Q1 2025 Earnings Summary
- Strong Capital Position and Strategic Flexibility: The executives highlighted a robust capital framework—including a strong CET1 ratio, prior repositioning actions that improved yield, and a planned $1 billion share repurchase authorization—which provides the bank with the flexibility to support client lending and pursue opportunistic balance sheet adjustments in an uncertain environment.
- Resilient Revenue Streams and Loan Growth: Management emphasized robust fee-based revenue performance and strong growth in C&I loans (with an uptick of approximately $1.5 billion) as well as shifts from lower-yielding consumer loans that should help drive net interest income growth of 20% year-over-year.
- Preparedness Amid Macroeconomic Uncertainty: The team discussed running multiple scenarios—including recession and stagflation—and noted that their diversified fee base, disciplined risk management, and credit-quality initiatives leave them well positioned to handle headwinds while still capturing growth opportunities.
- Macroeconomic uncertainty and recession risks: Management highlighted an environment marked by heightened macro uncertainty with recession probabilities around 20%, which could negatively impact client sentiment, impair loan growth, and lead to lower fee-based income.
- Tariff and global trade concerns: The ongoing tariff dynamics were described as evolving unpredictably, potentially delaying deal execution and leading to adverse impacts on investment banking and related fee streams, while also complicating the evaluation of credit exposure.
- Vulnerability in loan portfolio growth: Although initial C&I loan growth was strong, there are concerns that any significant slowdown in economic activity or a reversal in recent gains could lead to reduced loan growth and pressure on net interest income, especially if increased credit defaults materialize.
| Metric | YoY Change | Reason |
|---|---|---|
Total KeyCorp Revenue | +16% (from $1,533M to $1,773M) | In Q1 2025, revenue grew substantially driven primarily by strong net interest income improvements and a better overall credit environment; this builds on FY2024’s modest revenue, as strategic repositioning (e.g. reinvestment from maturing securities into higher-yielding investments) helped boost revenue compared to the prior period. |
Net Interest Income | +25% (from $875M to $1,096M) | The 25% rise in NII is attributed to proactive reinvestment into higher-yielding assets, an improved funding mix, and portfolio repositioning, which offset the challenges seen in Q1 2024 such as lower loan balances and higher deposit costs. |
Net Income |
| Net income more than doubled in Q1 2025 driven by a strong recovery from the previous period’s low performance (including a significant Q4 2024 loss from a securities sale) and improvements in revenue and cost management, leading to boosted earnings for key common shareholders. |
Revenue from Contracts – Commercial Bank | +5% (from $210M to $221M) | Moderate growth of 5% reflects incremental gains in fee-based income, contrasting with the significant FX-driven jump seen in FY2024 driven by investment banking and debt placement fees, indicating a stabilization of this segment in Q1 2025. |
Long-term Debt | ~40% decrease (from $20,776M to $12,392M) | A dramatic drop in long-term debt continues from FY2024, largely due to scheduled principal repayments and a massive reduction in Federal Home Loan Bank advances, which had plummeted previously and maintained the downward trend into Q1 2025. |
Total Equity | +31% (from $14,547M to $19,003M) | Total equity improved significantly due to reductions in treasury stock and gains in accumulated other comprehensive income (AOCI) – along with a robust net income recovery – building on the enhancements initiated in FY2024. |
Depreciation | -87% (from $24M to $3M) | A steep decline in depreciation expense suggests adjustments such as asset disposals or revised depreciation schedules for premises and equipment; however, the documents do not provide detailed reasons beyond the notable drop compared to the previous period. |
Deferred Income Taxes | +900% (from $3M to $30M) | The deferred tax benefit surged dramatically, primarily reflecting the recognition of large tax benefits from securities transactions and related income tax adjustments in Q1 2025, contrasting to much lower benefits recorded in Q1 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Interest Income (NII) | FY 2025 | “Expected to be up roughly 20% for the full year 2025 compared to 2024” (Q4 2024) | “Expected to grow 20% year‑over‑year in FY 2025 ” | no change |
Net Interest Margin (NIM) | FY 2025 | “Expected to reach 2.7% or better by Q4 2025” (Q4 2024) | “Expected to reach 2.7% or better by Q4 2025 ” | no change |
Adjusted Fees | FY 2025 | no prior guidance | “Expected to grow 5% or better in FY 2025, underpinned by mid‑ to high single‑digit growth ” | no prior guidance |
Credit Quality | FY 2025 | no prior guidance | “Indicators are trending positively, but future charge‑offs will depend on the path of the economy ” | no prior guidance |
Share Repurchase Authorization | FY 2025 | no prior guidance | “A $1 billion share repurchase program was announced, expected to commence in the second half of FY 2025 ” | no prior guidance |
Commercial Loan Growth | FY 2025 | no prior guidance | “Continued strong growth expected, with pipelines elevated and project loans anticipated to fund FY 2025 ” | no prior guidance |
Deposit Growth | FY 2025 | no prior guidance | “Deposits are expected to grow mid‑single digits year‑over‑year, supported by disciplined rate management ” | no prior guidance |
Investment Banking Fees | FY 2025 | no prior guidance | “Expected to grow mid‑ to high single‑digit in FY 2025, though risks to this performance are rising ” | no prior guidance |
Expense Growth | FY 2025 | “Expected to increase by 3% to 5% compared to 2024” (Q4 2024) | “Expenses are expected to increase throughout FY 2025, reflecting salary increases, investment spending and seasonality impacts ” | no change |
Macroeconomic Assumptions | FY 2025 | no prior guidance | “Base case assumes the U.S. avoids a recession in FY 2025. Guidance incorporates a range of potential rate scenarios, including 0 to 4 rate cuts ” | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Interest Income | Q1 2025 | Up ~20% year-over-year | 1,096 (Q1 2025) vs. 875 (Q1 2024), which is an increase of ~25% year-over-year | Beat |
Noninterest Income | Q1 2025 | Up at least 5% year-over-year | 668 (Q1 2025) vs. 647 (Q1 2024), which is an increase of ~3% year-over-year | Missed |
Noninterest Expense | Q1 2025 | Increase 3% to 5% year-over-year | 1,131 (Q1 2025) vs. 1,143 (Q1 2024), which is a decrease of ~1% year-over-year | Missed |
Tax Rate | Q1 2025 | 21% to 22% | ~21% (109 in taxes on 515 of pre-tax income) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent Loan Growth Trends with Mixed Sentiment | Q4 2024 discussed modest commercial loan growth with client caution due to low utilization , Q3 2024 noted declines in consumer loans but optimism in commercial/project loans , and Q2 2024 featured cautious guidance with promise in middle market and renewables. | Q1 2025 emphasized strong commercial and C&I loan growth with active portfolio rebalancing, while still highlighting mixed sentiment amid broader macro uncertainty. | Recurring focus on loan growth remains strong, with evolving optimism on commercial/C&I segments despite persistent macro concerns. |
Net Interest Income Growth versus Margin Pressure | Q2–Q4 2024 discussions centered on structural tailwinds through fixed asset repricing, significant securities repositioning, and proactive deposit cost management (e.g., NIM increases and sensitivity to rate moves). | Q1 2025 set a target of 20% NII growth supported by improved loan and deposit performance, while margin pressure is managed via fixed asset repricing and balance sheet flexibility. | Consistent optimism for robust NII growth continues, with similar strategies deployed to mitigate margin pressures amid challenging interest environments. |
Credit Quality Concerns (NPLs, ACL, Defaults) | Q2 2024 reported increases in NPLs and modestly higher criticized loans ; Q3 2024 mentioned peaking NPLs and some higher net charge-offs ; Q4 2024 showed improved credit metrics with reserve releases and declining criticized loans. | Q1 2025 highlighted declining NPLs, reduced net charge-offs, and cautious reserve builds in light of improved credit migration trends. | Overall credit quality appears to be gradually improving, with consistent monitoring and conservative reserve practices maintained across periods. |
M&A and Investment Banking Pipeline Expansion | Q2–Q4 2024 demonstrated robust pipelines with record fees, strong M&A backlogs, and broad-based activity driven by private equity and middle-market deals. | Q1 2025 continued to report historically elevated pipeline levels and record investment banking fees, though noting a pause in new projects because of macroeconomic uncertainty. | The pipeline remains robust with a consistent growth trajectory, though current sentiment is tempered by a cautious outlook on new transactional activity. |
Deposit Beta Management and Funding Cost Pressures | Q2–Q4 2024 emphasized proactive deposit repricing, effective cost management with falling deposit costs, and targeted reductions in wholesale funding usage. | Q1 2025 reported further decreases in funding costs and improved deposit beta metrics, with continued reduction in market funding reliance. | Ongoing and disciplined deposit management strategies are in place, with steady improvements in managing funding cost pressures across periods. |
Macroeconomic Uncertainty and Recession Risks | Q2 2024 acknowledged uncertainty impacting reserve levels and credit trends while Q3 and Q4 2024 offered limited discussion, generally assuming a constructive macro environment. | Q1 2025 provided detailed commentary on broad economic uncertainty, discussing tariffs, geopolitical risks, and a potential 20% probability for a recession scenario. | Focus on macro risks has intensified in Q1 2025 with a more detailed outlook and stronger emphasis on scenario planning despite a generally optimistic base case. |
Strategic Capital Positioning and Share Repurchase for Flexibility | Q2 2024 noted improvements in capital position with rising CET1 ratios but no share repurchase plans, while Q3 and Q4 2024 concentrated on capital optimization and securities repositioning without buyback commentary. | Q1 2025 reported a robust CET1 ratio near the top of peer groups and introduced a new $1 billion share repurchase authorization slated for later in 2025. | There is an emerging emphasis on both maintaining strategic capital strength and increasing shareholder flexibility through planned repurchases, marking a shift from prior periods. |
Emerging Tariff and Global Trade Concerns | Q2 and Q3 2024 largely omitted discussion on tariffs, and Q4 2024 only briefly mentioned pre-emptive buying ahead of tariff policies. | Q1 2025 featured an extensive discussion on evolving tariffs and global trade risks, with detailed analysis of first-, second-, and third-order effects impacting client behavior. | This topic has gained prominence in Q1 2025, reflecting heightened focus on global trade uncertainties compared to minimal treatment in earlier periods. |
Declined Focus on Mass Affluent Business Growth | Q2–Q4 2024 consistently highlighted strong growth in the mass affluent segment through increased household additions, asset under management growth, and strategic hires. | Q1 2025 did not mention mass affluent business growth. | The absence in Q1 2025 suggests a potential shift in focus toward other priority areas, though previous periods indicate ongoing strength in this segment. |
Reduced Emphasis on Fixed Asset Repricing and Securities Portfolio Repositioning | Q3 2024 included major repositioning events with significant yield pickup and planned second tranche repositioning, while Q4 2024 indicated a reduced emphasis on additional large-scale repositionings. | Q1 2025 signaled a reduced emphasis on further large-scale repositioning, focusing instead on smaller, opportunistic adjustments in a stable economic setting. | There is a clear scaling back from aggressive repositioning, moving toward routine management as previous major actions have already enhanced portfolio yields. |
Less Discussion on Long-Dated Low-Yield Securities Impact | Q3 and Q4 2024 featured extensive discussion on selling long-dated low-yield securities to improve yields and liquidity , while Q2 2024 offered only minimal details. | Q1 2025 shifted the discussion to the maturing of low-yield securities as a tailwind for NII, rather than focusing on active repositioning efforts. | The focus has transitioned from actively repositioning such assets toward managing their maturation, reflecting a more routine treatment of the issue compared to previous periods. |
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NII Guidance
Q: How will NII grow 20% this year?
A: Management believes that despite current economic uncertainty, 20% NII growth is attainable thanks to last year’s proactive restructuring, solid loan and deposit performance, and effective cost management—assuming a base-case scenario without a recession. -
Margin Outlook
Q: What drives the margin improvement?
A: They expect margins to improve with strong commercial loan growth replacing lower-yield consumer loans and a favorable yield curve, though a flatter curve or reduced loan growth could pose risks. -
NII Puts/Takes
Q: What risks could derail 20% NII?
A: While prior restructuring and robust deposit growth provide a tailwind, potential reversals in the C&I loan book and a quickly flattening yield curve remain notable risks that could require funding adjustments. -
Buyback & Capital
Q: How will buybacks affect CET1 targets?
A: They plan a $1B share repurchase but will prioritize client support and capital investments; the target is a marked CET1 of 9.5–10%, with buybacks contingent on improved economic clarity in the second half. -
C&I Loan Growth
Q: What’s driving C&I loan expansion?
A: Management reported strong, broad-based C&I loan growth in regions like Chicago and Southern California, along with an uptick in utilization by roughly 92 basis points, signaling a healthy demand environment. -
Tariffs & Reserves
Q: How are tariffs impacting reserves?
A: They are conducting a name-by-name review of tariff exposures while a modest $8 million reserve build reflects a 20% recession probability, with adjustments planned as the situation evolves. -
Market Dislocation
Q: How do you capture dislocation opportunities?
A: Management sees market volatility as a chance to win share—using flexible financing strategies, especially in real estate, to bridge loans until conditions stabilize in the CMBS market. -
CRE Charge-Offs
Q: Why were CRE charge-offs elevated?
A: The increase was limited to just a couple of names rather than a broad trend, underscoring that overall asset quality remains on an improving path. -
CapEx Uncertainty
Q: What's happening with CapEx amidst uncertainty?
A: Ongoing CapEx projects are proceeding as planned, while new investments are on hold until clearer economic signals emerge to guide fresh commitments.