KEY - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to KeyCorp’s Second 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

Thank you, operator. to Quarter welcome Call. Earnings and morning KeyCorp’s XXXX Second Conference Good Chris Banking. the Don our Mark and are with Chief President our Officer In me Officer; Kimble, room Chief Financial Risk Gorman, of Midkiff, financial Slide X on statement is measures. and forward-looking disclosure our non-GAAP It comments, well question-and-answer materials as and call. of our presentation covers the our as segment I’m to X. Slide turning now from from with share of common reported results the period KEY year-ago per strong quarter. for earnings the the and XX% up second XX% first quarter, $X.XX,

was our and ratio average on comments. line the Results Don equity insurance quarter common items some efficiency in from notable detail number item business tangible cash Our gain offsetting quarter. our will that XX.X%, this walk return XX.X%. sale a items, his was of were through including and this the unique included of a to

flows expense continue growth the both well results by client we leverage earning net number continued we to in revenue With and improvement interest with benefited in the grew by to basis prior assets. growth our prior point average year activity. strong Net loans operating generate as our We sentiment, prior see quarter. clients. from year With commercial a and existing loans business driven discipline. margin our from of growth Average four in backdrop the continue as positive interest and income continue economic quarter, prior positive and double-digit grow and as relationships and industrial more driven and X% from do good solid a to

remain pipelines We and strong. are our share taking

efficiency and initiatives notable the and clients. from across reached banking made to quarter, as of were cost to record incurred included up quarter, items ability our for as a this sale quarter solutions the by fees. and reflected some investments of debt prior business Our reflecting we Expenses to fee-based once again, XX% fees Cards offer in advisory a strong insurance related from businesses, full the driven second the franchise. payments level new business. success the have placement well our range our Investment our our

Excluding million the savings, seasonal First or expense quarter, savings. $XX savings and both This last of remaining total reflecting trends XX% these realizing or annual acquired bringing million cost Niagara the were items, X% included to our expenses down from base. approximately cost $XXX

Directors the in year increase our the increase was third over consolidations, a with ratio outlook our ended approach cash vendor in XX% recently Board XX% the to end as our as in benefited a sections Plan, As first capital the that with expense final efficiency payable shareholders quarter position, and Equity quarter the implemented our strength, committed contracts third by risk we Common number of two returning quarter target XXXX of current at of These quarter, both large a our common to consistent we past approach of XX while These our share call, strong for in future for maintaining stock adjusting dividend approved will remain Tier achieving of plan to high also well net a and of remains terms our points. a of staffing realignment. path year-end highlight and The third-party the yield of Capital charge-offs ratio expense to savings reflect our year. capital And X.X% KEY’s and dividends has X a quality Credit to which loans our XX.X%, capital. XX% the from this on are our included dividend position slide consistent earnings we portion focused branch strong shareholders. models period. our discussed initiatives repurchases. management part and and initiatives on basis and actions and to business long-term remained our both through

capital restating prior Plan that our maintained continue C&I. net down consistent and growth the banking my XX We with and debt in the of in commercial it quality drive cards X% fees managed including I range broad-based franchise million and items repurchase placement XX% grew payments. we expenses, well increase also our stated are consumer And Capital us $XX bringing both strong we believe disciplined credit XX% XX% by which were record targeted as included was remarks grew Our we a a share value. ratio priorities, to with basis our capital, our linked growth common quarter investment fees for notable quarter billion. as These were our and long-term authorization quarter shareholder $X.X will including We will quarters businesses. from in overtime. excluding across finally, the which our loans payout with We a of of points. to our conclude charge-off dividend actions to closer share with with

change returns call value our definitive shareholders. represent Don? the move With our long-term toward and in improvement turn Don. with with will in performance targets. to and guidance for that, the I for this year meaningful continuing to and our to productivity, remain our close a a step performance results achieving We Our over quarter deliver committed efficiency and

Don Kimble

I’m and X. Slide on Thanks

income As continuing Beth reported operations $X.XX said, second we per share. of common quarter from net

this many million the items and the benefit. a in In additional number in $X.XX to in the in on this slide compared materials. resulted Notable and on share items had notable year-ago be period, after-tax can the are the I’ll found a with were we notable There items million the my detail after-tax of of presentation $XX of of per bottom items listed our slide remaining rest a appendix first in presentation. impact. the of cover which $X.XX results quarter. during quarter, year-ago period in the $X Our total,

up the first billion from unannualized $X.X to average Total quarter. So, I’m X. of now turning of billion Slide loans $XX were

in growth growth Bank quarter driven commercial across strong loans, linked billion and which by saw Corporate unannualized. were commercial client $X.X industrial up Bank. our was Community both a We or segments X% quarter Second

X. see new balance. offset We entered which continued and good total billion of X expect deposits to portfolio $XX.X for balances billion elevated as and basis continue the first period-end the increases by points well line within higher-yielding full loan growth to the as was up on be impacted the paydowns of year. targeted our strong for from which deposits billion second utilization, billion XXXX, our second of The half recent totaled partially our into the cost was X% $XX.X quarter, from our reflecting unannualized pipelines continued migration to business of Continuing or the $X.X lower compared Slide We products. $XXX with to up range activity, first Average the year of quarter rate to quarter. to

Our expect deposit current to higher quarter resulting XX%, cumulative migrate was a the XX%, overtime. in which beta for we beta of

relationships betas from deposit money by continued Our historic shift the market second a the be will levels we deposit balances, to basis, benefit more strong On primarily higher, in this was linked ramping outlook mid-XX% quarter half commercial NOW and driven year. into a up growth and deposit assumes our growth, of as higher-yielding products. retail range during

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

or net results interest million income was interest basis net quarter. XX first the X. first $XX XXXX the compares margin to and contributed These in million equivalent quarter in million million the was Taxable points X.XX% points income second to Turning Purchase Slide in $XX XXXX, and of the a $XXX $XXX results. million This interest and second second margin our accounting a million $XXX X $XXX to points XXXX. of of and or basis net second of equivalent taxable for interest quarter X.XX%. in quarter or and the compared X.X% the accretion basis of quarter net with XX quarter

X% the one purchase income Net growth, driven was sensitivity XXXX. $XX X% rates prior excluding higher interest increased of accretion commercial day million the or asset The in quarter benefiting quarter. interest accounting income and or interest Excluding earning $XX loan quarter accretion, accounting from additional from million interest strong second rates, the was purchase and from growth. increase asset up higher by largely net

As than earlier, faster expected. our deposit originally betas increased noted

assumes to result, we a As move purchase of mid-XX% range the this accounting our a up core continued the growth remainder this deposit excluding higher increase the more and balance included the during end year. second which have half of ramping net rate margin, year, our one beta in we in our the outlook sheet to expect accretion interest year. toward this, of With modestly in

compared to income. plant from leveraged included is with originated $XX lease including million loss of unique In over impacted KEY’s operating million year-ago and site X. Moving singular notable for ago. second asset, structure, the over $XXX on leverage the the was the lease current a nature quarter number a XXXX, income in non-interest and of which a decade. a terms both on was of The lease this power our residuals, It not in quarter, Slide coal the quarter, that for lease periods a was XX and a years items. we originated million to of have $XXX

notable our accounting insurance the other gains the year-ago sale purchase a impacted the recognize million finalization. of of gain and million period, In merchant the items included from a services also We $XX $XX in the business, income. which acquisition

quarter items, up results items, related period. funding. from Cain quarter including largely year the the non-interest fees, fees. the Visa’s acquisition notable litigation and $XX we Not and advisory year-ago which from fee-based our account continued by banking $XX escrow benefited the the million the the Growth but from included momentum a record were $X from was of Excluding from investment X% up prior was million also a impacting in second million placement within all charge period year-ago debt businesses, second income to was notable stronger or as Brothers driven

corporate million well in each increased and quarter as franchise. as debt saw XXXX, non-interest banking grew services. revenues, benefitted of cards related mortgage and payments excluding items. $XX notable across income the the fees and also growth We Investment to ongoing first as Compared momentum placement servicing from by we

impacted the non-interest improvement notable results, would to XX. expenses These current million to of expect the not we $XXX that efforts and cost half quarter, Slide our our back our the in there of continue number million including year. expense Again, related a for were XXXX. of efficiency $XX to to items items the quarter was business. Turning of insurance the sale which for KEY’s related totaled second this

realignment on for efficiency a ratio This outsized the branch continue expenses and plans decline First staffing middle plan of implemented efforts, These path next into us that Niagara These target of approaching year in seasonal in of unit by which compared savings. continuous and down realization kicked-off of conference discussed our initiatives were items, first trends vendor reflects of Compared high-end office the clearly quarter, integration, the we our normal to to year. call cut this were excluding coming including cost adjustments. will million in consolidation, which our our are $XX April, this cost notable million to costs improvement represent contracts, X%. model reduced we end year. the efficiencies, first expected As $XXX to or keep on savings last plans quarter back quarter business third-party out

on was a benefit was One million $XX largest the drivers of basis. expense, employee linked quarter which down

million $XX totaled which investments result grew from year-ago facing year million Brothers, residential savings. and non-interest client $XX of mortgage as items a we��ve Costs includes addition the and notable offset HelloWallet, prior the associated across This organization. acquisitions from – the of expense roles in in the Cain mortgage and merger-related cost investments period, Excluding benefit with our these business. the made investments the

within our by of our with this We XX% approaching to of full-year the long-term expense non-interest the again, efficiency billion and high-end be range target of continue XX% $X.XX to to guidance year. expect end $X.XX of to billion ratio

Slide XX. to Moving

average our relatively reserve second of represented stable strong. provision loans were quarter, were losses XXX% our $XX total loan XXXX, represented and targeted XX credit $XX with remains which loan million million points for the basis for XX, below losses range. of end continues was be Our loss of loans our quality in reserve prior end total XX credit loans. Net to or points the period loans for of quarter. charge-offs The June about loans. basis the At our X.XX% quarter – and coverage total period non-performing Non-performing

of equity common with Turning of the also Slide the the ratio to end Capital at a XX. second quarter strength Tier XX.X%. our remains X company of

Beth to quarter to common the common $XXX mentioned our continue shares, earlier, totaled increased repurchase and by million. we As which dividend during we share XX%

included Our and positions remains us with levels we a April. of last toward XXXX our and meaningful in dividend, targeted dividend we outlook as increase in in shareholder payout long-term plan which XX for capital is XX% announcement Slide week’s increase our you common of same as capital what the a move progress shared for XXXX, payouts.

are continue billion we we from loss core expect average expense will rate to to points be exceed and one November and range additional the the and the should billion our balance rate billion expect billion. charge-offs assumes This provides growing range for $XX.X basis the be basis $X.X to to assumptions. to the $X.XX Niagara billion billion we the anticipate is $X.XX be updated to XX below of slide, in in Appendix, $XX.X and to And $X.X income of First sheet interest to expected We provision the provide have to of our deposits interest loan in range net deliver continue to We rates drive increase billion. to range slightly increase revenue different to loans. $X.XX growth level synergies. income our sensitivity loan charge-offs non-interest to our with less to balances $X.XX non-interest which Net growth. continue in as businesses than Net of in loan XX expected range targeted remain points, of billion

continue expect XX%. franchise. our a our growth in quarter, GAAP to of we tax to rate XX% Beth strong continued said, the be this As to was range with across

to back operator look Q&A the the now made. and the commitments in portion We improve have call. deliver for Operator? are to efforts our benefiting and continuing efficiency from call to returns to on I’ll the forward our results we of of over the instructions turn

Operator

[Operator Instructions].

Please Our Matt go with O’Connor of first Bank. Deutsche question today line comes from the ahead.

Matt O’Connor

Good morning.

Don Kimble

morning. Good

Beth Mooney

morning. Good

Matt O’Connor

wondering I landscape competitive talk if the could was you bit. about just a

some big We’re banks Actually, increasing into of regional your kind forward. bigger your in marketing the seeing of spend way some expanding have about going talked markets. of your about talk competitors one a

the overall been competitive environment, particular, wondering banks wondering in think, start? So, it’s Midwest very you about I’m just I always I talk but in for maybe just and the if the could

Beth Mooney

or grow see particular any has as it and to Matt. that Chris then would performance, businesses. landscape, a positioned our is in loan, to marketing commentary. tell we commercial have our Beth. we This I start But targeted Yes, too is I’ll always increased you our look in you strategy, grow in to with our and Post continue propositions our competitive continue he if additional business color to is deposits with to consumer believe but our franchise. our relationship can see we Niagara, model well our spend commercial value success First

suggest it competitive The the intensity that Niagara First the have our we landscape we also, shift would enhanced that franchise So with see particular our is and acquisition the the western this particular. and as any northeast and we in I don’t look, growth in strength markets. in outsized

we competitive feel again, have a proposition franchise, a like So seen, value results businesses. and have balanced momentum we across strong our I

Chris Gorman

it’s asked Midwest. only would the thing to specifically add Matt, about I you Chris. that, The

year three strongest in that As the years. in on the having probably the we we’re at look going we’ve Midwest, what’s had in last Midwest the

a of we New Salt and from So, where lot we economies Midwest. you there since feel like Portland, are York, Metro think about we have momentum, Community have asked robust of and And benefit I lot in pretty Lake and Other a migration. Colorado, City we good Bank. momentum our in the areas

momentum Bank, about we is our really the and we As of as a have an we healthcare M&A, got around of a specifically our Corporate where think is well. lot shares think as there which businesses, momentum we’ve other taking about lot technology And area.

a last paying It’s really think are competition level back, other stiff. the we’ve a step and bankers I in it’s So five investments off. I years But made all the landscape. investments think Yes, the yes. is competitive of over

Matt O’Connor

I quarter really delinquencies, I if on low realized ask levels helpful quite they bit That’s If a jump unrelated overall, off you mean did color on up I it’s at a any levels related color. the they up year bounced low wondering, last strong, was of But could a also – and you that question quality. ago. there. if provide? there’s early-stage I and asset separate, could look just

Don Kimble

Matt. Don. Hi, is Yeah. This

as far loan the get the by window. didn’t delinquencies, end influenced by As renewals are early-stage completed those that really of that XX-day some

as don’t we a quality. that see trend so as credit as far And overall

we things normal with expected as progressing so are And seasonality. that think the

Matt O’Connor

on of is the would I that? Just renewals, be that the what driving delay guess

Don Kimble

the XX-day paperwork that getting some unfortunately, then And and Just bumps create delinquency every that. does drives now signed, really the only and thing that’s that in bucket.

Matt O’Connor

Thank That’s helpful. Okay. right. really All you.

Operator

we question line And a Please the of do Ken Zerbe with Stanley. ahead. go have Morgan from

Ken Zerbe

standpoint. one costs a this have I – deposit betas footprint, deposit competitors even of I could negative, year? NIM despite hoping moving far And got beta, of little their bit taking from also guess in hikes. hoping you actually the thanks. rate their morning, you’re of a seemed was expectations about in of certainly, talk up very regional more is your on Thanks. what down course so the seeing this given guidance terms little your was a a just higher deposit Great, it or I pricing the about you over overlapping markets deposit similar deposit pricing for rest

Don Kimble

beta was beta XX%, see we we XX%. up and our quarter. pop our this deposit And Right. betas the deposit cumulative deposit said, is did as And

see of really, continued and some more it’s more whether offerings, consumers into type the time is we in, a higher-yield What So of we a change. change money-market a or migration of on the have product. commercial deposits seen side higher-yielding did

We’re bank, customers banking to of we little have this type saying that expect of especially the seeing private are into our ramp to that the we area continuing that adjusted that range close wealth rest in that. bit throughout our betas guidance year. But or of mid-XX up the by our see accessing to to a

our it perspective, we that So, interest as net with very income margin. but from comfortable is competitive overall and feel still outlook as far more

we’re feel there. we’ll But And something shape good so continue it’s we watch. to in

Ken Zerbe

then And guidance. I okay. in it, saw Got rate, just tax of terms your the separately,

seemed this light. may a quarter was been think unchanged. it But that I have it little

You’ve one-time the the just impact you been backing half second change? within to second the there out your half of reason of sort are would potentially tax implying stay higher incrementally Does items. – could tax is tax rate range? Or that to think any be

Don Kimble

still Not seeing second for think a second the range quarter the I appropriate, have is half say well. change would as the tax overall a But which tax in rate. significant implies some I did rate. that credits slight tick-up maybe that

Ken Zerbe

Got you. it. Thank

Operator

the And we do have ahead. Siefers go O’Neill. with Please a question of line Scott Sandler from

Brendan Jeffrey

is Hey, guys. from Brendan This actually team. good morning, Scott’s

can two, to income what that of the guidance one, year, on that first relatively going the income the second the up be the back growth in-fee look it specific to first fee half seems from the a levers And expenses compared holding expense for relatively down while good to to half I that of flat? are not are the then the as ramp implies just So, the income in bit, just if for you deliver year. expenses pretty are little while flat of fee get both season the drivers expenses at I’m like half, what ramp allow to side the a in half midpoint. curious, it

Don Kimble

Great.

see, peak some of several payments-related the that As far banking, to categories, other tend accounts, and we a in fees be us – especially income quarter placement fourth for including investment debt as activity-based quarter, fee the including cards revenues. and

to and growth that’s those some our we to so why would outlook expect we’ve maintain And income. continued see seasonal for categories, fee from

can in at announced million we some about rate does looking the the does is from the baseline assuming On the would of quarter. cost and achieve We our and the quarter, what that just It the the the and continue stable. can to to by of – you’re FDIC benefit $XX in some also, assume remain think the and maintain us. our benefit $XXX in that outlook quarter that there continue that’s efforts relatively portion for the guidance expenses, using expense in same that earlier charges And be million savings a premium level remaining second a additional side, to we took continuing of assessment for fourth of general away that have the range. from we we go that

coming And the outlook so that year. that all predicated with had it’s on adjustment that’s through, throughout consistent and we’ve our

Brendan Jeffrey

quarter then And back benefit, entire the year? that million $XX FDIC half for of is or the per

Don Kimble

fourth That’s in the quarter only.

is per that quarter. So

Brendan Jeffrey

my All right, right. question. great. All taking Thanks for

Don Kimble

you. Thank

Operator

have question we Jefferies. with a from Ken ahead. And go Usdin do Please the line of

Ken Usdin

– lot. just just for for are items just of expenses, for inclusive GAAP the and basis those – Hey first, year this Don, and all a I full quarter? The wanted fees double Thanks – to guides confirm.

Don Kimble

that true we’re reported is results. showing That

items, numbers. we adjusted but reported And on notable that does those if would it include you for say results. would within so range include And does guidance the be it still I went even actual

Ken Usdin

Any Okay, your of you the get expect a end – high – getting can look that you And color chance you of XXXX? XX% got it. on ratio cash view for by give you then of year-end year cash reiterated range as full this to you the believe XX% year. XX%, inside us forward, efficiency efficiency towards do that you have

Don Kimble

the show to provide think ratio that provide efficiency on the we clarity We’ll operating that and we’ll guidance on our And later, I think trajectory on we’re path. say to that we will come XXXX our but And down, positive right leverage. clearly outlook we’re more continue would XXXX so later.

Ken Usdin

up true then. great. just And then last Okay,

efficiency-related second efficiency-rated to quarter of as you year the second a some well? in are the of expense side, On expect have thing? items half was do – cleanup that of – these you to type will Or the continue –

Don Kimble

part, That really, cleanup. was the second-quarter a for most

if some will reflects the what typically later to four you type have the quarter, we would second for these we accumulation quarter at charge But normal that continuous in times plans look efforts. year. into last able the any minor of We are types the really five year. took weren’t to of we in improvement it those this of charges in severance year And place it’s see and implement putting

Ken Usdin

it. Got

Okay. Thanks, Don.

Don Kimble

Thank you.

Operator

a have of question do Alexopoulos we the Steven from line And with JPMorgan. ahead. Please go

Steven Alexopoulos

everybody. morning, good Hey

Don Kimble

Good morning.

Beth Mooney

morning. Good

Steven Alexopoulos

You loan I’m trade And guys What had what growth it solid tariffs loan the commercial yet? levels impacting really of customers? commercial talk – curious, the your impact impact having all in of quarter. on that always is pipelines war. a at is confidence

Chris Gorman

Steve, it’s Chris.

are We’re to of the our different really that short in we’re impacts that any hasn’t clients the But your out a that seeing. it seeing to discussion, it’s do impacts manifested have change imposed discussed but are is Clearly, clients. talking those tariffs we of different keep been topic for plans that have in being answer all time. and itself mind not Also, question the yet.

Steven Alexopoulos

which you think, are give verticals such could I strong little here? loan driving Chris, a growth color, industry

Chris Gorman

some as I mean, really the places We of in And were was highlights the our geographies. growth York the board. start earlier, and little across let just really ours particular it me had with across strong places very Community like Metro west. mentioned a the I loan New Well, Bank.

with the we Midwest. the We’re also had that in traction really pleased

lot from geography of getting perspective, kind are those where the growth. so of And a Steve, we’re

to estate, places to portions As of would growth, it some it of see Corporate that would expect portions you real like that industrial, relates debt our some be be and in energy. Bank where would

Steven Alexopoulos

to shift Great. And just second. a for maybe directions

being relief We’re billion that curious, end range, with you I’m getting given below yet now provided relief. to banks regulatory billion banks potentially are size of that your And $XXX at started billion assets. have regarding $XXX to the in seeing conversations regulatory $XXX lower guys

Beth Mooney

in they of regulatory timing clearly, the window potential there and are view of to discussion there And it how and which the get point. this on is with assess it nothing the since regulators. point that Obviously, is our days regulators in magnitude have the the But will comment further industry, is implement Senate early passage and a would we, in a relief. – at in I bill, always of the

Steven Alexopoulos

you point. And you of Don, some Okay. you out do of if you CETX, what are level at can need CCAR think remind us

Don Kimble

as we talked X.X%. our believe to X% maintain And for We’ve allows having capital in a us is us, it strength CETX an capital. also of about appropriate to that and a range

So, capital continue that ratings as like in debt downturn maintain reinforce we that. that helpful to and our issue A-rated don’t have that’s well to have to and the we we being bank,

Steven Alexopoulos

Perfect. taking for Thanks my questions.

Don Kimble

Thank you.

Beth Mooney

Thanks, Steve.

Operator

Please the have a of RBC. we Gerard ahead. And do with Cassidy line question go from

Gerard Cassidy

Don. morning, Beth. Good Good morning,

Don Kimble

Good morning.

Beth Mooney

Good morning.

Gerard Cassidy

higher, just And you the quarter on people drive the Don, revenue interest going you’re expecting can us, banks net like forward, a you betas. share margin all from discussed. you out higher see to and What alarmed guys margin growth negative, what with us net – there’s been you can you you offset hopefully, that do? Can betas to think going with number still of pointed income. are rising points to do discussion that expansion that or to that betas the are interest share getting I higher? be quite this going can higher Because

Don Kimble

on available flows of not of X.XX%, points is that and our portfolio. cash yield out that have coming of billion yield the them. got One We’ve to points rollover. we’re to additional investment got might right about about a off others And cash now the XXX flow basis $X.X getting we’ve couple in basis levers that XXX

that’s for so and we’re there. helpful us, And benefit seeing

swaps those $X billion $XX the liability mature we’ve billion about before, that the we about billion tax for received have, year, $X our over and of received talked on asset as We’ve We X.X%. also worth those that of fixed is got rate management. next use

now, so to that, we we’d we because XX we’d replace in replace receiving pickup have And point have X% X.X%. basis paying right still if were and point a we’re if yield. the basis And even didn’t today, those about XXX benefit,

loan line portfolio those lastly, And our for the yield we’re today. additive. so in seeing for being of both average be is new I’d say And yield what originations will with our

And pressure we’re there not as would as much the seeing so have what seen we historically.

of going one offset higher so impact forward. those, the each think, are to I help And betas from of the some helpful

Gerard Cassidy

And finalized yet Don, XXXX. repeated your the impacted the – think the I in regulation regulation business? speaking queue, of betas was guidance that betas, it Has has in

Don Kimble

customers. for into taking strength on also. of funds interest-bearing support the to able seeing seeing so shows commercial And thank we’re help our is is flexibility of retain they’re they relatively I that are off right going balance several credit commercial the customers goodness and And their move think us, deposits, the we’re non-interest-bearing in loan what now them that deposits industry those it those excess sheet. I deposits stable you’re maintain bit to starting just some some those for either commercial over and business, customers quarters. last which balances for of also are so our and a more rate earnings are little what have those past think many commercial servicing

Gerard Cassidy

a just And final follow-up. then quick

a got On the you number. capital guys obviously, strong return,

approval? it terms terms if and is did it In in guys the How you for get Or by divide get the equally total amount how each the is loaded? you approval you quarter? of that four – buyback, weighted take front-end do

Don Kimble

it loaded, I’ll that. at that little it’s a leave Well, and being say I to biased would front-end

Gerard Cassidy

Okay, Thanks. it. that’s Appreciate fair.

Don Kimble

Thank you.

Operator

Peter Please from with ahead. Securities. have line And of go we Wedbush Winter a do question the

Peter Winter

morning. Good

Don Kimble

morning. Good

Peter Winter

wondering, past. doing peers growth of for past in The really had been past than different just And you that’s driving has change the you a C&I two growth? stronger the this is quarters, loan which than from are guys kind something the much I’m

Chris Gorman

Chris. it’s our No, unchanged. strategy Peter, is

is of it, is fact, We’ve areas new very we’re box credit as always – been unchanged, good growing and the and C&I we about at, think those. we In that our one targeted, is in out strategy our unchanged. there customers we’re

velocity of balance time, also, our a a to We of there’s from have time where, business model course, of sheet. lot

many how indicators on, progress enhanced we steady. So leading the many look look relationships. we has you our and ebbs are, we bring as – flows. new But at and And we certain at clients how been pretty get

Don Kimble

as a were I burdened Peter, some of there fairly increases had we Don. of the large in the half second paydowns. by this couple In year, other is early year. last this much this and is snippets I pick late compared well. early that see just say, did we through and to we And elevated of First they’re I’d would’ve one this in seen while that that Philadelphia. some in their the historic And of levels, we second really of than working also the piece have second half. year, you lower still were first part year they’re what to half remember And to many of Niagara the conversions year customer start success see too former And last would that our volumes origination markets was – markets assimilation. up here add really this to in the

have And present there XXXX that the so in we’re seeing results. wouldn’t growth some been

Peter Winter

just I ratio given level to you it’s realize Okay. would That’s to formula-driven, reserve-to-loan more see helpful. ratio loan reserves that X%. but then aggressively? growth, want fall And to a reserve-to-loan the strong below? add just Is wouldn’t the you there certain expect And about down

Don Kimble

accounting be though a of on Even allowance would you’re would that purchase impact we’re X.XX%. at of you normal they done the loans, reserves X.XX% basis, be the reserve book would as a back out if and right just total our

adding in thought charge-offs. showing provision of many going might I And it with peers. more that’s whereas angle. peers below are line our be our you So, different to a But we’re from reserves, at our actually

And are credit remain a the believe reserves very the continues so with it to we to we will good position. quality, in and appropriate maintain continue and that

this And think are the we point. appropriate at that so reserves

Peter Winter

great. you. Thank Okay,

Operator

Instructions]. [Operator

line question John with Evercore. ahead. Pancari the go next of Please from comes Our

John Pancari

morning. Good

Don Kimble

Good morning.

Beth Mooney

morning. Good

John Pancari

loan to back of of line side just demand. growth from to a I the utilization question want bit. indicated is go My the other NIM – little you believe I the

you areas on seeing Just you’re where weaker cautious see want the maybe to more any And where also, demand. or that are are de-emphasizing? still

Chris Gorman

couple a of things. John,

this being estate, real an that of year year. But clients in commercial about that sheet, be that we’ve on we’re we’re than think capital putting last would extremely you our in there. area more our accommodating careful if all, balance we’re raised XX% of terms what First

is XX%. think, shows Don’s one construction slides, piece in our I it that So about of

you look real market. we’re if So for estate, the below at example,

growing really is by is market the X.X%, by X.X%, shrinking that actually We’re but strategy. by

where out area to that so we’re you would would of point I be And outlier. kind that an an

John Pancari

you All the know Okay. be higher moving it’ll could modestly the margin color points just that changing? progression I through three still XX four margin, hike? give core for of that about point then look And that right. is then that how to separately, you do more bit How should separately, Or basis improvement? on each implied you upside year. think Can the basis a us on see little points of like? And basis pace we

Don Kimble

information in some we basis $XX the interest with quarter each Well, do would’ve for increase, rate it far kind lower XX on beta, there We point a updated that million $X benefit increase $X sensitivity. as to million been versus the a show a million. a rate it’s for have as appendix, of

three points points is in points basis the to that range increase. basis two for so basis And three to probably basis each points four rate

those will keep from be so help each will as support But investment the rollover one to impact. the that. book, of we is overall continue portfolio swap mind and that what as additive in should continue also margin And far to in our margin the on benefit

John Pancari

NIM Okay. the And year? the progression of the through

Don Kimble

very is rate quarter said there’s we’ll that’s and increase for the impact the reflected until Well, results. November, what is we’ve basically next so in rate And have June one little second increase not not there.

for margin say, probably up third bit, quarter would relatively in a fourth quarter I the should the stable. so And step but little

John Pancari

Thanks. right. All it. Got

Operator

the And Martinez UBS. a Please Saul line ahead. do with from question have of go we

Saul Martinez

morning everybody. Good Hi.

going the on is a assume Just beta following the the Is beta XX% for deposit and up your June discussion, right? to mid-XX% deposit both guidance I mid-XXs. that implying the November hike.

Don Kimble

we’re see we’ll some drift fourth into that say that It’s the of through ramping quarter. up the

all later if would I our expectation third at that be in going be quarter, know level hike June rate So the don’t there the but in it’s to in the year.

Saul Martinez

Got it.

from So, rate the if a it’s gets guess. the comes hike, to that with it XX%, fruition, up likely drifting to I run but November

Don Kimble

Right.

Saul Martinez

Okay. question I then on on, related NIM. And guess

commercial we in we think a XX, being each mortgages You think was result – uptick yields, CRE see XX yields very – fed bps. bps. loan I in, as think, mean? XX it do that about had up, I of hike? the should Commercial does yields, if Is spread. that was And with nice incremental of How a it that LIBOR what coming fund do think C&I in we

Don Kimble

right. You’re

up one we quarter, points. LIBOR XX saw basis second average The month

was are a that that offsetting stronger loan And received fed little portion commercial as $XX far fixed good So swaps that funds. against pecked than yield. loan yields, in that, as the a of is C&I billion

so And that margin perspective. growth in from minimizes that the

what and move trend more LIBOR And for line so that one we you’ll with continue. third the as month quarter probably fed opposed to in average see will see to funds,

Saul Martinez

a Got it. Thanks lot.

Operator

do the have Erika And America. we ahead. question Please Najarian line with a go from of Bank of

Erika Najarian

good morning. Hi,

Don Kimble

Erika. Hey,

Beth Mooney

good Hey, morning.

Erika Najarian

response Just wanted to Saul’s clarify, Don, to your question.

beta the does think As compared mentioned you compare to to deposit that and beta that reflecting mentioned? cumulative about ramps that you I earlier? deposit that – XX%, the XX% XX% is pricing a Or Slide to up XX

Don Kimble

for to Thank Compared clarifying. you the XX%.

Erika Najarian

it. Got

question all seems peers, the half especially for to second levels, we as M&A, like is of other the outlook and in And listened your Chris is, the year. second the it activity quite for strong Okay.

it Or comes As we about about accrued every and think the sort half incremental am wrong that we efficiency for dollar some of the line? fees, of way revenue should assume terms the that we you’ve upside about in banking comp in first the what to potential placement think I already thinking of investment surprises ratio of and year? in the for of through debt

Don Kimble

some assume what we as year second half incentive-based. outlook that indications – the from expect one, is two, highly say, of far as our market the of the said the far would correlation revenues. as does the and would we as And I normal for what seasonal it expense trends

And to debt a so there each we incremental tends item. basement said XX% in dollar incentive about line fees, in increase the banking investment corresponding that for be

one at at of higher the you also as so levels, seeing would typically banking incentives fourth the see, level the for us, higher we’re that as of in investment quarter point fees placement And debt time because well. year

Erika Najarian

you. Thank it. Got

Operator

do from of Please have go the ahead. Reevey line we Kevin question And D.A. with the Davidson.

Kevin Reevey

Good morning.

Don Kimble

Good morning.

Beth Mooney

morning. Good

Kevin Reevey

during or drove quarter driven So, the it Was CD very $XXX,XXX higher growth which strong your yields customers by that have had like any more looks average you in it that specials that and balances greater. was of seeking you just growth? rate

Don Kimble

higher our specials, level area as really of CD as rates. the CD at first We That the the really that of we are is far how retail look Yeah. accessing broadcast get the customers don’t far to products. price from as the And benefit advertise. category really we relationship as or

for And rates think that on those time bit that are in with rate category. so get we little the teaser campaigning that I overstated do attractive have or market rates offers seeking actively out don’t the deposit But better customers yield. a to we’re

Kevin Reevey

third the quarter know the And quarter think And exceptionally about the pipeline we fees? usually your quarter on you I some second investment debt for was looks like quarter? fourth strong. four of It you color give the your mentioned is then How third your us placement the should that quarters. can pipeline, for and banking strongest

Chris Gorman

the always characterize think having third having that, you XX Yeah. I a business But debt on our fee basis. investment we’re banking strong. clients really and We prospect about about trailing since with would our activities asked and strong. the discussions quarter, pipeline quarter are as this and placement said being our third

Kevin Reevey

as you, lastly, as And Niagara you what’s then your acquisitions depository institutions? appetite of have far First with behind –

Beth Mooney

believe Brothers and very of strategies made support capital submission return we talked And looked to First on that good Beth. and additive that our payout XX% some this have for our use while well shareholders. our capital year’s our capital sure growth our clear we making to focused organic of dividend are been our preserving meaningful a that of at a We’ve purpose shares, a CCAR and move XX% we’ve and to has to with repurchase Niagara is as as franchise, continuing we targeting about as been capital This was priorities, of our of we Cain we quarter, year, Kevin. Yes, have businesses. examples acquiring And for nonorganic shareholders. not on examples our think I where the example, for Those in value prioritizing call uses the we how of good interest or and see appropriate creates extent platform feel, capital capabilities, over the our on are bank to our see the relaunching uses fourth franchise to believe product and merchant bringing of and is then year we we servicing which can people, you ago, other a acquisitions. lieu last augmenting we in HelloWallet, reacquiring

Kevin Reevey

great on you. Thank quarter. a Congrats

Don Kimble

Thank you.

Operator

time, Please does appear are queue. no at And this in continue. questions there further it

Beth Mooney

and you in thank all your schedule thank our call taking of in your to today. participate for time we you, Well,

questions, you can If the team them direct at Relations and our a you day, Investor any have have everyone. remarks Thank you. That follow-up XXX-XXX-XXXX. great to for our concludes day,

Operator

that gentlemen, Executive ladies your and Thank Teleconference today. for for conclude for does participation AT&T you conference the And using your and Service.

may now disconnect. You

KeyCorp (KEY) 19 Jul 182018 Q2 Earnings call transcript