Sign in
K/

KEYCORP /NEW/ (KEY)·Q2 2025 Earnings Summary

Executive Summary

  • EPS of $0.35 exceeded S&P Global consensus by ~$0.01; company-reported total revenue (TE) of $1.84B rose 21% YoY with NIM up 8 bps QoQ to 2.66%. Note: S&P’s revenue definition shows a miss vs consensus due to methodology differences (see Estimates Context) . EPS/Revenue consensus from S&P Global: $0.3435* / $1.807B*.
  • Management raised 2025 guidance: NII (TE) growth to 20–22% (from ~20%), 4Q25 NII up 11%+ YoY (from 10%+), 4Q25 NIM ~2.75% (from 2.70%+), average loans down 1–3% (from down 2–5%), ending loans up ~2% (from flat); commercial loans now ~+5% (from +2–4%) .
  • Credit trends stable-to-improving: NCOs fell to 0.39% (down 4 bps QoQ), NPL ratio ~0.65%; provision rose to $138M on a $36M reserve build for loan growth/mix and macro .
  • Deposit costs declined 7 bps QoQ (IB deposits -9 bps); L/D 72.9%; AUM reached a record $64.2B; investment banking fees +41% YoY, with 3Q fees expected roughly similar if conditions hold .
  • Potential stock catalysts: upward estimate revisions from raised NII/NIM and loan guidance; clearer capital return path (modest buybacks targeted in 3Q with a step up in 4Q, market permitting) .

What Went Well and What Went Wrong

  • What Went Well
    • Structural NII tailwinds delivered: NII (TE) +4% QoQ, NIM +8 bps to 2.66% on deposit beta management, asset repricing, and loan growth . “Our clearly defined structural net interest income tailwind is materializing as expected” — CEO .
    • Fee momentum: Investment banking fees +41% YoY; company raised >$30B for clients, retaining 22% on balance sheet; AUM at record $64B; commercial payments fees grew high-single digits .
    • Credit quality stable-to-better: NCOs 0.39% (down from 0.43%); criticized outstandings and delinquency metrics improved or stable .
  • What Went Wrong
    • Provision rose to $138M (+16.9% QoQ, +38% YoY) as KEY added $36M to ACL for loan growth/mix and a softer macro scenario .
    • Expense growth: Noninterest expense +7% YoY (+2% QoQ), including higher incentive comp on strong fee generation and a $10M charitable contribution .
    • Funding and competition: Average deposits fell 0.7% QoQ as KEY let higher-cost commercial balances and retail CDs roll off; management flagged rising commercial deposit competition ahead .

Financial Results

MetricQ2 2024Q1 2025Q2 2025 (Actual)Q2 2025 Consensus*
Diluted EPS – continuing ops ($)0.25 0.33 0.35 0.3435*
Total revenue (TE) ($B)1.526 1.773 1.840 1.807*
Net interest income (TE) ($B)0.899 1.105 1.150 —
Net interest margin (TE) (%)2.04 2.58 2.66 —
Noninterest income ($B)0.627 0.668 0.690 —
Noninterest expense ($B)1.079 1.131 1.154 —
Provision for credit losses ($B)0.100 0.118 0.138 —

Notes: TE = taxable-equivalent. Consensus values indicated with * are from S&P Global.

Segment performance

SegmentQ2 2024 Revenue (TE) ($B)Q1 2025 Revenue (TE) ($B)Q2 2025 Revenue (TE) ($B)Q2 2024 Net Income ($M)Q1 2025 Net Income ($M)Q2 2025 Net Income ($M)
Consumer Bank0.758 0.871 0.912 59 116 122
Commercial Bank0.768 0.942 0.974 206 321 349
Other0.000 (0.040) (0.046) 8 (31) (48)

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Average loans ($B)108.961 104.354 105.715
Average deposits ($B)144.180 148.542 147.446
Cost of total deposits (%)2.28 2.06 1.99
Loan-to-deposit ratio (%)74.0 70.2 72.9
CET1 ratio (%)10.5 11.8 11.7
Tangible book value/share ($)10.13 12.40 12.83
NCOs / Avg loans (%)0.34 0.43 0.39
NPLs / Loans (%)0.66 0.65 0.65
Assets under management ($B)57.602 61.053 64.244

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average LoansFY2025 vs FY2024Down 2–5%Down 1–3%Raised
Ending LoansYE2025 vs YE2024FlatUp ~2%Raised
Period-end Commercial LoansFY2025Up 2–4%Up ~5%Raised
Net Interest Income (TE)FY2025~+20%+20–22%Raised
4Q Exit-Rate NII vs 4Q244Q2510%+11%+Raised
Net Interest Margin (TE)4Q252.70%+~2.75%Raised
Adjusted Noninterest IncomeFY2025—Up 5%+ (baseline $2.645B)Affirmed/quantified
Adjusted Noninterest ExpenseFY2025—Up 3–5% (baseline $4.520B)Affirmed
NCOs / Avg LoansFY2025—40–45 bpsReiterated
Tax Rate (GAAP / TE)FY2025—21–22% / 23–24%Affirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
NII/NIM trajectoryQ4: 2025 NII +20% and 4Q-to-4Q +10%+, NIM 2.7%+ by 4Q25; structural tailwinds from securities repositioning . Q1: Reiterated +20% NII and 2.7%+ 4Q NIM; PP&R rising .Raised to +20–22% NII; 4Q NIM ~2.75%. Affirmed 3% NIM by end-2026 .Improving
Deposits & betasQ4/Q1: Betas outperforming; costs down sharply; NIB ~19%/23% incl. hybrids .Total/IB deposit costs -7 bps/-9 bps QoQ; expect more competition in 2H .Mixed: costs down, competition rising
Loan growth & pipelinesQ4: Commercial outgrowth vs H.8 long-term; pipelines elevated . Q1: C&I spot +$1.5B; utilization ticked up; pipelines robust .Period-end loans +$1.6B QoQ; C&I spot +$1.7B; guide raised; utilization ~32% (+50 bps) .Improving
Capital markets (IB/DCM/ECM)Q4: Strong year; $125B capital raised; pipelines high . Q1: Record 1Q IB; elevated pipelines .IB fees +41% YoY; 3Q fees could be similar to 2Q if conditions hold .Strong/stable
Credit qualityQ4: NPAs peaking; expect decline by mid-2025 . Q1: NPLs -9% QoQ; reserve built for macro uncertainty .NCOs down to 0.39%; NPLs stable; $36M ACL build for growth/macro .Stable-to-better
Capital & buybacksQ4: CET1 12%/marked 9.8%; $1B buyback auth to begin 2H25, dependent on macro .CET1 11.7%/marked ~10%; plan “modest” 3Q repurchases, stepping up in 4Q (flexible) .Clarifying path
Consumer strategyQ1: Consumer mortgage runoff; consider future consumer re-acceleration .Leaning into HELOC opportunity ($2–3B over time) .Pivot to HELOCs
Tech/operationsQ4: Core modernizations; cloud migration; +10% tech spend to ~$900M .Continued hiring (+10% frontline in 2025), cloud adoption, ML/RPA efficiency focus .Ongoing investment
Macro/tariffsQ1: Clients paused activity post tariff headlines; scenario planning .Clients “cautiously optimistic”; watch leverage/Medicare-dependent sectors; bonus depreciation could spur capex .Slightly improved tone

Management Commentary

  • “Our clearly defined structural net interest income tailwind is materializing as expected. We are enjoying significant success in the marketplace while concurrently making investments in people and technology that will drive our future growth.” — CEO Chris Gorman .
  • “We now expect full-year net interest income growth of 20%–22%… 4Q exit rate NII up 11%+ and 4Q NIM ~2.75%… We’ve also improved our loan guidance.” — CFO Clark Khayat .
  • “Investment banking had its second-best first half… Several clients accelerated transactions into the end of the quarter… we’re optimistic 3Q investment banking fees could look similar to 2Q levels.” — CFO Clark Khayat .

Q&A Highlights

  • Investment banking/3Q outlook: Late 2Q rally; 3Q IB fees could approximate 2Q if markets hold; pipelines backfilled after pull-forward .
  • Deposit strategy/pricing: Active decision to let some high-cost commercial deposits and $1.4B of retail CDs roll; balance growth expected to resume in 2H with local-market pricing discipline .
  • Capital return: With marked CET1 ~10%, plan modest buybacks in 3Q, stepping up in 4Q, maintaining optionality for client support, hiring, tech, and tuck-in M&A .
  • NIM path: Still target ~3% by end-2026 at current course; excess cash depressed 2Q NIM by 4–5 bps; ability to lower cash if environment constructive .
  • Credit & reserves: Reserve build split between loan growth/mix and macro scenario; potential room to reduce reserve if economy improves; monitoring leverage and Medicare-exposed sectors .

Estimates Context

  • S&P Global consensus (Q2’25): EPS $0.3435* vs actual $0.35 (beat); Revenue $1.807B* vs S&P-actual $1.693B* (miss). Company-reported total revenue (TE) was $1.840B, reflecting TE adjustments and company methodology . Differences between S&P’s “Revenue” definition and company TE totals can create apparent revenue “misses” despite strong company-reported revenue growth.
  • Forward implications: Raised NII/NIM and loan guidance should support upward EPS revisions; expense guide maintained at +3–5% (planning midpoint); credit guide unchanged at 40–45 bps NCOs .

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Positive estimate revision setup: Raised NII/NIM and loan outlooks alongside stable credit underpin potential EPS upgrades .
  • Durable NIM trajectory: Structural asset repricing and deposit beta management lifted NIM to 2.66%; 4Q25 ~2.75% and 2026 ~3% remain credible targets barring adverse macro .
  • Fee flywheel intact: IB/DCM/ECM momentum, record AUM, and payments growth diversify revenue against loan-market variability .
  • Capital return visibility: CET1/marked CET1 at upper peer levels enable “crawl-walk-run” buybacks beginning 3Q; optionality prioritized .
  • Credit discipline: NCOs dipped to 0.39%; reserve build reflects prudence versus deterioration; watch leveraged borrowers and Medicare-dependent sectors .
  • Funding resilience: Deposit costs trending lower with L/D at 73%; management expects deposit growth in 2H despite localized competition .
  • Tactical consumer pivot: HELOC opportunity targeted as mortgage book intentionally runs off, improving asset mix and returns .

Appendix: Additional Details

  • Dividend: KEY declared $0.205 per share in May, payable in 2Q25 .
  • Capital ratios: CET1 11.7%; marked CET1 ~10% (AOCI included); TCE/TA 7.8% .