KEY - Earnings call transcript Q1 2018

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Operator

Good morning. And welcome to KeyCorp’s First Quarter 2018 Earnings Conference Call.

As a reminder, this conference is being recorded. I would now like to turn the conference over to the Chairman and CEO, Beth Mooney. Please go ahead.

Beth Mooney

Operator. you, Thank welcome Call. and First XXXX Quarter Good to Conference Earnings morning, KeyCorp's In Kimble, are Officer me the with room Don Gorman, President and our our of Banking. Chris Financial Chief and our on is measures. X Slide forward-looking disclosure non-GAAP statement financial as It question-and-answer as segment and the call. well covers the materials our presentation comments, of X. turning am now I to Slide

more continued and quarter core a businesses our our was to economic expanded and The clients. large in with positive good first targeted the small. year dialog from markets improving we we grew and momentum start a for relationships our clients activity in KEY client with seeing are backdrop as and With sentiment, healthy strong

We and pipelines continue strong. take remain our share to

this we had into closing. activity of for expanding and and The loans, in the fee well out competitive up growing in the per XX% equity positioning. was up the this tangible corporate year coming return quarter of market quarter prior share our middle revenue average Earnings growth of our adjusted over from The was reflects results momentum fourth Our were margin, reflect and Reported X% performance from the was the as common success X% first and from quarter we quarter. and it strong over and XX% solid for common strength growth up commercial in was on based loan X.X%, quarter growth based generated purchase which revenue and for businesses. quarter, relationships, of broad higher driven a model industrial by loans growth first our net the business primarily carry the a and interest was accounting to pipeline the year and linked strong quarter. as last accretion,

debt banking attractive solutions help based to drive our sheet our meet level. our on managed generate range capital. markets quarter income, KEY investment alternatives returns needs, once to record and a risk including that financing a fees our drive again to clients’ off placement clients, ability first portfolio reflected Our and of Capital offer to enables fee businesses balance fee execution full

the period, were of our saw we to we Don XXXX well quarter for in the quarter, elevated comment. in both the off technology vary of activity and walk clear will Expenses balance result as higher high his of and sheet success as While can and investments. level results given items in through year. the in this mix certain But costs remain severance, reflection importantly, of the to quarter will any and continue a strength believe committed our of be the be as point a achieving the expense line model. benefits first acceleration that our on guidance the and expense

Given toward high and our of we this of efficiency for XX% year. end end revenue XX% outlook lower by the our growth expenses, expect ratio the to to term of target move long

the First we integration second that including efficiency from were our a that captured are quarter in implementation expense on results. the We've a from last expense year to to number when Niagara also across opportunities previously, initiatives, on including carryover discussed our have remaining fully company, we devoted of started the several the resources acquisition. of As saves realizing be continue will benefit execute

remain factors Final while several contracts, loans of shareholders seasonal repurchases. has our ratio consistent, party through a savings stronger year, move realignment start committed at priorities. business position to to through differences net as savings quality over I the the and additional the Credit remains high target our growth expected achieving large timing and these approaching was it meaningful incremental through strong pleased which the the degree such in back points. our we to third year. capital. confidence efficiencies a end make vendor with remained this year. as will the are highlight both from a middle the across come sections remain and branch areas things the slide risk of to portion with capital consistent month, Expenses was of the on plan reflected come returning from our we risk this a capital solid We course the of maintaining to have submitted our position, profile. the franchise. Earlier are strength CCAR capital and to plan and and to And seeing capital realizing approach of our our our earnings share consolidations, on We path maintaining stated and our in progress of in charge-offs upper units. Overall, also two we terms XX moderate process we management some basis dividends was down other efficiency year, our with office

Now, over I’ll the the Don? call turn quarter. Don on for detail more to

Don Kimble

on first I’m share. $X.XX quarter income Thanks, net Slide common from We reported per Beth. of X. continuing operations

notable to in compared the quarter items. year ago results fourth the per period prior adjusted with $X.XX periods in $X.XX to share Our and exclude

on quarter. XX.X% average common first to in the return tangible Our grew equity

elevated expenses Our quarter. in the ratio was by efficiency cash impacted first

we effective from GAAP to I rest will now our from high ratio the change as efficiency items on slide more this $XXX end I In we first XX% will million were $XX of the of many credits on up investments end recent cover tax fourth of quarter. and in average plans law the of from loans billion have assets. we a the XX%, tax-advantaged but Beth this presentation, to quarter, Total the to to remaining Slide tax I’m rate and in and expenses benefited later, X. of approach target of and my reflecting of detail mentioned our turning place by as year. in XX% expect Importantly, reduce the comment

up corporate bank, commercial quarter and by annualized. in were driven Community relationship growth markets. linked new a on our which and business our was over activity from both growth and we loans, was saw our in Bank The good business overlap X% core industrial quarter First

continue Importantly, continuation standards pay reflected and pushed our remain also this we maintained the growth and on move momentum trend were we from The of the into selective that we and expect elevated this the year. at slowed the as focused this we first strong Loan end, pipelines. quarter clients significantly targeted and deals quarter our underwriting were downs to through carryover segment. quarter had still would year

business of relationships. dealer consumer geographies lending our we On and growth into saw side, existing the the from expansion auto

on of Slide on positioned second to higher our balances year, $X.X commercial reflecting billion up from portfolio see as and compared as with X. quarter, recent shift a billion annualized of into was increases as to the deposits we from deposits deposits total also into growth certificates migration to or totaled balances higher coming for X cost continued the our the The the fourth saw quarter. ending to $X billion, quarter. are yielding rate continue billion We basis up into well the prior points we -- of deposits. cost this retail average and mix Compared XXXX, fourth loan quarter of Continuing $XXX Average first X% $XX quarter down the of products.

bearing the is was from bearing increase fourth balances seasonal driven On These our We deposit primarily These deposits. non-interest growth NOW XX% were well in basis, certain short-term also partially linked in year quarter as due the prior non-interest quarter offset accounts by change higher due shift to deposits. managed bearing to a decline non-interest and consumer elevated saw in consumer as public deposits. money-market exit decline cost were and our deposits. corporate largely in the escrows. by and in of a declines mix deposits sector

consumer a deposit our We deposit stable mix. continue have with to accounting XX% deposits core of strong total for base

quarter to X.XX% of Purchase equivalent million, the compared to first quarter was or and in and points margin to quarter the results. interest X.XX%. net and $XXX the results in XX $XX of X. net quarter Turning in quarter quarter our for first fourth XX approximately interest From quarter. XXXX. account contributed and expect decline margin This $XX of in $XXX first with XX% fourth the income equivalent million The net net basis interest of a was accretion points XXXX. million points we accounting These of accretion taxable million XXXX. to the compares XX income continue the X.XX% basis margin per $XXX basis level, $XX to XXXX, or by first million million Slide for interest or first quarter Taxable purchase

driven largely million $XX quarter deposit accretion, low increase data. income first net was and by The interest up Excluding of purchase higher accounting from managed XXXX. the rates was

increased the interest income the accretion, X.X% quarter assets was interest by adjustment. offset Net have earning equivalent the day million $XX increased million by from accretion first total Excluding the purchase impact purchase lower of accounting short-term lower of $X accounting liquidity revenues or XXXX. and of quarter excluding higher count as would levels with of taxable the partially rates and benefit the from

we net rate the to as are the move be $X.XX which of another remainder year, in the excluding our our end rate the net continued for accretion, increase accounting from assumes March sheet and year and of income range modestly the purchase increase Reflecting the expectations in the core increasing million $X.XX year. mid-year to interest margin, a this billion. by We remainder of year, balance expect of well our outlook for to now growth $XX as toward higher the billion

as which Brothers, benefit from was by compared year million X. investment year quarter the million Slide investments we benefit KEY’s platform. up was million, of were to from Moving the our record markets year from largely banking the placement prior to for acquisition ago as quarter the continue Cain XXXX across $XXX as in well fee-based of million Growth capital businesses. quarter $XXX ago period fees, driven several first $XXX the first from we non-interest debt strength for $XX our to of income as for

including momentum and payments quarter driven our in to was in non-interest The other fee-based XXXX by areas, We million. investment and $XX decrease services. several corporate placement, impacts seasonal businesses, leasing largely and commercial and debt by saw insurance. income life including fourth Compared fee-based banking many also deposit cards of decreased

expense fourth notable the number quarter seasonal items, charges adjusted Slide tax reflected of number XX. which compares quarter the was with quarter which actions. of The billion quarter for impact to of comparison including billion with the merger-related and in related and impacted a the and quarter. current XXXX, the items, the timing reform for $X.XXX $X.XXX non-interest to KEY’s first Turning prior a fourth

this of of increase the Excluding $XX higher notable million $XX related employer the million were to items due increases from expenses million prior and personnel in the were primarily costs -- technology costs, approximately drivers seasonal the the healthcare up acceleration quarter. first into fourth benefits quarter. accretion costs $XX period, and development from employee in in taxes The

these incurred in non-personnel operational true-up decline a quarter. in was were expenses, despite line $X also the a impact from higher cost of $XX costs of increase The incentive We in this increases offset of million $X net personnel million compensation. accounting purchase And $XX increase losses. personnel and by more in $X million and reduction severance than resulting offsetting million million

to quarter high billion reflected targeted $X.XX the we First Contributing cost be level will in that to remaining expense for for our should the lower second will results. year, quarter fully will XXXX. our expense of rate $XX be elevated expense base achieve our which this point expect billion Niagara represent of range the and $X.XX run our million, We

are year. contribute continued we of culture, part that results Company will ongoing our across our Additionally, implementing this as improvement the plans to

savings cost contracts; close vendor Beth expecting units; functions; adjustment XX realignment and of realizing efficiencies organization. branch additional this to back-office from As from year; mentioned, include and the business middle these consolidations additional staffing models several reductions branches third-party to throughout

Again, year. full-year long-term to to to these our efficiency billion. the of target maintaining end of guidance by the be high we approaching billion of of $X.XX With expect XX% we’re end ratio expense XX% for non-interest $X.XX our this efforts,

on Slide Moving to XX.

our but in credit $XX losses charge-offs Slide company of XX, period ratio of below loans Net XX. for Our loans. period or which remains from X% for were the loans continues Provision Capital to quarter our XX points XXXX, Tier the quarter, the was to end XX%. first Non-performing be end basis were and X for of of the non-performing loans. with strength total fourth to quality million total targeted quarter, strong. XXX% reserve basis losses At range. million X% $XX XX of turning our loans or million equity the loan $XX points remains coverage credit March quarter. up average prior a And represented of common end represented at

to repurchase to our the with the totaled million. capital requested a capital our common payout quarter, earlier which this We to continue messages plans the XX%. which $XXX range to level actions, to long-term earlier during targeted We dividend of shares continuing of consistent our common are with month XX% approaching increase submitted

requested Our of XX also X% move our for will Tier XXXX. equity X long-term to share is outlook capital closer our our target Slide to repurchases X.X%. common

our we tax With higher adjusting shared the and the same you of January. rate remains our guidance, with net in exception income what with interest outlook the

growing to loans. to less deposits increase $XX.X expect billion continue with We to balances to range billion than $XX.X average loan

is As guidance with assuming and $X.XX our We be in assumptions. in also Niagara into in $X.X will range expect I In as interest net the the sheet billion rates income businesses increase of anticipate year. income billion $X.X rate interest the billion one to to continue sensitivity revenue the in outlook middle and slide, growth billion year our which our net the another synergies. of to mentioned drive interest range later -- we our provides to we First balance the updated earlier, appendix, our of more from core $X.XX different be non-interest

in first non-interest marking points $X.XX billion targeted for guidance to tax to of charge-offs range the to expect the the year. point We expense our quarter $X.XX to GAAP we've this net XX% high lower to XX%. the exceed basis continue point And basis rate to remain XX with expenses our and loan level loan our be billion charge-offs Net XX in below slightly full-year expect for to of growth. given our range quarter, points should provided our provision starting loss for our down adjusted of

Beth start with meaningful now to in we to expense the long-term this turn for outlook over this I'll There achieving year our call was and a expect remain seasonality our confident to the make portion operator toward call. us continued franchise. then of goal. the on instructions As our the said, year was Q&A progress for back our good noise some for across Operator? the growth but and

Operator

Instructions]. [Operator you Thank

Zerbe from Stanley. with is one First Please the go line ahead. of Ken Morgan

Ken Zerbe

or on efficiency the guys target. intangible to Just you referring ratio, you excluding ratio the have amortization? question a efficiency quick Are reported are XX% to the XX%

Don Kimble

ratio our efficiency cash why that’s intangible, use than would we Other correct. that’s which and target, as the exclude

Ken Zerbe

in there. guidance. about assume call side let’s see the But expense built you And additional, we -- here. it’s then Because risk future question is, from or spend I that technology up I’m accelerated guess, of risk your quarters about into that curious spend. it, in technology technology I may terms are guess all my thinking is expense what guess I additional just how the I

Don Kimble

expenses will manage and far our technology first will as the No, we quarter expect that forward. our point to it like high would continue the be as overall, guidance built appropriately and spend is we going into

Ken Zerbe

expect just that And question. do over you deposit On last in you migration is into of mentioned and the X, Thanks. how then course on the you elaborate higher terms year? Slide pervasive just of what yielding the side. one Can products the

Don Kimble

the but core in to there change essentially that some commercial yet. we’re pricing in much the money increased consumer lot we others that we’re customers that’s other market of in line are see seeing products. can a going And you are get and rate, seeing think the I not deposit and deposit more time than the item, growth where

back we’re And that into so we year. and time continue that seeing expect deposits the next drift to throughout

Operator

go go And next Please to Siefers Scott we’ll O’Neill. with Sandler ahead.

Scott Siefers

Thank highest, on little what or expect here. more maybe the more do in there think typically year. to high XQ of the is by you’re almost the from an to like in year. that wide question down then tends going a the the the willing from would for typically margin, guess they clockwork, the the first is, the expenses course specific on this to fourth and almost about guess the because expenses is growth project then is be you guess asking trajectory reverse the wondering this watermark going on for step the you the the quarter I investment in change And is of of and I way comments over I’m I’m way ratable thoughts follow for low are year I mostly down watermark you I the and some remainder immediate if -- your your quarter if cost year banking. the

in think So fourth expenses seasonal costs the a of even increase into in the have weaker you cost. baked what so that and lower year and quarter guide, end the of is you typically still compensation you in spite can

Don Kimble

at say we the quarter first that from our fourth average down And that I quarter look for level expenses outlook $XX on would be about should as imply second through million. that would the

us And and the of quarter, operating accounting. elevated here what we and so I costs incurred that about benefit also as $X true-up if what in look million which Purchase accounting far $X had first about items some we about losses in $XX we as which we the one-time cost also would cost had us million mention higher at million. the

those that quarter, adjustment not But accounting down to that those operating higher year some taking do meaningful We true-up for losses we meaningfully recapture the investment increased continue banking items merit offset the we’ll cost here of expect but for base. combined question, windfall the also do second won’t also includes be to the in that be a that. that fees XXX% the the through to in expecting down of expect achieve. are some well. would million expect consideration rest we $XX benefit purchase in are $XX to those quarter. other and will to million of in so things and your a earlier savings as we compensation that related of We see would this three see other throughout range. come the increases And come expect to the We’d which occur second some by And of

and And our would as see we expenses expect to this have for and is of to about expense result, more guidance in improvement savings years as achieve that different increases. timing compared that’s to a so offset these making year seen of year as as we previous programs of related we in and the sure this a our that those that would talked we’ve embedded continues some trajectory far those what part

Scott Siefers

to basically to -- on be got almost revenue So happens enter of right? happens, base side, plan what regardless of what XXXX going a lower XQ now of your you’re off the expense we is regardless than

Don Kimble

on expense expectation timing It’d we based be these our about. initiatives the talked of

Operator

ahead. Usdin go go Jefferies. Ken we’ll to with Next Please

Ken Usdin

trend as quarters it have Just question should to watermark are up Scott’s absolute we hallway? go to then color going first ’XX rest we down, the the so down for we an into The the follow as for year all go just seasonality now different -- but expense new questions, be Don. quarters seems on are like thanks expect well or a of should we’ll for expense a like down, generally the just is the to down expect we the high

Don Kimble

had cost been were say of $X mainly were our in of which the expect that would benefit items also of million $X other quarter, wouldn’t every up some forward. quarter. quarter costs accounting and which Benefit had also to see into mentioned, true was year, items higher We purchase of severance seasonality would the expectations themselves have elevated I expect this the have going to about $XX what about then continue and million we higher, would we losses, the the operational coming of that first the compared million we we because I two expenses. first

Ken Usdin

-- on end things the you XX.X really XX us just to that -- just helpful really approaching really, given -- then printed that all far-far to really And approaching or just you talked I expected that a us you away the can can about. give to directionally of side. want from it tight XX what that’s means, to actually help get is XX high understand you just XX is really

Don Kimble

We XX approaching closely mean that side. will be we that

Operator

next Our Gerard Cassidy with Capital ahead. is RBC question go Markets. from Please

Gerard Cassidy

loan that's with First some in franchise it us was Can give the I quarter, the am geographically? think And about some some growth. coming us Niagara color and additional about growth you you further that share strong had color, I may growth sequentially guess. commercial this from where area came annualized Don something Can you with I some be you from on mentioned some overlapping, assuming XX%, the

Don Kimble

that Chris as more The things, some growth we is well. you’re ask out pipelines color quarter number and there. driven fourth the have we first provide I’ll that so But into got one volumes a by did growth here and really the pushed quarter, saw of right. to was of some

than the billion also fourth what quarter. this We lower downs pay-offs in and we quarter about $X.X pay was quarters this had from being lower that benefited significantly

contributed the and it. markets was market, And some I think of benefit to so well. especially Chris And some as that the was for the us across us highlight a to those that huge growth will new board, of

Chris Gorman

you our back out if our business things constantly clients where a second, So and one over to develop step just we’re for is talking time.

have. have you better back, bankers, step we we we have continue we more dialogue, clients that have more expand if clients, to the So we

in industry the of see in like would performance in strong Northwest, you'll the our Rocky had And businesses, in for area. those the quarter Valley Philadelphia. performance across Pacific markets the overlap strong strong in we Pittsburg quarter, some also new so board. Also really performance and had of this. We and and Hudson Don board be given balance based good strong some pretty like our We across much we markets off strong like sheet movements had we these performance Buffalo a growth. was any that on performance our growth, in had So just it mentioned had really markets and both Mountains,

Gerard Cassidy

sheet shifting expectation I doing would have the of when heard you this the then balance apologize. other today? to are side, at you And is the deposit deposit the is your later may on so not XXXX give what look And be beta, to idea year when your betas this side what an of deposit I it? Can it and get terminal will level and about that what us you

Don Kimble

far basis deposit you X fed this in deposit by at to compared fund. went basis the As can quarter, rate as the XX up quarter about our points beta look points this increase

we’re for to way the time to getting and it’s just that the into calculating rest probably beta, expect about increases year XX%, XX% beta. on this mid-XXs would cumulative at more XX%. historically of XXXX that simplistically, basis be increase we've our period about future So We a talked normalized to continue would throughout which

gradual from outlook income for the to for And into year. so guidance our are point. we that see a here would net interest this And those assumptions baked the are increase

Operator

Najarian Lynch. Bank of ahead. is next Please America Our question from with Erika go Merrill

Erika Najarian

questioning. of Scott and to follow-up line Ken's wanted on Just

expenses of within Slide for to I mid-point quarterly rate way the So you expense the revenue it parameters the run seasonality, laid of the your high line. clear you was But should XX, the average million out first outline range. in expense to point some that the using $XXX Don, thought between million $XXX very quarter on

Don Kimble

correct portion of And the that from That's good seasonal some decline really removal on the items. one that say these and million quarter about it's average of level a was. first I or $XX so what would from roughly time again comes of just

and related performance other talked offset we savings so the be making cost compensation those. increases and markets we’d the impact of stronger be about will the capital investments some of by And essentially and and to of timing incentive the

Erika Najarian

am on to side follow-up underneath balance a activity and the $X.XX clearly as average you've guide, contemplated interest outperformed income quarter. growth this guidance. And regional billion wondering net on guys billion $X.XX sheet loan trends you I what banks among that client

Don Kimble

What guidance we've loans. included in for we here total is have the

And the the we midpoint increase believe were be about so of would was and based balances quarter. our a for I to-date second on average think ending from first first quarter. in so where on was billion to how quarter, being the the deposits those I for here off we’re billion for that billion of up good the positioned And $X $X with range, billion $XX start $X.XX midpoint basis the loans from average the in the we're both dollars

Erika Najarian

higher And that one potentially written? one how the return like lower change week am passed thinking capital with Beth, last that or you’re favorable dividend could capital ago wondering the two for out is if about proposals clearly I guess stress favorable buffer towards Beth. proposal weeks come payers. I last had for risk if as models KeyCorp and

Beth Mooney

about how and question our no does certainly support Erika, not. and it it we augment talked Good But does capital have priorities.

Operator

to Winter go Peter Securities. with we’ll Wedbush Next

Peter Winter

quarter, net at look and the for the wondering forward? leverage operating so just year-over-year. for X% possibly to the it you be first I’m did was And revenue enhancements frontload pre-provision have there of down revenue If expenses last pretax should going year, some better

Don Kimble

of timing of revenue and more that expect as as I level see the down are throughout we’re those about the far the of was And of as talked the we’ve come revenue. making that rest investments year. revenue net proportionate to synergies say the more before the that we expenses this related to pre-provision and of would quarter some to impact the elevated really the

those achieve to by year believe million a path on next synergies of the $XXX year. revenue rate end million target of and so a And we’re still we year a run $XXX achieve this for end by the of

Peter Winter

it’s then one major. just C&I And an not on one But there wondering credit, was I’m in just quick increase non-performing.

Just wondering a give little if could you color?

Don Kimble

it really so as be trend tend as is item to more time. industry any pressure, just isn’t far or any at there any really a one seen deal or It specifics specifics, stress

unusual or and there. big concentrations no no industry So transactions

Operator

go with we’ll next to Evercore. John And ahead. Please go Pancari

John Pancari

for it horse Thanks am I the kick to expense going on twice. to trends. dead color the kick here, the but don’t I mean

number, expenses, target? your reason, more expense -- to for come the pull weaker ability in just back in your does On can ability any this the could talk about just be get to efficiency you about flexible talk to the on if order your and your willingness to given year you and revenues

Don Kimble

mind more that that on point a portion there expenses that coming tied of markets and revenues. associated and growth supporting between the some direct their correlation right of is from a but in our fee-based those actual keep You’re the revenue capital with and good are businesses, is to the of

our far made normal expense live up for And focused if talked what don't this expenses. be that on upper about, the talking make expenses. will pull payback investments, our revenues as our that with about for of on outlook. toward reduction would commitments bit And this a the we’ve those we’re and can we’ve end investments. we because talked the would seeing well to and sure opportunities see are as that corresponding through, to as the quarter that back revenue so we’ll because we’re little range of be seen year were probably you’ve and as of the here And so additional we’re manage to we and elevated we growth on improvement. to making rest the very and times what guidance always times make there, come expense have taken revenue revenue initiatives And continuous a At won't

John Pancari

saving lot announced of tax then yet, a have. on again peers reinvest haven't you plans to And your separately expenses, your any

guess, tax know IT indicated you not any you and ongoing, area? XXXX about just so anything reinvest you’re and is the jump the signaling you likelihood cost. big investments portion going relocate yet but or savings And just are -- not I of into other the to a drive could decide I in that a IT that What that to that

Don Kimble

take. as was that to funds make that of to retirement meaningful say I when people had was lot we $XX individuals did contribution to step law a our an our we investment and an hour, and in one-time the would to appropriate I so those a increased changed, feel well. for tax And also we minimum-wage employees and our the

And was so both we constructive. that very thought

and to driving We’re core And from us want the thing operating on through benefits current for be and year very in. do to positive to we growth. focus have on for future cost will and made we’ll drive have same expect savings the to our investments and ’XX from beyond to that, continuing leverage revenue in focused the we do

connected or result that’s direct a be the tax won't it occurred. to so reform And

Operator

question next Martinez Please Our from with UBS. ahead. Saul is go

Saul Martinez

a previous on make clarification guidance. in just the similar I a $XX a NII that that I respective guides basis, this just you numbers I on like clear I want to to on sure your about slide just it’s so that think is a tax a is sure equivalent know First not basis. but it for basis. versions This comparing year’s wasn’t it's specified. on big deck million, made explicitly it’s we’re like it number make wanted

Don Kimble

is quarter's this taxable And not, right. the last that question a it recently I had that was. added as whether call not and you're was or quarter No, or equivalent we

just consistent basis, the to we I want so that know to that. a was And make for clear investors sure on

Saul Martinez

quick much to the do the dead how that and of The guess And that $XX cost. couple questions incremental rate second realized, first on run was quarter you’ve to in million beyond? filter a expect of quarter the save you beat and further you a much expect into cost of I how horse, expense savings little to in

Don Kimble

amount said quarter, would that expenses, over way the million And outlook, achieved. there we have related half that were the full down linked it of basis. I have in will is are quarter in say that We $XX the non-personnel first quarter on some a and second which would so in the you the we then see

Saul Martinez

seasonality was but has years cost in it’s years. have First guess I than -- it’s so it very, Niagara, still expense first ago clear I Obviously, much quarter pronounced. in on and been it very couple you And the why in seems the about you some seasonality the I line final detail. previous maybe But me not greater talked didn't question of the know to this don’t know if

this seemingly through year is why So in seasonality? can walk of it me -- just terms you was different so

Don Kimble

had First it quite year as is this last quarter Your been as so noise around some would have it year. right, have might first of Niagara, not transparent

was of turned really related pronounced which quarter just, against we expenses I And at would look timing you about up this this that historically. more that expense quarter to or have $X anything $XX million what just ago this million beyond even and that had against we that as worth was overall what If $XX earlier, issues has then it expect timing quarter to we’re for seasonality compared as year quarter and perspective continue a so quarter. example been made highlighted benefit adjusted of this the as recur. related wouldn’t far us and than that pronounced an really we costs, than from but million expenses, on an quarter to more of and expected. But this so the basis broke

Chris Gorman

we forward expect in XQ. on going of this kind And average seasonality shouldn’t

Don Kimble

We would some expect forward other benefit ongoing count correct. that's as far and related going the as issues day cost seasonality

Operator

Deutsche with go question Matt is from next Bank. Our Please ahead. O’Connor

Matt O’Connor

helpful. lot specifically narrow So what to XQ for details a on just on miscommunication expenses of in and reduce of be year. any might can to be But expect you of the full-year do that you risk range the if expect what you expenses just the the existing down

Don Kimble

guidance down. Matt, increase million it a come don’t benefit that of given we I specifically should majority we $XX quarterly But typically see will on that say the basis.

for other expect And us about true-up, in items that which million. operation decline which $X talked to the of would wouldn’t so the to $XX line million the cost about $X would Two I losses line purchase that elevated it be about in at million we item. expect neighborhood that were level, about of I that see continue

million point a imply this basis on for a core walking combined And those in reduction think would $XX around that's a time. about good so to assumption I expenses, and

Matt O’Connor

that. what are the it. little bit over driving us the way, I'm trust But just year-over-year? Obviously, and the a cumulatively and year, that's market choppy just down puts up then wondering just why has but last been if level And down fees, look what's we’re we of there year-over-year bit. and takes of remind one separately, component nicely why little that's

Chris Gorman

of Actually, our private which is on a really actually bulk business, banking the good trajectory. that, is

lot offset You there. traction of was trading challenging continue comp $XX we and gain we had of businesses. somewhat periods our That a billion by both our to saw for and AUM probably income fixed equity

Matt O’Connor

And versus trading how bank revenues much the the private disclosed? are roughly about

Chris Gorman

it's business. vis-à-vis disclose banking never We've private small relatively the but that,

Matt O’Connor

was why thinking And and think, overall weak? broader areas were if I at some two? to between the universe mixes up on depending the we equity look banking those flat the

Chris Gorman

previously. and both income liquidity I business, In fixed platforms didn’t pressure our that income equity under our And we've clients. in general fixed quarter in facilitating have had equity that and a just we think we just margins. really of business, terms for are the our of are The lot

Operator

Please Our go ahead. is Alexopoulos next question with from Steven JPMorgan.

Steven Alexopoulos

KEY core. around accelerated this I first that that lending project on airplanes platform, upgrading wanted tech its And upgrade to entire start, the the first project. question? driving I is tech what's a saw accelerating the headlines my one that's the commentary follow-up

Don Kimble

more I two consumer year. increase related lending two the for to initiatives. of we’ll kicked in say non-residential platforms, have real-estate of that the component both this for we've this and continue are and off that it real-estate, area development future core. and year question, there so really Those to the of our years, are Good in for a continue technology really would reinvest to the initiatives of also has been residential

and This also overall be making make we that ongoing we that aspects investments as will those to make more critical believe those have continue we year, for both the of think digital so And will business consistent commercial model digital are plan in consumer efforts. investments and again our for see and going part be we opportunities those and that will on we're with some investments, stay the to well, customers. current our an appropriate sure because us the there

Steven Alexopoulos

year? tech anticipated this spend the what’s And

Don Kimble

more would range include technology in is which some what $XXX One at with integration in look have the million rate. we the spend had efforts as fairly I where million, keep for would the And line we tend spend item this all couple year. be Niagara. personnel were periods that which go saw consistent and in that's software And through that in $XXX But conversion for would we run say different elevated our million and When hardware of that will buckets. contractors, would captured personnel to level. and a total technology some is for to closer $XXX mind investment First the on a on prior well. we’ve focused to

seeing those we’re so platform, core to investments business. ongoing now the the digital the more And efforts aligned and in just

Steven Alexopoulos

maybe Beth. And for

in tech share? the which enough overtime. needed or scale at the make Do investments think to upgrade significant you size larger potential need are you do in the core get think costs the have upgrade you With you

Beth Mooney

both the past. we’ve that as to we capabilities the we business to investments about include think enable adequate the we talked that in resources product at would support it, and As people, our have And and need we look strategies those.

So being how believe always smart investments our this, of part and we are do well-positioned do but believe in prioritizing allocating is we compete. and a to have certainly discipline you we that

Steven Alexopoulos

could more If I in. squeeze one

give realigning staffing you. expense the about color more what talked you Can On initiatives, doing you unit there? a business on little you're adjustments. Thank

Don Kimble

more and more businesses, integration things gone the we make where some of can we as Realignment identified areas efficient those First through effective. Niagara, we’ve with

some achieving alignment. we’re outside normal our targeted efficiencies where efforts. lot that’s -- the staffing other through we And some so we combined of and those performing gain a models of just And as what from and have business would we’re levels far of areas have then a attrition as a areas be number models, normal

we adhere making deliver just it’s combination. models to so would the to that continue And to continue we to sure and expect synergies the see from those

Operator

next go Please Mayo Wells go to And Fargo. we’ll Mike with ahead.

Mike Mayo

and savings Niagara with merger is ago you're despite First everything the topic, year still doing. efficiency so else XX% and So that on efficiency that’s the the retail flat

the of the give line color improved maybe other has business reason. not that your If you're or maybe savings with merger some savings? the or allocation progress, happy the And maybe why you some the could it’s just to some benefits spending or despite

If you could color give would on great? some be that

Don Kimble

leverage Community these Bank was efficiency to the as come some see impacted disproportionate a and would Community the the costs their party unusual And Bank of that we operating seeing this Community that drove these seasonal Bank some that show overall to seeing the forward ratio see seasonal continue going from was to through quarter to see for progress efficiency we want as expect merger. We we savings and going and/or are improvements are by of expect The go the for the far some that positive and some items away up. from that strong ratio meaningful forward that.

Mike Mayo

you’re But a on sounds longer $XXX $XXX like just Is A $XXX it and you technology. a ratio that spending you’re year if you’re year clear follow million you phase on to to than potentially going in you probably of business scale sounds like super technology right just at back million on JPMorgan XX% expect not a $XX budget to expect? spending efficiency last could -- And a of technology? question the It investing line. year if the say the million timeline, improve. is going billion a up, your you’re about excited having that budget, technology that

Don Kimble

You’re right.

I far As would very that. the say spend, overall remain can as that we with competitive

we partner other and to thing that is going other forward The ability fintechs providers. our have with

some market talked types of ourselves. we of that competitive strategic number about we having products in very partnerships to payment where very and our our to develop banks own benefits. customers can the we larger And the while have of space technically And that might so advanced some get we and like bring to believe we same capabilities where be capabilities can a might, without we’ve not developing the of

$XXX the just and as consistent is forward. so And look as it’s going appropriately spend at believe the how we far positioned million with

Operator

question Reevey D. go Davidson. A. ahead. next with Kevin Our is Please from

Kevin Reevey

your increase any of Chris for you versus is quarter seeing the the question first Don. or Are end So quarter? the line in prior for utilization at

Don Kimble

been corporate flat. Actually, banks our both across and has our utilization community relatively

Kevin Reevey

book, it��s is moving then And portfolio. order behaving? book order I your overall percentage small the your of How towards loan a know

Don Kimble

we the FICO The well. been of already well order fine an score book holding very performance And that again as the on a XXX, business. legacy delinquencies we’re has the highlighted, done about footprint as focus But us been and with far very to has we area to have key the up the of of benefit across that’s with. we that as taking that dealers product relationships

we’re from so some as seeing And synergies that well.

Kevin Reevey

Niagara, a And follow-up talk you then enhancements revenue on from First Gerard's Can my enhancements revenue last to the it’s question. question seeing that about is there? any you're from

Don Kimble

products speak been that’s for Niagara. or on that the much up good XX% real One run a commercial in capital we be estate auto as customers outlook million we’re year commercial We with the end are a from related by this on going Again, former growth ago. if that continue seeing is capabilities residential well, space placed about Kevin adoption expect on already million the some And we First seeing rate growth the we that we’re and that and $XXX at win mortgage. here that thing earlier the by to where front, Where strong seeing at the look moving markets debt we seen hasn’t And we volumes those to Niagara you of the so benefits with first as so are bottom talked we're to of for of First line on $XXX next so especially there. customers year. end do expect from of far the and a year application $XXX activity on We’ve that million and the indirect nice activities, about we shown payments the see us. as quarter, have there. they’re some line as the front, rate real

the closed and some optimistic we’re see seen And starting as deals and here come to so second as haven't far pick we that in beyond. through volume up that are we quarter

Beth Mooney

mortgage investments largest of part ready our I making a last was platforms we add we we’re Kevin, our probably that well accommodate servicing of saw on and ramping year up revenue synergy. And talked as through what from the staffing what was underwriting as driver to would our side about sure

so statement be our I is income able build And staffed reported would where that but XXXX ready, say to will definitely throughout entered in and something is the year, we that it. we will way on the track and

Operator

go to we’ll Jeffery Elliot Autonomous ahead. with next Research. Please And go

Jeffery Elliot

as hear the in that that in pick-up might gone a say non-performing? or factor or that across mean is nothing little C&I that common anything But those out stands specific. of to leverage anything it's loans into deals I cover companies there terms non-performers, back Maybe you interest have industry I characteristics of

Don Kimble

year, it's that There overall. slight. the really portfolio there more of aren't we're at quarter of but of pretty we're that our deal-by-deal very basis leverage and XX low it's total industry points, to any down still percentage stable the up a basis at is from well. some fourth from last all, but what loans threads And first compared seeing quarter to as and are which comment in is there, and relatively small seeing it continues perform increases the It the

Jeffery Elliot

in or that that? corporate to or Do the other rising one two some heard you from do on And getting think a how be more that We've we about leverage might more broadly, that's see the on comments the sign press that you cycle. as in agree we started concern sector. later banks

Chris Gorman

our really is book. there two So things, one is

some that lot and total small secondly to time, it Our book for respect has our portfolio, a of of a flat With loan leverage is a been period book so that's percentage velocity. of fact the some very general seeing our levels in in parts watch and we what we're marketplace, transactions that's leverage of something rising there closely. in of obviously and business in some leverage is in has

Operator

Mosby Vining Spark. go we to Marlin next with Please And go ahead.

Marlin Mosby

revenue little the Focusing bit more a on side.

through as this that's that pull-back normal rates little Do or You a acceleration particular do faster climbing. think investment had we banking just for going temporary curious bit about that or placement, a you the is pull do is pipeline there you of quarter. up this have and rates than that to were more think people the are levels step were a trying down the debt deals

revenue as just stream you thought So of the that rest year? move about through

Chris Gorman

is line What basis. always you’re pretty experienced typical a at seeing on we look I in We think trailing that a line. that XX really that seasonality

better this record our And so absolute example, terms first quarter are in if they now you ago. year ago, us. a than If at, look look is for for our backlogs vis-à-vis were year we actually a backlogs a at

and business is and feel investment can adversely impact vis-à-vis where it good that banking the we and fees really placement where time But line fee well. year. as about the this we is. last one is that about have the There we pay business few thing of good the pay feel there downs, So you were in quarter and and where fewer was noted first downs typically particularly pretty when

Marlin Mosby

up I for terms have you Don, you’ll you if get at security look in questions re-priced, and they actually well as of And swaps our pull then, rate just two the in the roll-up yields, now one as yields. interest those of as

Is want because And and you I let's your continue tax actually rate items are was that Thanks. quarter. two to the benefits and is as there related term So then the look that stop probably this could the also rates where rates say increase, net So fed stock margin to an to and price medium item? that down -- just at. raising just longer popped unusual benefit.

Don Kimble

a as as portfolio. they’ll investment we margin, as far be for that our are the flows there overall lift As believe the cash far do

on purchases I basis rate same about portfolio, quarter highlighted swap the what cash point of to new the book seeing at we’re wider. on the had maturities billion rate think higher $X.X off roll-off XXX a those and a and flow about than points swaps swap on for versus coming is plus investment the the each replacement new We about billion of portfolio, thing the the books. about the roll the we of were that now $X.X

seeing we’re well. so And there lift as

we so would both be those think additive. And

it a credits. of then deposit quarter, purchase some as of rates deposits, we a but benefit And each as be as the lift as that the that when way far as heightened that would there, the us maybe that be quarter because that our there higher so accretion, is offset that portfolio we on this tax think for expense side. that and also really in the continue core purchases a a at when And essentially some and as two of which as we refer more go drove to drift on up really taxes, and look the margin offsetting $XX some relatively to some did benefit about stock stock first that the seeing something employees the but on vest; right margin really was based far with being as range in was they’re quarter, vesting time the if components don't there, would that on to million could plans the for one slight stable even this would we far more is the reduction bias the far the with do basis would the side some quarter. you're the as occurred; continued timing And impact saw point the issues other have by the decrease accounting lift

good that us baseline provide so for feel at going of feel forward. essentially offset being both And quarter each the about other $X.XX and we a for pretty and those

Operator

Kevin with to Parker And Piper we‘ll Please Jaffrey. go ahead. go

Kevin Parker

there competition tax of are today? your is is in market markets the of you increased increased that mentioning seeing NII increased you guidance to and yields Have One effect competition some competitors in your in reform. competition contemplated loan on the your of due that

Don Kimble

on did reform crack hand change or first of any pricing it the has seeing the would plus. last that the And at pricing front we’re to tax pressure not on commercial that over to before. after here and Chris more or competitive we extremely competition. than what But get take more year acceleration over the any I been on the I’ll competition, this color say the

would And but so some say been isn't characterize it’s of what continuation seeing. the as this I don't I want there, there to we’ve impact that

does to marketplace for continue the Our see a for outlook volumes us guidance net and very assume re-pricing. we income far for loan interest competitive that new as as pricing

Chris Gorman

think to increased our has degree the even area, you mortgage clients estate our in growth in that remained were I -- that But of have would serving our because Don, can XX% reflected than approach in on we And add were real I significant basis. is quarter-over-quarter getting that to thing business, level commercial one terms intensity you up on that C& I greater a unchanged. front. really has to the see see of

doing we’re needs. figuring we’re what the fund and to And our out really right clients is so place take their to

Kevin Parker

seeing Are others? you seeing any competition where particular markets or you're asset classes within greater commercial real estate versus

Chris Gorman

is there in has appreciation. an anything. specifically, it Also as significant I probably multifamily estate industrial broadly we real where see much area and would price as then say been

about that then single in digit, last mid last that's and the hot an space Over as year, scenario been was quarter, so XX% appreciation industrial there well. there's

Operator

I'll with Mooney back it no to And you turn closing for further Ms. questions, any comments.

Beth Mooney

Thank And you in taking today. to participate call time you, Operator. all again, thank our your we for from schedule

If that today. for concludes you. you questions, team at them XXX-XXX-XXXX. our have remarks follow-up direct our any Relations And to Investor you can Thank

Operator

thank gentlemen, participation. your for and you Ladies

may You now disconnect.

KeyCorp (KEY) 19 Apr 182018 Q1 Earnings call transcript