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) Q1 Earnings Miss on Lower Revenues, Costs Dip
Read MoreHide Full Article
KeyCorp’s (KEY - Free Report) first-quarter 2019 adjusted earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents. However, the figure compared favorably with earnings of 38 cents recorded in the prior-year quarter.
The stock fell nearly 3% in pre-market trading, indicating that investors not have taken the results in their stride. Notably, the full-day trading session will depict a better picture.
Results were adversely impacted by lower non-interest income, lower net interest margin, decline in deposit balance and deterioration in credit quality. However, higher interest income, slight loan growth and fall in operating expenses acted as tailwinds.
After taking into consideration certain non-recurring items related to efficiency initiative, net income from continuing operations was $386 million or 38 cents per share compared with $401 million or 38 cents per share in the prior-year quarter.
Revenues & Expenses Decline
Total revenues were down 2.1% year over year to $1.52 billion. Also, the figure lagged the Zacks Consensus Estimate of $1.60 billion.
Tax-equivalent net interest income increased 3.5% year over year to $985 million. This included $22 million of purchase accounting accretion. The rise was driven by higher interest rates and increase in earning asset balances.
Taxable-equivalent net interest margin from continuing operations decreased 2 basis points (bps) year over year to 3.13%.
Non-interest income was $536 million, declining 10.8% from the year-ago quarter. The fall was mainly due to lower trust and investment services income, service charges on deposit accounts and investment banking and debt placement fees.
Non-interest expenses decreased 4.3% year over year to $963 million. The decline was largely attributable to the company’s efficiency initiative efforts across the franchise.
At the end of the first quarter, average total deposits were $107.6 billion, down slightly from the prior quarter. Average total loans were $89.6 billion, up marginally on a sequential basis.
Credit Quality Worsens
Net loan charge-offs, as a percentage of average loans, increased 4 bps year over year to 0.29%. Also, provision for credit losses increased 1.6% to $62 million.
Further, KeyCorp’s allowance for loan and lease losses was $883 million, up marginally from the prior-year quarter. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other nonperforming assets were 0.66%, up 2 bps.
Capital Ratios Improve
KeyCorp's tangible common equity to tangible assets ratio was 8.43% as of Mar 31, 2019, up from 8.22% as of Mar 31, 2018. Also, Tier 1 risk-based capital ratio was 10.97%, up from 10.82% as of Mar 31, 2018.
The company’s estimated Basel III Common Equity Tier 1 ratio was 9.84% at the end of the quarter.
Capital Deployment Update
During the reported quarter, KeyCorp repurchased $199 million worth of shares as part of its 2018 capital plan.
Concurrently, the company announced its new capital plan, beginning third-quarter 2019 through second-quarter 2020. The plan includes a share repurchase authorization worth $1 billion and a 9% hike in quarterly dividend, subject to approval of board of directors.
Our Take
KeyCorp remains well positioned for revenue growth, given the rise in interest rates and solid loan and deposit balances. Further, the company’s efforts to improve fee income are commendable.
However, persistently increasing expenses owing to investments in franchise and acquisitions, are likely to curb bottom-line growth. Further, the company's significant exposure to risky loan portfolios is a major concern.
Comerica (CMA - Free Report) delivered positive earnings surprise of 7.2% in first-quarter 2019 on high interest income. Adjusted earnings per share of $2.08 in the first quarter surpassed the Zacks Consensus Estimate of $1.94. Further, earnings were up from the prior-year quarter adjusted figure of $1.54.
PNC Financial (PNC - Free Report) pulled off positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflects a 7.4% jump from the prior-year quarter.
Riding on higher revenues, U.S. Bancorp’s (USB - Free Report) first-quarter 2019 earnings per share of $1.00 came in line with the Zacks Consensus Estimate. Also, the reported figure is up 4.2% from the prior-year quarter.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
Image: Bigstock
KeyCorp (KEY) Q1 Earnings Miss on Lower Revenues, Costs Dip
KeyCorp’s (KEY - Free Report) first-quarter 2019 adjusted earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents. However, the figure compared favorably with earnings of 38 cents recorded in the prior-year quarter.
The stock fell nearly 3% in pre-market trading, indicating that investors not have taken the results in their stride. Notably, the full-day trading session will depict a better picture.
Results were adversely impacted by lower non-interest income, lower net interest margin, decline in deposit balance and deterioration in credit quality. However, higher interest income, slight loan growth and fall in operating expenses acted as tailwinds.
After taking into consideration certain non-recurring items related to efficiency initiative, net income from continuing operations was $386 million or 38 cents per share compared with $401 million or 38 cents per share in the prior-year quarter.
Revenues & Expenses Decline
Total revenues were down 2.1% year over year to $1.52 billion. Also, the figure lagged the Zacks Consensus Estimate of $1.60 billion.
Tax-equivalent net interest income increased 3.5% year over year to $985 million. This included $22 million of purchase accounting accretion. The rise was driven by higher interest rates and increase in earning asset balances.
Taxable-equivalent net interest margin from continuing operations decreased 2 basis points (bps) year over year to 3.13%.
Non-interest income was $536 million, declining 10.8% from the year-ago quarter. The fall was mainly due to lower trust and investment services income, service charges on deposit accounts and investment banking and debt placement fees.
Non-interest expenses decreased 4.3% year over year to $963 million. The decline was largely attributable to the company’s efficiency initiative efforts across the franchise.
At the end of the first quarter, average total deposits were $107.6 billion, down slightly from the prior quarter. Average total loans were $89.6 billion, up marginally on a sequential basis.
Credit Quality Worsens
Net loan charge-offs, as a percentage of average loans, increased 4 bps year over year to 0.29%. Also, provision for credit losses increased 1.6% to $62 million.
Further, KeyCorp’s allowance for loan and lease losses was $883 million, up marginally from the prior-year quarter. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other nonperforming assets were 0.66%, up 2 bps.
Capital Ratios Improve
KeyCorp's tangible common equity to tangible assets ratio was 8.43% as of Mar 31, 2019, up from 8.22% as of Mar 31, 2018. Also, Tier 1 risk-based capital ratio was 10.97%, up from 10.82% as of Mar 31, 2018.
The company’s estimated Basel III Common Equity Tier 1 ratio was 9.84% at the end of the quarter.
Capital Deployment Update
During the reported quarter, KeyCorp repurchased $199 million worth of shares as part of its 2018 capital plan.
Concurrently, the company announced its new capital plan, beginning third-quarter 2019 through second-quarter 2020. The plan includes a share repurchase authorization worth $1 billion and a 9% hike in quarterly dividend, subject to approval of board of directors.
Our Take
KeyCorp remains well positioned for revenue growth, given the rise in interest rates and solid loan and deposit balances. Further, the company’s efforts to improve fee income are commendable.
However, persistently increasing expenses owing to investments in franchise and acquisitions, are likely to curb bottom-line growth. Further, the company's significant exposure to risky loan portfolios is a major concern.
KeyCorp Price, Consensus and EPS Surprise
KeyCorp Price, Consensus and EPS Surprise | 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
Comerica (CMA - Free Report) delivered positive earnings surprise of 7.2% in first-quarter 2019 on high interest income. Adjusted earnings per share of $2.08 in the first quarter surpassed the Zacks Consensus Estimate of $1.94. Further, earnings were up from the prior-year quarter adjusted figure of $1.54.
PNC Financial (PNC - Free Report) pulled off positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflects a 7.4% jump from the prior-year quarter.
Riding on higher revenues, U.S. Bancorp’s (USB - Free Report) first-quarter 2019 earnings per share of $1.00 came in line with the Zacks Consensus Estimate. Also, the reported figure is up 4.2% from the prior-year quarter.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>