps) to 2.89%. Both metrics benefited from lower deposit costs as a result of declining interest rates and proactive deposit beta management, the reinvestment of proceeds from maturing low-yielding investment securities and fixed-rate swaps into higher-yielding investments, and a shift in the balance sheet composition to a more favorable mix of higher-yielding commercial and industrial loans, partially offset by the impact of lower interest rates on repricing earning assets.
Non-interest income was $706 million, up 2.3% year over year. The rise was mainly driven by higher trust and investment services income, cards and payments income, service charges on deposit accounts, corporate services income, corporate-owned life insurance income, consumer mortgage income, and other income.
Non-interest expenses increased 5.5% year over year to $1.22 billion. The rise was due to an increase in personnel expenses, computer processing costs and equipment costs.
At the end of the second quarter, average total loans were $110.07 billion, up 2.2% from the previous quarter. Average total deposits were $147.58 billion, up marginally sequentially.
KEY’s Credit Quality: A Mixed Bag
The provision for credit losses was $92 million, down 33.3% from the prior-year quarter.
However, net loan charge-offs, as a percentage of average total loans, increased 3 bps year over year to 0.42%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets and other non-performing assets, were 0.74%, up 8 bps.
The allowance for loan and lease losses was $1.45 billion, stable year over year.
KeyCorp’s Capital Ratios Deteriorate
KEY's tangible common equity to tangible assets ratio was 7.7% as of June 30, 2026, down from 7.8% in the corresponding period of 2025.
The Tier 1 risk-based capital ratio was 12.8%, down from 13.4%. The Common Equity Tier 1 ratio was 11.2%, down from 11.7% as of June 30, 2025.
Update on KEY’s Share Repurchases
In the reported quarter, KeyCorp repurchased shares worth $341 million.
Our Take on KEY
In April, KeyCorp entered a definitive agreement to acquire Clearwater Corporate Finance LLP’s UK business, marking its entry into Western Europe. The acquisition is expected to expand KEY’s middle-market investment banking advisory capabilities and strengthen its cross-border merger and acquisition platform.
Along with this, robust loan balances, balance sheet repositioning efforts and stabilizing funding costs will likely support the company’s top-line growth in the near term. However, weak 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 Major Banks
Bank of America’s (BAC - Free Report) second-quarter 2026 earnings of $1.21 per share handily surpassed the Zacks Consensus Estimate of $1.13. The bottom line grew 34.4% year over year.
BAC recorded an improvement in trading numbers for the 17th straight quarter. The company’s investment banking (IB) performance was solid this time as well. These, along with higher NII, drove Bank of America’s total revenues. While provisions declined in the quarter on a year-over-year basis, non-interest expenses increased, which hurt the results to some extent.
JPMorgan (JPM - Free Report) posted second-quarter 2026 adjusted earnings of $6.14 per share, which beat the Zacks Consensus Estimate of $5.59 by 9.8%. The bottom line rose 17.2% from $5.24 reported a year ago.
Strong Markets and IB activity powered core growth, while NII got support from decent loan demand. Lower provisions also offered support. However, an increase in operating expenses was the undermining factor for JPMorgan.