KEY - Earnings call transcript Q3 2021

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Chris Gorman

[Call Starts Abruptly] and Mark Midkiff, our Chief Risk Officer. On Slide 2, you will find our statement on forward-looking disclosure and non-GAAP financial measures. It covers our presentation materials and comments as well as the question-and-answer segment of our call. I'm now moving to Slide 3. This morning, we reported another strong quarter with net income of $616 million or $0.65 a share. leverage full to year. operating leverage positive positive the for delivered and generate expect operating We We was the up record X% delivered third from year quarter ago revenue, which period.

income teammates our by record creating growth way to the a quarter relationships year. across of growth proud by including especially new in year. level, and the businesses, consumer so, am communities both in were our The doing income across our from third growth households investment XX% our the clients; record was period the results new income. Noninterest continue fee-based driven and net we In Our up banking, I serve deeper experienced broad-based first business, net interest of same and up our X in increase noninterest reached driven franchise. XX%. in which and last months was

of our to Our fastest-growing a is the rate at continue clients Xx younger of Western growing be and over rest segment. franchise our footprint

Additionally, have billion. mortgage add consumer strong exceeded year consumer of high-quality full business relationships $X.X expand and quarter, originations our from as we the level digital X national originations of growth loan which Laurel Laurel reflects bank. record $X.X for our record another our had months billion to Road generated XXXX's quarter continue through business Through the the and year, Road. first consumer mortgage in a our

our has broader is is Road outside of a healthcare as volume sets from digital really the what is Key client healthcare of our Road initiative that apart nationally. part footprint. Laurel targeted of established relationships results Laurel our approach, banks. X XX% Importantly, high-value our company leading which Currently, across in coming

had on Moving our commercial we another strong businesses. quarter. to

We third Our the level the growth and highest business in fees record a quarter generated platform. of second Investment quarterly our experienced million, level across history. $XXX Banking entire

decade. grow business comprehensive past over has consistently enabled the and platform this broad to Our

grown at annual growth has over XX business banking the an compound rate investment Our years. last XX%

XXXX. pace and we Expenses or on franchise are in incentives consolidations will consolidated reflect teammates. growth future branches continue of quarter investments. approximately in again in These in ongoing digital, investments our X% and this We to branch cost we make XX Year-to-date, our higher drive to production-related generate analytics and in our network. savings double-digit support the

for will opportunities footprint. to our to continue Shifting look to credit right-size We quality.

were net Our points. quarter very average loans basis this all quarter. XX prior and were remained trends from charge-offs Nonperforming and strong the loans criticized to down loans

continue our has support risk to maintaining clients business company cycles. all which continue our and profile, the moderate to while well We will to perform position through

position strong have we capital our capital to while maintained Finally, shareholders. to return our continuing

remain X X.X%. third ended range we accelerated capital from the into Our the relief sale the a of common of accelerated repurchased repurchase an repurchase share ratio $X.X quarter. in Dividends authorization. common equity priority. entered quarter In X% X.X%, our our disclosed part previously above Tier of facilitated we to indirect targeted stock at the is program quarter, also auto The total, In the by of our share $XXX share program billion third million portfolio.

dividend Our above X%. remains

expenses another Board our top our I for make growing restating and investments by Our while We at our month. will will leverage to increase strong consider operating close it next dividend future. continuing positive Directors meeting that of by generated was line a managing quarter.

results now repurchases. of Don? remain I capital management dividends will committed quarter. approach to on we turn and share shareholders over the returning to to more always, to Don, As details call will the through disciplined who both risk provide our and the

Don Kimble

X. now on I'm Slide Chris. Thanks,

continuing quarter, share. $X.XX operations third was income the common For net from per

positive driven economic by from a largely metrics and losses, which benefit reflected strong was outlook. our for net credit results provision credit Our our

to interest Importantly, operating income for leverage net were income. period as growth in and the X% this noninterest leverage Total had year. And both compared year. year-over-year we said, revenues same positive expect up deliver we delivered operating positive the Chris quarter. last to We

on I'll on cover XX.X%. Our equity tangible other later the for quarter my slide common this return was items in presentation. the

Average loan to billion auto Slide declined take clients of major X. of that loan items were Turning X There loans $X.X sale our this we and helped as quarter this forgiveness. indirect impacted PPP quarter, growth the loans advantage portfolio. PPP

indirect for loans Adding PPP from the Adjusting $X average sale indirect auto and the down loans reflecting by loan $XXX quarter to the of our total loans reduction been impacted our quarter indirect quarter, We sale on both X.X%. Average auto line auto period, on commercial sale also prior adjusting growth were loan on over the ending up were the and basis. lower to loans our our ending The $XXX million million in basis. third up approximately an down average growth, average our month. would on the $X.X an portfolio core approximately year-ago the results balances utilization. sold loan for portfolio, and were linked last billion have billion PPP Compared and X.X%. comments

We continued growth consumer and to driven mortgage. see Laurel strong by loan consumer Road

costs Total the see the XXXX, reflect consumer X. year quarter ago offset to X decline decline interest-bearing commercial billion basis or for X% Slide of billion we The compared X quarter, down following and second both $XX up period the was the growth comparisons on in linked deposits partially by quarter a up and deposit On point time point expected slight prior side, commercial $XXX quarter. from Continuing quarter. Average were X% The continued to from year and and came uptick balances. a to growth utilization. last totaled ago basis third in the pleased in deposits.

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

the of quarter. XXXX the to compared billion $X.XXX ago quarter equivalent X. a Slide third billion was Taxable billion income to $X.XXX year Turning net interest $X.XXX prior from for and

net but X.XX% by earning Lower quarter, day compared reduced and margin interest million compared net and basis margin asset levels. X.XX% to the the to increased last deposit interest the was margin $X quarter prior by third period interest 'XX driven impacted continued to benefit and deposit yields strong net interest sheet by increase inflows. benefited income the of Both quarter. larger income The X and the lower interest interest ago and period. net income growth partially offset count liquidity net X.XX% costs in a year the declined points. our sheet interest-bearing for elevated liquidity were were significant in balance the due to prior the balance for significant Compared same net the Our meaningfully for margin year

PPP portfolio $XX asset the million positioning. loans We've and last $XX with our we and our For also $XX rates the cash the in liability loan quarter, from on and quarter. over compared included In in ended third the our billion million rising detail total investment were to to higher sensitivity appendix short-term fees period quarter, additional moved investments.

X. Moving Slide on to

reached our for the investments. in was million XXXX million $XXX We from to continue of fee-based for the by across income third placement to including third ago year in quarter. investment fees, million We the and growth for which see million, fees. period, strong Compared the our strong ongoing businesses, broad-based $XXX debt compared $XXX a year the which quarter to banking $XXX XX%. Noninterest period M&A income benefited noninterest increased second driven ago have quarter platform, had and growth record

sale $X.XXX fees. this and million. now noninterest services investment and to on mortgage by income was record Offsetting expense increased growth was Slide Compared $XX driver margin. second to XX. fees increased the increased commercial $X.XXX third $XX gain the $X.XXX The placement Additionally, mortgage largest billion on fees quarter. billion quarter, year of $XX due lower was million. to this I'm million income lower last debt consumer in corporate billion increase quarterly prior noninterest for the the compared quarter quarter banking and Total a

additional future reflects reflect first, and million, largely increase driven ago attributed higher quarter to the The production-related stock higher and our primarily was price. increased slightly of compensation benefits; increase incentive Key’s the higher related expense settlement have of in from the expense employee The expenses to pension X stock-based investments incentives production salary $XX the and higher second made we higher day year in and and areas: expense expense contributions. X was Our related by other primarily an period fee levels the personnel drive to growth. charge in increase quarter-over-quarter charitable

XX. moving expectations. We credit Overall, outperform to Slide to continues quality Now

$XX the to loan points XX quarter, or in loans. the quarter auto included the average million charge-offs of current For Net third of portfolio. net indirect charge-offs $XX million related were the sale basis

as production. metrics loans of a benefit $XXX the continued Our was determined or outlook prior our period-end credit provision on credit or This of of from XX% net points Nonperforming quarter. $XXX well based decline the strong quarter our losses economy overall $XXX a loans, for and this XX loan basis million. million was million for were as

X.X%. sufficient ended Tier customers places X This targeted with X.X%, needs to to to and us capacity with equity on which range We ratio Slide our return provides borrowing shareholders. and X% XX. common our Now quarter capital support continue third the of to to of us a our their above

to On the results. our and accordance the common program, XX% We repurchase settled million ASR with of ranges shares Importantly, return third purchased years, bottom priorities. provided we the million authorization. representing shareholders million we to XX, share. Directors settlement $XXX quarter open in the remaining of for dividend $XXX accelerated common our XX% fourth common share Guidance quarter. $XXX at Slide are Board in our the quarter per Of remaining $X.XXX were listed similar market. share of million slide. the of guidance be repurchases, the fourth will of continue the relative million at in during related a our capital the approved quarter third quarter prior of $XXX initial to $XXX our to repurchased capital were the in to The The

Importantly, outlook above this is year using quarter. buy at midpoints full XXXX last PPNR of provided or outlook would our

Average sale indirect guidance fee-based the low continued our in We single as have up digits, the credit well businesses be excluding third portfolio. quality. to especially our quarter strong auto will the loans of our adjusted in our of reflect impact strength our performance as

off in year-end. Average impact to in forgiveness businesses in third fourth of most stable the growth digits, balances. single come Noninterest fee-based both PPP the core through quarter be Net interest our stable remain commercial income in is consumer down the of continued fourth and and our be quarter. record should reflecting expect lower relatively momentum our deposits performance sale. with should quarter the We relatively auto loan low expected

investment banking our from We for benefit what will record also business. to be expect another we year

low noninterest down expect the fourth expense We quarter. to be digits single in

Moving quality. on credit to

expect we XX%. net third to unchanged a our in our basis fourth for be XX the were quarter, quarter. guidance has at rate And to We tax charge-offs expect the strong our and year. finish the Credit below trends GAAP strong remained for points

shown long-term our remain the of targets, are at slide the which Finally, bottom unchanged.

stakeholders. on in our will the of progress Overall, quarter, for it was to all our our back instructions We our operator continue portion to by and expect confident our improving risk now will remain in deliver productivity to With Operator? call make another the Q&A turn on ability the commitments moderate strong that, to maintaining we these returns. call. I efficiency, on profile and the which targets to of drive

Operator

first JPMorgan. And line the with Instructions]. Steven [Operator with of Alexopoulos

Steven Alexopoulos

I wanted to start.

this IB moved million the debt on per were pre-pandemic. from, I right, think, $XXX placement you has fees, So and quarter

issuance. about this think should an consistently know we million Now intermediate How just you're year quarter. term? per this do over to debt unusual for $XXX we is line eventually go the back over we million? And running $XXX And

Chris Gorman

Chris. So Steve, it's

on at at rate of decade, As growth XX%. line, we're trailing don't a basis. I we've a think XX always annual grown we million. the going as back at In I compound look look this we $XXX it mentioned, last of to this, kind

bankers. continue add We to

X business, But We having continue XX%. interesting. niches long-term we in. middle of deal This unique business. feel of these find we're said the that activity is the added might up to business. we I'll terms about verticals the It's the market. serving industry give that, the X% It in call really X is trajectory you good further bankers penetrate year, and incremental statistic you a

So I sectors. the we're in think right

business, do the double-digit think a and we think be grower. invest it's don't in I continue back a it's to unique I it think think, $XXX time, will going to million. I over to continue business. I

Steven Alexopoulos

Okay.

that is this consider should current rate a we baseline, So Chris, right? as run

Chris Gorman

I a we I at to continue XX mean basis. don't as can a do think it, grow I Steve. know if would trailing consider on look we But baseline. it I it always

know, business, you deal you the in As guys too. are

but can You grow you can't do trends, quarter, to think continue long-term I sort annualize we'll of X look and it. at

Steven Alexopoulos

you. Got Yes.

Okay. on guys And were? the have And quarter the period what end do you PPP? out the give you in on the balance PPP, can -- maybe, recognized fees of Don, balances

Don Kimble

Sure, quarter balance last $XX for was ending million were realized $X.X loans this can. The The was down fees million. from average total at loan our and was $X.X billion, the That quarter. billion. PPP $XX

Steven Alexopoulos

bank been or could this X in Chris. year. all actually you, It's more at a There's M&A Have squeeze record been Okay. for quite M&A active activity That's helpful. exploring in bit nonbank? If in year. either a you I opportunities of

Chris Gorman

particularly in nonbank space. -- always people, out the We we're to talking there Steve,

of track which analytics bought is businesses and buying We have pretty Obviously, year, a AQN, firm. entrepreneurial an integrating good them. we record this

We have fintech investing and a in history companies. long of with partnering

we'll be there. whether So niche around it's active to sort very continue of banking, very, always we're out And businesses, then boutiques. investment

is is of out a that there job there and create to value. there see be in always out the what Our marketplace lot could

focused we're particularly these out businesses. so, but on niche there, And

Operator

of go America. Ebrahim next, And Bank we'll to with Poonawala

Ebrahim Poonawala

I up guess, if outlook. a you bit little the could just follow on

about positive this operating talked You've year. leverage

PPP pressures mentioned look operating is. that forward, beyond how on of Give XXXX an look about would banks as you you to on And we off, you maintaining tail positive love how branch other do big perspective we inflationary impacting right-size about the heard talk think some that. us leverage As perspective some opportunity footprint. that expenses? So revenues the your

Chris Gorman

thank Sure. Well, question. you for the

important us. fact very First proud of positive we on year-to-date a leverage of operating have is really the all, leverage basis. to operating We're operating -- that

leverage for positive year We will operating XXXX. have the

pulled not XXXX. our together We have yet plans for

we're of I everybody the with our a run important January huge guidance a It's focus business. that in we call. how share is all to tell positive we'll but in the we're the continue very in, when that, able leverage. will positive part leaders We have leverage get investment. be you, But these business to have growth date, can our operating of investing on area to but we obviously, for of heavily getting we operating businesses, to And focus

will pressures industry. think clearly the there's pressures. question our any there's those. in services those customer think, the for in within seeing be inflationary mentioned I financial don't that we inflationary are a You I And everyone challenge, base, And economy.

Ebrahim Poonawala

And I guess X for you.

of us your XX want sheet at to at just you're months in disclosure slide rates? deployment balance the So seen? looking think ALM set terms the in to interest And end, up do the the points we've steepening we curve the talk cash where sensitivity you from given as managing higher how NII XXX now basis about bank

Don Kimble

our purchases $X.X $X.X the some time of traditional runoff that a It's portfolio. from compared great we investments activity saw quarter, about billion challenge had that's all this billion in we flows question. we of to the that core see portfolio the of bond materials that existing from cash the you off And something might with

that, some billion to short-term treasuries portfolio the about transaction up addition increasing as and bought of our securitization $X In billion $X.X also overall ended auto by bond well. we

seen $XX of quarter quarter the at $XX of say we of an average the investments range. the in the nice in made purchases at about XXX Those the to investments, start a that yield is ended the in the that XXX. same which of rates is fourth up up we billion. so average third XXX had types from And would I billion of quarter total tick What we've

to of some portfolio sitting heavier that opportunity give us with assess continue into that as a now to quarter compared more do and the clip short-term see time. positioned term probably purchases $X.X range beyond, and to billion near little quarter the something $X plan treasuries, would lean with We're that in a term. the to purchased get and rates And that billion put billion maybe fourth we we long that positions third liquidity over for of on we'll right and So in moving are to that. where more comfortable in excess cash we work up and probably and instead $X the of billion $XX

Ebrahim Poonawala

And you the on next helpful. XX, That's think to I lay that Don, Slide over portfolio any changes, what's $XX billion state rolling in stay out off? Is steady expected that Is year? hedges. number

Don Kimble

liability hedges billion remainder maturities debt all maturity swaps. the for a true number That's months, for specific of $XX are are as very those the both hedges. really asset hedges The the XXXX. security $X.X also next hedges, and far billion for those some XX as Of

-- received X.X%, and And and X.X%. the the perspective, just $XX fixed swaps go-to rate to in would in current so about for rate for put that us billion is average those be

So that up we're pick risk. that seeing to start markets that rollover start we as far to -- as have and rates close gap

Operator

to Piper And go we'll Scott with Siefers Sandler. next,

Scott Siefers

talk starting about say what a maybe kinds you I side has and and loan offers guys a a you like which was talked please. speak terms was of bigger you pricing you certainly I'd those once structure, some have hoping see all quite about of out you I the magnitude in recovery. of just Laurel flexibility. others what's you're the to second, about things some of mortgage, maybe growth little yours degree, you Road there. there. And seeing noise sort of bit, could But guys for you're hoping some To been things, differentiating commercial comments a wait a the through than more to

Chris Gorman

Sure.

well. have you'll sure some I'm Don, then this and comments start, as me Let on

growth, our trajectory are with the We Scott. loan pleased of

X side, our You mentioned both engines. will growth consumer continue. Those on the

good So about those. we feel

energy, lot around the affordable activity we've seen to housing. side, We're a specifically healthcare in relates it and technology. of significant players around commercial As

pipelines those of active, been and All sectors strong. have look the

we giving I at credit it of Think a benchmark. all. of would to And are As relates structure say points, on and current from of pre-pandemic structure, BBB that continued pricing be maybe to a and been about kind erosion a of sort basis good would erosion of sort not sort there's of XX pricing.

Don Kimble

up coming Chris. housing and coming commercial us core of some $X.X efforts I I'd as paying those that we're been about billion. $X.X from additional linked commercial our other about that the chunk of from a benefit And utilization saw us. loans is and by on absent growth. estate $X.X growth. really addition there I areas the and would the about seeing We a portfolio Chris agree, our PPP, we're that as And is for the increased help balances dividends on we over billion good up that, say itself quarter drive growth mentioned would have focus bit Then real And aided billion. affordable portfolio, commercial basis grew that that say rates bankers of customer more of calling in street the XX little to that the saw of points. seeing that is by far

Scott Siefers

be can't thoughts? And think of portfolio sort on be question just starting the the hear of Perfect. but bearing any Does of just reserve Okay. size I imagine what a steady-state curious huge about to you indirect that the have maybe, sale. Don, portfolio, would that just then it given will your level. on any

Don Kimble

have impact at doesn't all. on really a It huge it

there, loan we little line. reserve they were levels a in overall the for had bit the but you average generally than look the book, less If at

continue as watch there. expectations continue X credit of performance and as to there. a our our relative improve So the not far that The metrics much to is thing we change exceed

as And as the as seen so some main down our levels. as reserve adjustments overall of far been that's far driver the we've

Operator

to go Carcache Wolfe Bill we'll Research. Next, with

Bill Carcache

it follow up fee how growth how item leverage fee accretive but to between over line on investment corresponding line Wanted there's the your and compare the producers, you of relationship that in expenses operating rate a the does your revenues is in to operating leverage? time? to in How income consolidated income item. the dynamics, specifically banking compensate Clearly, that

Don Kimble

that we've though historically, that investing margin operating in well held fairly say even I that seen business, would in it. we're for

as compensation formula, while variances from an would XX% be increase a higher as it's the far about about out see this isn't of I in strict be dilutive company. work business, not the the revenues. for that range. a And quarter, it ratio core tends we As efficiency than And the typically quarter to change it's would see what to little incentive too overall, say but to entire to to in we

Bill Carcache

bit rate a That's color Laurel can Road's to a on how mortgage helpful. environment? higher you then separately, in Got give And and of you'd mix little mortgage expect it. evolve volumes

Chris Gorman

Yes.

So Bill, for your question. thanks

XX% our step broadly, just back as our of at is to you look now, business So and doctors. you volume mortgage right about

it's an of across inconsequential all So not Key. piece

Additionally, XX% volume is our right XX%. now about year-over-year. up purchase We're

relatively I think are [MDA] the would say flat. those

expect we'll will obviously, I Laurel purchase rates the relates it of that to And impacted continue be aggressively it So up, as Road. on would the that. piece side refinance as by go obviously to grow fairly interest

Don Kimble

keep mind, permanent and really that Road Laurel target also It off customer residency coming in for their those the the is And business. are to assignment. locating doctors our

is establish more X to so a permanent residence. step and house loans a consolidate student X And buy would of step their be typically to and

if coming that purchase expect customer targeted see to though base well. even volume are we so rates And would some up, as going from strong

Bill Carcache

I business, X of with simply on relationships to customers? Was of a now indirect Got exiting lending the direct sale, desire in fully consumer auto the with one. have that behind it. exited And squeeze last your indirect you lending? If may rationale strategic result your focus

Chris Gorman

Yes.

not believe targeted auto with really and And being we is relationship just you mean a you So indirect a that the bank. if think And there. in being clearly, scale. Bill, business about on focused there's are question, you're who no bank, correct I relationship relationship business we specifically, a do business.

great value repurchase, just accelerated because exit whole of for share automobiles lot to then recently made up it risk sense high. eliminate the the of transaction that with the business used capital, had tail time so the us quite at freed just we was frankly, we made a completed decision and IRR when a And us and enabled to the the a

that the executing did logic kind exiting between of recently. transaction was So and the the we strategic business

Operator

is Ken Our from Jefferies. next Usdin with question

Ken Usdin

Don, talked it. follow-up just X.X and But XX about wanted swap that number gave with just [X.X a I to the comment, you on billion]. The swap broader understand and strategy book. now that the the

just Just -- and in what those? about thinking could wondering how how you'd us benefit some income you the you're And remind expect if replacing of to quarter either income traject? was from swap that hedge this

Don Kimble

in The whole typically Sounds been we the have to really that of of as now to year the much be the asset far forward target end -- asset-sensitive to talk also swap next about available in that's going a get where the in good. us size position and our our sensitivity asset we biasing slide to is thought our more than book be higher is sensitive We're position traditionally. redeployment as would. our liquidity. we deck, X% it the would But

some rate those it X-year securities, of and low long-dated a variable which variable cash typically average with securities. rate have but rate be will a the position, asset, So out and for replacing we or is taking earnings still investment life asset, that about variable

reassess swaps. now, continue Right replacing consideration in of have we'll not take to additional been more we've swap that of we'll so the to maturities and not that that do going whether or to of or the we do just replacements And forward. any we as

manage So asset position company. that's the how just of would sensitivity generally the we overall

the the is far down, over And loans from of what the have forward that move We could quarters. going As coming up, up, an happens as would be we couple but come rates on rates. that the with see as will swaps. seen then income those come net going number commercial question And about from interest offsetting see from swaps higher would from rates the the next slightly benefiting you we quarter, $XX third rates. short-term in impact down benefit the million had the the of

and we're And forward. summary what so a that's again, going of might there where be just today positioned impacts

Ken Usdin

as the X% you sensitivity of let's where Yes. would were And -- X.X into? all follow-up, not just, asset go replace, do you that idea have of turn to if a so that that say, an and

Don Kimble

I would there. exact X monitoring outlook I but take changes say would be far rates in we'll don't be the the as the the our And is that, us things probably balance just up of as that would overall have what's what asset for sensitivity, other rate and sheet.

in something prospectively have swaps since asset fairly overall duration, impact just that evaluate. but So those it huge have wouldn't a to in sensitivity, we'd are short

Ken Usdin

Understood. And just the if what last? could total you versus us last I was ask quarter give a Don. just clarifying Can income one, PPP this

Don Kimble

fees. was on interest individual including million The $XX million $XX total, the include that quarter, million, will was of which loans the $XX including $XX the last million, in fees

from the just relative change that’s quarter-to-quarter. so, And

Operator

O'Connor go with Matt Bank. to we'll Deutsche Next,

Matt O'Connor

more? on of seasonality for categories. fee -- some A follow-ups there's and nicely. kind back others consumers leading and inherent bit recovery. that spending start could liquidity think and some might you it couple you a what Do individual charges obviously, are a borrowing you excess of down their also Or you that? think driving do be guys But indicator bouncing that's of Service are some just are

Don Kimble

if One, far though across even we're retail deposit growing the balances customers smallest the of if Board, we balances maintained, the customers, our individual average at as balances. look not seeing as

activity we're point, so we've your I exceeds this some up, that's previously of activity year originated some growth customer first say And pick that new record had for year. and of not there and full charges seasonality, we're lot level, as that as months net a to is And for growth. far a seeing we in us household up. households driving importantly would service levels seeing X we're change had the that, seeing what more And

growth activity strong as also there, which increased for well. fee seeing we're does so translate to And us

Chris Gorman

Matt, up general business, just up payments to first up XX%; XXXX, give quarter from XX%; you cards our of the XX%. are retail purchase in some numbers merchant

velocity. of So to a lot Don's point, there's

Matt O'Connor

the then results going markets. fees and separately, that. embedded little in linked a on well in you flat how were year-over-year. recover trust as for and quarter good money there? are then And And us those Obviously, backdrop waivers down Okay. market What's bit much a flat rise and rates when remind

Don Kimble

Yes.

income biggest there and and As commercial trust the fee far as brokerage that was quarter driver activity, was year-over-year. down the linked really that

those If retail down at investment you the year-over-year. core and linked those quarter of of seasonality periods, revenues, sales banking look but slightly for each because up up private are were

the your I I are question, main those apologize. Matt, last so forget And sorry, what there. drivers -- I'm that And then was.

Matt O'Connor

market Any line waivers you'll when that are in rise, rates that money embedded recover? that

Don Kimble

waivers don't market there really don't revenues any I have We market doesn't all. at our really and that there. money funds, so trip any manage money

Operator

with Next Peter is Wedbush from Securities. question Winter

Peter Winter

I to to the target capital is moving just getting it on maybe with risk or the the for you I'm the better. the wanted X.X profile, credit to wondering improved ask X the outlook Chris, end end? take low low capital. economy of Would consider below even

Chris Gorman

CETX. do lower on number X our the Could obviously portion scenario the we think X.X that of we be in business. of to X.X? X.X of variables. about believe is right to Depending target a to to lot X we Peter, could, as lower but still we There's not the intend X we of the

Peter Winter

Okay. the And net in also then of net sale ask of about then, excluding the you talk the of average the intercom Don, indirect outlook, the PPP fourth if income, the just interest that can loan with auto? excluding growth terms I could impact and in quarter

Don Kimble

indirect growth that up PPP But and overall the the talked would impact forgiveness as as that the the X% to we billion balance to loan far If added growth. about the the Sure, there, we've $X.X single impact another expectations average of up low could. X%, auto. digits, add excluding loan on of loan

So almost single a would basis. X%, it digit so expectation a linked mid-single-digit take quarter that growth from on of low to kind a

something reported essentially so And to quarter. similar we what this

PPP would so for hit the a revenues. impacting far expect PPP. outlook of in X probably say NII the would As fourth neighborhood is of the that outlook, And there's $XX million things as NII type on in we one, you that or are quarter, I decline which

The income our for be loan that those the auto but income sale, points will We be servicing other of indirect net XX a as received sale fee up. our the interest essentially loans. down, will is basis result

fee see of $X in offset will and increase And to those an parts range so of million and income NII the you of decline And help about million pieces. are that. moving kind of a in $XX the

Operator

we'll Next, Securities. Eric with Fargo go Wells Chan to

Eric Chan

that tech. to relates question a have I

perhaps how if as guys you So have retold a And bit give number changed speak partnerships that could bank, have partners you guys was wondering if just you us little role fintech currently of I about the fintech you of possible, the with? for Key? the could work

Chris Gorman

Sure, Eric. Thanks your for question.

So and our has us. partners really important relationship for helpful with been fintech both

early. were Frankly, we scale technology us helped strategy. thinking bank, our clearly in with our road really service I it's it's us our And think kind targeted It's also of our execute to a we map. client As strategy, helped developed successfully contributed sales our as strategy.

our understood And unique by the into fintech is entire tied the community, clearly ecosystem. strategy fintech and both known helpful. are is which We

to literally or have maybe I step because have XX lot, of question a say, relationships with groups. because sort of would is and relationships distinct in we dozens Kind XX makes that's partner And whole scale in as targeted What Laurel that XX at from have done our today, probably client-facing think just we digital we it helpful. Key you're developing the have a have, client X strategy, relationships we've we perspective, a Going software, known Road month is great of opportunities a and how really such are us affinity if which fintechs best sort pain of see fintechs strategic really we point at look your doing extremely many approach it we're we we What this of every a digital banking. built of about kind to kind through. well. back single you solving national ecosystem, and relationship really take bank, infrastructure is as obviously,

well. I -- been say and I'm So can us, good relationship been for as it's for relationship good fintechs certainly sure a it's for the a probably

Eric Chan

helpful. to follow-up And of then a that's on kind Yes, just that.

you what partnering so like a guys follow level, are of say, do actually comes high to on how in-house it just when which of thoughts building or So kind determine to strategy your fintechs, there? to

Chris Gorman

It the starts out. client with

bank. relationship-driven We are a

have impactful can that serving pursuing. market a these we that we're set. partner, make distinct us so that with the And fintech invest can more client extent in client groups And we to the specific

in customers, into specific enter pass. a We'll a take point will partnership. marketplace invest some We win for extent help we pain and doesn't the our us them. To it targeted the compete in solve and

buy versus the In on Now dozens And there client-facing stuff. cheaper infrastructure is we mentioned, the as space, it. and obviously, the and to faster that's it I build it dozens. have criteria

Operator

is Gerard Cassidy RBC. from question Next with

Gerard Cassidy

Credit for guys give some been you peers. color? us you Can has obviously and your great

long-term lower guidance think that level creeping for charge-off cycle. quarter about or number, have quarter basis later do up for is a net You've creeping given your stay When or XX a the think you us this recession, I'm basis we XX then numbers you points up already 'XX? And you 'XX than to another we but do through in points second into the for you normality? start which talking lower start not at and X,

Chris Gorman

to me this X fourth points, that basis XX million while Interestingly let we we XX the basis to points. look we guidance clarity. results pass don't our take closer The into really really you that, Obviously, out quarter, enough, at it's We've relates auto. So indirect know. we good $XX quarter, gave report when Gerard. is, the answer of as take a got

in Key. are can we think -- I I for speak

to think, points. below gone going of We a actually basis won't the But we've about extremely serve that level low. see XX this look to us last derisking into I at the for stay XX XX well. going us XXXX, range targeted as our basis think you're years point I is still we to

Don Kimble

I we're what Gerard, of pre-pandemic. about. to we metrics quality would far the there. position, than better as overall many of agree One is our credit for with actually things as were today, comments A Chris' couple think

loans, assets, all better the look nonperforming if for where are than stats delinquency were they nonperforming at you So consumer pre-pandemic. and commercial loans

before little are incremental what are higher and classified that but pandemic, outpacing the quarter criticized this improvements they Our we've And before dramatically. down seen we've coming what a than that. seen were

over would to stimulus. you're little time, be well. for good that see be to, at the that consumers normal there's as commercial just going going then start customer, to to if turn probably expect down you start They've challenges going the things And liquidity, slow the to that And the away would see some time same still starts of are that return go to the start aren't we suggest like a to so road. of some think it time. of seeing that signs and And so sooner. much it's I more beneficiary with levels we some flushed to would to while that But would been but the early

we're the I the so some see that think low guidance to And period ranges below charge-offs be going industry. for to of where a we're time going end in across

Chris Gorman

on price some pressure pass I the and a think what a that are commercial side, think, in through small that pricing beginning particularly smaller less see power. the first with have be wage of sector, I Gerard, of significant bit customers X business you'll to will pretty the And is things increases. the inability the of

Gerard Cassidy

follow-up, does as your And can if last that But at first sold like Chris, banking questions. pointed a M&A thought of levels, your out normally, in strong, then you of DCM, that thought a were of the bullets, cetera, I seemed you it are investment Very that high things. give I flavor numbers, those us compare loans. to the because advisory X then for et of record more versus it any business X year? very prepared XX% good. you look that course, And quarter looked and how you second, which, One, out XX% but million, break retained when you on $XXX off,

Chris Gorman

Sure.

So investment the of different our can was given equity banking we fees. that Gerard, we've And that a out technology. can you I M&A very the broken strong. have tell strong, extremely was business focus never each business components, on our imagine you

just couple a broadly. were spots bright those So

consistent of As the been about distributed actually it's we balance long very period sheet, and to we We've sheet. time. XX% on held We've always that on. held put what's balance our our basically our it a relates mix of take credits over what of on always

some dialed maintaining risk what So pretty are We've attractive we profile markets out really our that moderate up there. and been just all. taking at haven't of advantage

Operator

John next, And we'll to go Pancari Evercore with ISI.

John Pancari

growth growth seeing. loan that curious you're in into see. the terms you around XXXX could that sheet of that you're given interprets you've type the activity color the how loan I'm thinking of on-balance appreciate I

us give into that Just how that and how can the a you could color wondering of curious on about bit year? if play full thinking little you're

Chris Gorman

John, question. thanks for your

on are, dislocation. on model we when We you see went of our on the there's in will sheet specific balance But very, about be if question, for report could now XXXX view addressing going you some in went us in, very what January. But well, they're putting conditions you maybe view into a of could lot the our markets -- functioning right we'll more previous have January. market our the interesting what's back us to depending variables. is And see a

John Pancari

know talked then Got expense giving the on thinking inflation. I around And topic it. about expense about wage you're know you not at are look separately, how All as side, right, expectations? the it XXXX specifically. Chris, levels add to you’ve inflation you could guidance, what thanks. full And I wage year but

how that? annualized about do curious Just expense you think about impact,

Chris Gorman

Yes.

So the are that flows fact mortgage for the and businesses business obviously in driven have variable date by us investment biggest that and to our been impact those has in banking grown. structures, those principally business

at the the area. had that in Key in and have is Your we X particularly to, entry the throughout low question kind of a junior banker -- level in of end good the also

the And that you what increase can We on basis? of there. specifics an is fact, some on wages Don, had impact to us have, in give annualized

Don Kimble

the $X.X those year that probably about I us Our have expense million each say billion. is about X somewhere would to of a range total components cost $XX year. $XX million in salary And

seeing other highlighted, that well. overall. evaluate. we're to And positions. areas entry-level that it's little as we're So And some the continue to the as specialty type a more over impact of also But it's Chris something as there in as in we'll starting of see X% cost far

have targets overall. so what year, as we far next to we'll expense as of go have And salary assess into as we'll kind

John Pancari

But it. the Got wages mainly lower the on to banker $XX that million areas? year, that's junior end in $XX million per

Don Kimble

it. got Got You it. Yes.

John Pancari

And Okay. around question just the lastly, side X shop. All right. of then your tech

much perhaps size Just how versus your of been how growing tech running of can -- the annually? curious split on the -- And bank? budget your if then update the is you growing in and bank terms us between that's

Chris Gorman

Sure.

on So that, about year. Of client is broadly, it spent the of half is a million is spend $XXX facing. million, $XXX about Of about development. million our $XXX

The other is half core.

is more things we've been to up long updating great period a which dollars a less the we on that over spend the of development little actually time, of some One front of our category, in frees end. have technology for and the

brought a lot also of would been an think to really Road our thing terms of be niche The be we what been about that tech us. we've would investment of a budget. And businesses of that have outside buying example that have Obviously, is technology is tech other Laurel an that, in actually would example doing that. that's of of AQN we lot

Operator

And with comments. closing I'll the over Mr. Gorman further no questions, call any you, turn to for

Chris Gorman

today. call our in participating for you thank we Again,

This and If have Relations Goodbye. Thank time. questions, follow-up to we you. our Investor can direct concludes everybody's XXX-XXX-XXXX. them our you appreciate any team, you remarks,

KeyCorp (KEY) 21 Oct 212021 Q3 Earnings call transcript