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KEY Q3 Earnings Beat as NII, Fee Income Increases Y/Y & Provisions Dip
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Key Takeaways
KeyCorp's Q3 earnings of 51 cents per share beat estimates, while revenues rose 8.3% y/y.
KEY's NII grew 9.6%, while non-interest income climbed 6%, driven by higher banking fees.
KeyCorp's credit loss provisions fell 43%, but expenses rose 5.8% and capital ratios weakened.
KeyCorp’s (KEY - Free Report) third-quarter 2026 earnings from continuing operations of 51 cents per share surpassed the Zacks Consensus Estimate of 46 cents. The bottom line reflected a 24.4% 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 $537 million, up from $454 million in the prior-year quarter.
KEY’s Revenues Improve, Expenses Rise
Total revenues (taxable-equivalent or TE) increased 8.3% year over year to a record $2.05 billion. The top line surpassed the Zacks Consensus Estimate of $2.03 billion.
NII (TE basis) jumped 9.6% from the prior-year quarter to $1.31 billion. The net interest margin (TE basis) from continuing operations expanded 20 basis points (bps) to 2.95%. 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, an expanding balance sheet and a continued strategic shift toward higher-yielding commercial and industrial loans. These benefits were partially offset by the impact of lower interest rates on repricing earning assets.
Non-interest income was $744 million, up 6% year over year. The rise was mainly driven by higher investment banking and debt placement fees, trust and investment services income, and cards and payments income. These were partially offset by lower commercial mortgage servicing fees.
Non-interest expenses increased 5.8% year over year to $1.25 billion. The rise was predominantly due to an increase in personnel expenses, primarily related to continued investments in people, employee benefits and incentive compensation associated with non-interest income growth. These were partially offset by a decline in other expenses.
At the end of the third quarter, average total loans were $111.59 billion, up 1.4% from the previous quarter and 5% year over year. Average total deposits were $151.18 billion, up 2.4% sequentially and 0.5% year over year.
KEY’s Credit Quality Improves
The provision for credit losses was $61 million, down 43% from the prior-year quarter.
Net loan charge-offs, as a percentage of average total loans, declined 10 bps year over year to 0.32%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets and other non-performing assets, were 0.55%, down 8 bps.
The allowance for loan and lease losses was $1.40 billion, down 3.2% year over year.
KeyCorp’s Capital Ratios Deteriorate
KEY’s tangible common equity to tangible assets ratio was 6.9% as of Sept. 30, 2026, down from 8.1% in the corresponding period of 2025.
The Tier 1 risk-based capital ratio was 12.3%, down from 13.5%. The Common Equity Tier 1 ratio was 11.1%, down from 11.8% as of Sept. 30, 2025.
Update on KEY’s Share Repurchases
In the reported quarter, KeyCorp repurchased shares worth $320 million at an average price of $22.57 per share.
Our Take on KEY
KeyCorp delivered record revenues and pre-provision net revenues in the third quarter of 2026. The company generated a return on tangible common equity exceeding 15%, reinforcing its confidence in achieving and sustaining a return on tangible common equity of 15% or more by the end of 2027.
Along with this, robust commercial and industrial loan growth, balance sheet repositioning efforts and growth in fee-based businesses will likely support the company’s top-line growth in the near term. However, higher non-interest expenses and declining capital ratios remain concerning.
Bank of America’s (BAC - Free Report) third-quarter 2026 adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.11. In the prior-year quarter, the company reported earnings of $1.04.
Bank of America witnessed dismal trading performance this time around due to weaker fixed-income trading. Similarly, amid weakness in advisory and debt underwriting activities, BAC’s investment banking (IB) business performance was not good.
While BAC’s capital markets business performance was not impressive this time, year-over-year growth in NII drove total revenues. Provisions declined in the quarter on a year-over-year basis, which was a positive, but non-interest expenses increased, creating another major headwind.
JPMorgan’s (JPM - Free Report) third-quarter 2026 adjusted earnings of $5.75 per share missed the Zacks Consensus Estimate of $5.94. After considering the net investment securities losses of 18 cents, earnings were $5.57 per share, up 9.9% from the year ago.
JPM’s reported net revenues of $50.17 billion rose 8% year over year. Strong equity trading performance, IB activity and loan growth supported revenues, while the fixed income trading business was subdued. While JPMorgan recorded a year-over-year rise in expenses in the quarter, it witnessed a decline in provisions, which aided results to some extent.
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KEY Q3 Earnings Beat as NII, Fee Income Increases Y/Y & Provisions Dip
Key Takeaways
KeyCorp’s (KEY - Free Report) third-quarter 2026 earnings from continuing operations of 51 cents per share surpassed the Zacks Consensus Estimate of 46 cents. The bottom line reflected a 24.4% 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 $537 million, up from $454 million in the prior-year quarter.
KEY’s Revenues Improve, Expenses Rise
Total revenues (taxable-equivalent or TE) increased 8.3% year over year to a record $2.05 billion. The top line surpassed the Zacks Consensus Estimate of $2.03 billion.
NII (TE basis) jumped 9.6% from the prior-year quarter to $1.31 billion. The net interest margin (TE basis) from continuing operations expanded 20 basis points (bps) to 2.95%. 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, an expanding balance sheet and a continued strategic shift toward higher-yielding commercial and industrial loans. These benefits were partially offset by the impact of lower interest rates on repricing earning assets.
Non-interest income was $744 million, up 6% year over year. The rise was mainly driven by higher investment banking and debt placement fees, trust and investment services income, and cards and payments income. These were partially offset by lower commercial mortgage servicing fees.
Non-interest expenses increased 5.8% year over year to $1.25 billion. The rise was predominantly due to an increase in personnel expenses, primarily related to continued investments in people, employee benefits and incentive compensation associated with non-interest income growth. These were partially offset by a decline in other expenses.
At the end of the third quarter, average total loans were $111.59 billion, up 1.4% from the previous quarter and 5% year over year. Average total deposits were $151.18 billion, up 2.4% sequentially and 0.5% year over year.
KEY’s Credit Quality Improves
The provision for credit losses was $61 million, down 43% from the prior-year quarter.
Net loan charge-offs, as a percentage of average total loans, declined 10 bps year over year to 0.32%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets and other non-performing assets, were 0.55%, down 8 bps.
The allowance for loan and lease losses was $1.40 billion, down 3.2% year over year.
KeyCorp’s Capital Ratios Deteriorate
KEY’s tangible common equity to tangible assets ratio was 6.9% as of Sept. 30, 2026, down from 8.1% in the corresponding period of 2025.
The Tier 1 risk-based capital ratio was 12.3%, down from 13.5%. The Common Equity Tier 1 ratio was 11.1%, down from 11.8% as of Sept. 30, 2025.
Update on KEY’s Share Repurchases
In the reported quarter, KeyCorp repurchased shares worth $320 million at an average price of $22.57 per share.
Our Take on KEY
KeyCorp delivered record revenues and pre-provision net revenues in the third quarter of 2026. The company generated a return on tangible common equity exceeding 15%, reinforcing its confidence in achieving and sustaining a return on tangible common equity of 15% or more by the end of 2027.
Along with this, robust commercial and industrial loan growth, balance sheet repositioning efforts and growth in fee-based businesses will likely support the company’s top-line growth in the near term. However, higher non-interest expenses and declining capital ratios remain 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) third-quarter 2026 adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.11. In the prior-year quarter, the company reported earnings of $1.04.
Bank of America witnessed dismal trading performance this time around due to weaker fixed-income trading. Similarly, amid weakness in advisory and debt underwriting activities, BAC’s investment banking (IB) business performance was not good.
While BAC’s capital markets business performance was not impressive this time, year-over-year growth in NII drove total revenues. Provisions declined in the quarter on a year-over-year basis, which was a positive, but non-interest expenses increased, creating another major headwind.
JPMorgan’s (JPM - Free Report) third-quarter 2026 adjusted earnings of $5.75 per share missed the Zacks Consensus Estimate of $5.94. After considering the net investment securities losses of 18 cents, earnings were $5.57 per share, up 9.9% from the year ago.
JPM’s reported net revenues of $50.17 billion rose 8% year over year. Strong equity trading performance, IB activity and loan growth supported revenues, while the fixed income trading business was subdued. While JPMorgan recorded a year-over-year rise in expenses in the quarter, it witnessed a decline in provisions, which aided results to some extent.