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KEYCORP /NEW/ (KEY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 EPS was $0.41, up 17% QoQ and 37% YoY, with revenue (taxable-equivalent) of $1.895B, +3% QoQ and +17% YoY on an adjusted basis; net interest margin rose 9 bps to 2.75% and credit quality improved (NPAs -6% QoQ) .
  • Consensus context: EPS beat S&P Global by ~3c; revenue comparison depends on definition—on S&P “Revenue” metric KEY missed, while company TE revenue was above $1.895B* .
  • Management raised full‑year/outlook targets (NII growth to ~22%, 4Q NIM to 2.75–2.80%, 4Q ROTCE to 13%+) and plans ~$100M of Q4 buybacks, citing strong capital (CET1 11.8%, marked CET1 10.3%) .
  • Catalysts: increased buyback, guidance upward revisions, Fitch upgrade to A- senior unsecured, and sustained momentum in fee businesses/investment banking pipelines .

What Went Well and What Went Wrong

What Went Well

  • Adjusted revenue grew 17% YoY and operating leverage exceeded 1,000 bps; noninterest income rose 8% YoY on strength in investment banking, trust, and commercial payments .
  • Deposits and funding: average deposits +2% QoQ with cost down 2 bps to 1.97%; NIM reached 2.75% one quarter ahead of target amid balance sheet optimization and swap/fixed‑rate repricing tailwinds .
  • “We raised a robust $50 billion of capital on behalf of our clients during the third quarter while retaining only 15% on our balance sheet… Assets under management reached a record $68 billion” — Chris Gorman .

What Went Wrong

  • Expenses: noninterest expense rose 7% YoY (personnel +$72M on incentives and investments), dampening operating leverage in the near term .
  • Credit costs: net charge-offs increased QoQ to $114M (0.42% of average loans), though within full‑year guidance; provision fell QoQ but rose YoY .
  • Corporate services and operating lease income declined QoQ; consumer loans continued intentional run‑off, reducing consumer balances and revenue contribution .

Financial Results

Core P&L and Profitability (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Diluted EPS – Continuing Ops ($)$0.33 $0.35 $0.41
Total Revenue (Taxable-Equivalent) ($MM)$1,773 $1,840 $1,895
Net Interest Income (TE) ($MM)$1,105 $1,150 $1,193
Noninterest Income ($MM)$668 $690 $702
Net Interest Margin (TE) (%)2.58 2.66 2.75
Cash Efficiency Ratio (%)63.5 62.4 61.8
ROTCE (%)11.24 11.09 12.51
Provision for Credit Losses ($MM)$118 $138 $107
CET1 Ratio (%)11.8 11.7 11.8

Actual vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Primary EPS$0.381*$0.41
Revenue$1,884.8MM*$1,895MM (TE) / $1,779MM (S&P actual)*

Values with asterisk retrieved from S&P Global. Note: S&P “Revenue” definition may differ from company’s TE revenue.

Segment Breakdown (Taxable-Equivalent Revenue and Net Income)

SegmentQ3 2024Q2 2025Q3 2025
Consumer Bank Revenue ($MM)$800 $912 $935
Consumer Bank Net Income ($MM)$75 $122 $152
Commercial Bank Revenue ($MM)$866 $974 $1,014
Commercial Bank Net Income ($MM)$299 $349 $367

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Average Loans ($MM)$104,354 $105,715 $106,227
Average Deposits ($MM)$148,542 $147,446 $150,374
Cost of Total Deposits (%)2.06 1.99 1.97
NCOs to Avg Loans (%)0.43 0.39 0.42
NPLs / Loans (%)0.73 0.65 0.62
Loan-to-Deposit Ratio (%)70.2 72.9 71.0
Tangible Book Value/Share ($)$12.40 $12.83 $13.38
Assets Under Management ($MM)$61,053 $64,244 $67,855

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average LoansFY 2025 vs FY 2024Down 2–5% Down 1–3% Raised
Ending LoansFY 2025 vs YE 2024Flat vs YE 2024 Up ~2% vs YE 2024 Raised
PE Commercial LoansFY 2025Up 2–4% Up ~5% Raised
Adjusted Noninterest IncomeFY 2025Up 5%+ Up 5–6% Raised
Adjusted Noninterest ExpenseFY 2025Up 3–5% Up ~4% Maintained/Narrowed
Net Interest Income (TE)FY 2025Up 20–22% Up ~22% Raised to high end
Net Interest Margin (TE)4Q25~2.75% 2.75–2.80% Raised
ROTCE4Q25 vs 4Q2411%+ 13%+ Raised
GAAP Tax RateFY 2025~21–22% ~21% Lowered
Tax-Equivalent Effective RateFY 2025~23–24% ~22% Lowered
NCOs to Avg LoansFY 202540–45 bps 40–45 bps Maintained
Common DividendFY 2025$0.205/qtr (declared May/July) $0.205/qtr (Q3 declaration) Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
NIM trajectory and balance sheet optimizationNIM up 17 bps to 2.58%; securities repositioning benefit NIM up to 2.66%; swap maturities and repricing NIM 2.75; reached YE target early; expect modest further growth Improving
Fee businesses momentum (IB, payments, wealth)Record 1Q IB fees; payments growth; servicing fees rising Strong IB (+41% YoY); payments +9%; AUM $64B IB fees $184M; pipelines “up materially”; AUM record $68B; payments high-single-digit growth Strong and building
Deposit betas/mixCost down 12 bps; client deposits +4% YoY Cost down 7 bps; interest-bearing betas ~55% Cost down 2 bps; cumulative IB beta ~55%; funding neutral to cuts Easing costs
Capital and buybacksBoard authorized up to $1B repurchases CET1 11.7%; marked CET1 10.0% CET1 11.8%; marked CET1 10.3%; ~$100M Q4 buyback planned Accreting; buybacks resuming
M&A appetiteN/AN/AVery high bar; focus on organic growth; TBV dilution sensitivity; tuck‑ins only Disciplined
Regulatory environmentN/AN/AShift to safety & soundness; concurrent exams reduce duplication Constructive
CRE servicing/special servicingServicing fees rising; active special servicing Fees near historic highs; active balances elevated Fees to decline to $60–65M in Q4 as resolutions progress Normalizing
Prime rate changesN/ALowered prime to 7.25% (Sep) Lowered prime to 7.00% (Oct) Easing rates

Management Commentary

  • “Adjusted revenue was up 17% year‑over‑year, and we generated more than 1,000 basis points of operating leverage… AUM reached a record $68 billion… We raised a robust $50 billion of capital on behalf of our clients…” — Chris Gorman, CEO .
  • “We believe we can achieve a return on tangible common equity of 15% or better… by improving NIM to 3.25% or better… half from mechanical lift of fixed asset repricing, half from strong execution in our businesses…” — Clark Khayat, CFO .
  • “We expect to be back in the open market repurchasing approximately $100 million of common stock in the fourth quarter… the 15% should not be viewed as a final goal” — Management on capital return and returns path .

Q&A Highlights

  • ROTCE/NIM target path: Management detailed drivers to reach 15%+ ROTCE and ~3.25% NIM by 2027 with low execution risk; additional buybacks/restructurings could accelerate .
  • Bank M&A stance: Very high bar; focus on organic growth, tuck‑ins supporting targeted scale; acute sensitivity to TBV dilution; capital prioritized to clients, dividend, buybacks .
  • Deposits and betas: Commercial deposits recovered amid more rational competition; improving mix with non‑interest bearing growth; consumer remix from CDs to MMDAs .
  • Buybacks pacing: ~$100M in Q4 likely a low end; more direction expected for 2026 as uncertainty normalizes .
  • Regulatory tone: Shift to safety & soundness and exam coordination; expected to aid operational focus (e.g., cyber) .

Estimates Context

  • EPS beat: $0.41 actual vs $0.381 consensus* .
  • Revenue comparison varies by definition: S&P “Revenue” consensus $1,884.8MM vs S&P “actual” $1,779.0MM*, while company TE revenue reported $1,895MM .
  • Implication: Street EPS revisions likely upward; revenue revisions may focus on net interest trajectory and definitional harmonization (TE vs GAAP).
    Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • Momentum intact: sequential NIM expansion, deposit cost relief, and fee strength underpin positive operating leverage and upgraded FY/NIM/ROTCE guidance .
  • Capital optionality: CET1 11.8% (marked 10.3%) supports resumed buybacks and potential restructuring to accelerate returns; Q4 ~$100M repurchases begin the cycle .
  • Credit within plan: NCOs at 42 bps (in‑range), NPAs down; special servicing fees likely normalize as resolutions proceed .
  • Fee durability: investment banking pipelines “up materially,” payments high‑single‑digit growth, and record AUM indicate resilient noninterest income .
  • Guidance raised: high‑end NII growth (~22%), 4Q NIM 2.75–2.80%, ROTCE 13%+—supports EPS upgrade potential near term .
  • Near‑term trading: Positive catalysts from buybacks and guidance raise; watch expense trajectory (personnel incentives) and CRE servicing normalization .
  • Medium‑term thesis: Path to 15%+ ROTCE driven by NIM lift, disciplined expense, granular deposits, and balanced loan growth; capital return likely scales in 2026 .

Additional relevant Q3 press releases

  • Prime rate reductions: lowered to 7.25% (Sep 17, 2025) and 7.00% (Oct 29, 2025), consistent with easing rate environment .
  • KBCM activity: $75M financing for Lightshift Energy (Oct 16, 2025), reflecting active capital markets franchise .