KeyCorp Q1 FY2025 earnings call

• Chris Gorman noted strong first quarter results with revenues up 16% and expenses flat. Credit costs, NPAs, and criticized loans trending positively. • Clark Khayat discussed earnings per share of $0.33, revenue up 16% YOY, expenses up 1% adjusted. Tax equivalent net interest income $1.1B, up 4% QoQ and 25% YOY. Non-interest income up 3% YOY. • Balance sheet: Average loans ended at $105B, C&I loans up $1.5B. Average deposits up 4% YOY. Interest-bearing deposit costs down 18 bps. • Credit quality: Net charge-offs $110M, down 4% QoQ; nonperforming loans down 9%; NPL ratio 65 bps, down 8 bps.

Revenues were up 16% from a year ago. Tax equivalent net interest income was $1.1 billion, up 4% sequentially and 25% year-over-year. Non-interest income was $668 million, up 3% year-over-year. Average loans ended at $105 billion, with C&I loans growing $1.5 billion. Average deposits increased 4% year-over-year. Pre-provision net revenue increased more than $90 million from the fourth quarter on an operating basis.

• 2025 guidance unchanged from January. Expect 20% net interest income growth. • NIM expected to be 2.7% or better. • Fee growth expected mid to high single-digits, underpinned by investment banking, wealth, and commercial payments.

• Market uncertainty and geopolitical risks impacting client sentiment and transactional activity. • Potential economic weakness affecting investment banking and wealth segments. • Tariffs creating uncertainty in reserving and portfolio exposure, with ongoing name-by-name reviews.

Q: How to reconcile macro issues with unchanged guidance?

A: Chris Gorman stated economy in uncertainty but credit book, clients, backlogs in good shape; base case is avoiding recession, running multiple scenarios including stagflation. Clark Khayat added guidance reflects actions taken last year, pipelines robust with pause in activity but expecting a snapback.

Q: Tariffs and reserving?

A: Chris Gorman said tariffs are dynamic, still in early days with first, second, and third order effects; Clark Khayat noted reserve added $8M, incorporating 20% probability of severe downturn.

Q: C&I loan growth and NII guide?

A: Clark Khayat said 20% NII guide has tailwinds from 2024 restructurings, loan growth started strong; significant pullback in C&I loan book needed to miss guide, balance sheet neutral.

Q: Margin drivers and risks?

A: Clark Khayat said margin drivers include commercial loan growth, rundown of lower yielding consumer mortgages, yield curve shape; risks include low growth, flat/inverted yield curve.

Q: Capital management and buyback?

A: Chris Gorman said targeting 9.5%-10% marked CET1, will commence share repurchase in second half with clarity on economy and Basel III endgame; Clark Khayat added prioritization is supporting clients, investing in business, then capital levers.

Q: Commercial real estate charge-offs?

A: Clark Khayat said two names came off in the quarter, portfolio health improving generally but specific names can affect ratio.