KEY - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to KeyCorp's Second Quarter 2024 Earnings Conference Call.

As a reminder, this conference is being recorded. I'd now like to turn the conference over to the Head of Investor Relations, Brian Mauney. Please go ahead.

Brian Mauney

Thank you, operator, and good morning, everyone. you KeyCorp's thank Earnings Quarter to Call. Conference like for Second joining XXXX I'd Chris Chairman Gorman, Officer; with here I'm our Khayat, Chief and and our Financial Officer. Clark Executive Chief

this slides, measures, will statement disclosures our the only we on call. on Relations the non-GAAP statements of forward-looking XXXX, the of including and website. section be well today, will updated. the covers as be may measures. materially Actual July usual, As not our as presentation, differ Investor made This results materials earnings presentation and earnings you found which remarks reference those in In back as XX, financial key.com certain morning's can from forward-looking find will statements our and speak of

over will Chris. I it that, turn to With

Christopher Gorman

on quarter-over-quarter revenue Thank which offset the per $X.XX was of X. fees stable. quarter, but with balance essentially the costs sequentially. you, million we flat as and up well from year-ago growth This across share, credit $XXX of reported first the expected a controlled record the basis, I'm from were $X.XX Slide a in Brian. earnings Expenses or is $X.XX quarter remained banking franchise. down investment morning, pullback we On

positive income Deposit Importantly, fourth is for interest ability XXXX cycle we rate. value grew as to commitments on both the year this for in exit from quarter, and detailed be to we continue we will continues and year to our Key. in NII we the that be Net to what as the remain path to enhance first a a profitability a creation deliver our deliver clearly our defined ago. little believe story low over on continue confident well full quarter

by X% pace continued deposit in costs grew of to deposits the while increase sequentially, decelerate. quarter, This

up total X% XX% X.X% at Consumer relationship stabilized deposits also are up deposits of households year-over-year. to see deposits. client were noninterest-bearing annualized We Additionally, pleased year-to-date.

to continue to with we very be disciplined respect pricing. Finally,

interest at cumulative deposit stands Our beta raising XX% the Fed rates. began since

noninterest households With we wealth against income, business, as prospects, important volumes second the progress quarter [ respect have our to X,XXX in affluent targeting In platform. and production households $X.X strategic record mass added in Since we hit continued and $XXX management have made of household to XX,XXX million another of most to our initiatives. over ] billion over March this the business year, assets last new assets launching of Key. household added we about

Over households existing business. we investment our XX% a opportunity. have Within Key billion. flat million investment our our deposits are have over and relatively growing as $XXX,XXX growth Overall, at great base, our customers investable $XX.X retail customer under assets approximately are X% -- management XX%. commercial strength a payments, X of relation company, about year-end. believe we have management in existing with assets In see commercial to since beta in reached continue a and year-over-year Cash we now fees only

core Our for focus this made a has primacy competency us.

and solutions see capital focused businesses. ever efficiency their our driving to more continue are on as momentum clients than We in working own

below our real given timed verticals In those was strategy in banking, that quarter. the our first communicated, growth care, embedded seeing our like the quarter market. on focus second we estate fees and banking of create as Additionally, opportunities technology deposit well previously have health we're meaningful and investment were

however, for outlook positive the unchanged. remains Our business,

higher ago today year-end than are and pipelines Our quarter, year last levels.

streams banking remains fee outlook for M&A near revenue other record investment the Our and improved. levels have near-term pipeline

expect our At stronger this point, year, we second half prior guidance. of with a the consistent

business This commercial that into a us real market. also countercyclical business to well. is third-party continues the estate unique national Our servicing gives commercial also loan perform insight

prospects for feel We good to our growth very business. about continue this

the up and ratios pricing Lastly, taken on tepid year our last loans. and time competitive. improving to of potentially year. volume our are environment demand the our recent It growth will on liquidity has some machine back to speed. trends, some capital get Despite the focus start also remains fully Broadly, after loan remains in see to half we optimistic stabilization and we

building. middle over well. up Our market, broadly are our last pipelines than pipelines XX% are our engagements are quarter. institutional picking In And in the as higher business,

Turning to Capital.

equity XX.X%. This improved ratio basis to quarter, our XX X points Tier another by roughly common

CETX marked also improved. intangible Our capital ratios

Fed's which received capital the is As stress test few a ago, in of the weeks which points X.X%, for XX basis SCV reported a received up the DFAST, we from or stress results have preliminary we of buffer implied Key XXXX.

few I'll make comments. a just

even this plenty we buffer, excess preliminary have of First, under capital.

new ratio Our X.X% a minimum. what implied to CETX compares be would XX.X%

So our capital strong the illustrate to results position. continue

run a we, to like Fed's in look commercial with insight dialogue We Key, with topic. real have others our estate losses The regulators don't our modeled Secondly, and into industry, forward stress lien Fed's continued the tests. internally particularly models. for on our for portfolios inconsistent mortgage are our this constructive loan first

Looking forward, ahead Key. I'm lies excited about for what

income meaningful past by We of see are Management our us. I'm is have quarter the headwinds the momentum go momentum forward. this franchise. we to we deposit that now NII across We franchise. several become quarters. each upon across commercial Wealth discussing interest the pivot payments now experienced and have again demonstrated NII net we encouraged business Concurrently, for as pivot last the tailwinds client been will entire driving The and growth also in continue we

Lastly, loan investment pipelines prior up meaningfully banking periods. are and from

financial details results. With over that, to call on provide the I'll turn Clark? more to our Clark

Clark Khayat

thank and you, us today. joining Chris, everyone, Thanks, for

X. Slide on Now

of Credit roughly we increase revenue credit up for bill assessment. losses second versus FDIC adjusting per earnings our quarter. first $X.XX, mentioned, were a per in share meaningfully net quarter's million the as share share noninterest down quarter, quarter in costs X.X% impacts. allowance or a Chris income more FDIC $X.XX flat, as per and X% X% X% was special for X.X% expenses $X.XX last assessment included offset income, this was or essentially interest to declined decline while by stable by reported For excluding $XX the Sequentially,

declined driven On of by to income as flat. in we a back start we've Noninterest year. a quarter will while half basis, But shared year-over-year the tough net real previously, grew and comparison. interest were become expenses tailwind expect a NII the EPS next income X%,

the down balance at balance utilization of they client C&I what to reflects and mature. to the in a loans we Moving on about to as our decline low-yielding to runoff sequentially Average declined quarter rates, decline demand, ended put approach The the $XXX loans Slide as our billion pay $XXX tepid X% sheet on and billion. X. sheet intentional disciplined choose to about consumer X%

loan have mentioned, continue June XX levels. pipelines Chris and As to us will are we dialogue building gives that prospects which nicely, stabilize or improve balances and with our optimism clients begin from active to

billion, increased X addition as roughly roughly X, deposits of prepare we slower liquidity come interest-bearing rates changes have the to nearly deposits year a of anticipated short-term deposits. to $XXX reflecting intentional $X.X of reflecting billion were billion the ago year-over-year sequentially deposits as Client high. points for X% a growth points in Slide quarter basis $X.X time levels. and down to as broker average consumer On the the of basis of increased remained by cost rules. increase deposits Both commercial and X by compared from conservative quarter is approach have during across up X% deposits due first increase rate total more

remained Noninterest-bearing deposits percentage hybrid linked flat at and noninterest-bearing XX%. accounts, our at deposits this deposits XX% in of stabilized total for when adjusted quarter

rates. interest Our began cumulative beta was interest-bearing XX% deposit raising the since Fed

remained market. franchise Our deposit stable with ongoing rates by product testing across the and

higher rates. seen much opportunity rates year, have we Given as the through reduce to deposit not

attract without accounts. having the paying competitors to to new nor However, we've cash have offering market on been that the lead rates many attract continued are operating of we deposits to premiums our client

by on Tax and income to rate interest $X.XX $XX The forward billion prior equivalent income Slide effective that interest mostly margin Moving and loan from partly was swaps of from repricing, million, from balances short-dated benefit starting the net million asset fixed impact up roughly this quarter. U.S. X. funding the costs, swaps $XXX treasuries and lower from offset quarter. higher was net became

at we the X.X% You the we then the will were roll-off as managing put recall in prevailing a of of rate swaps forward XXXX place in XXXX that swaps.

Net interest margin basis increased to points X.XX%. by X

drivers the mentioned, points. Cash previously to build impacted addition NIM roughly just NII sequential. liquidity quarter X the about In $X.X by billion this assets mentioned basis by increased

of bottomed quarter to that XXXX. our the NII first quarter in in NIM XXXX third bottomed continue and We of the believe the

half XX% servicing income, decline and of servicing normalized which $XXX primarily fees reflecting offset Slide servicing the XX% level banking corporate to driven year-over-year. increase investment elevated was services, This a and cases. has to fees up and growth year, commercial reverted mortgage balances. trust and by year-over-year, at first X. Commercial XXXX servicing investment million, from income more benefited SFR-related in Compared LIBOR XXXX mortgage services rose was special a the to Turning active prior X% transition activity. in the Noninterest

set management grew the under services. X% as $XXX another XX, the in new Chris billion. was quarter, billion year-over-year active to on of flows including net of Trust saw We $X special assets third-party of June which servicing, At special and positive about quarter. in we production fees Investment assets sales grew billion of as clients in about XX% $XX.X mentioned, serviced billion record behalf and service $XXX

Across higher fees investment and for mortgage M&A debt were banking origination and activity. consistent lower with commercial activity prior guidance the products, Our syndication our quarter. offset

were $X.XX assessments. excluding special second On sequentially, quarter flat FDIC down noninterest Slide year-over-year X% and X, expenses billion,

offset and higher quarter. incurred a marketing to benefits top $XX the personnel professional we last adjustment. quarter, services an charge of price, Sequentially, million decline employee key seasonality FDIC from the was were FICA and On business basis, lower in fees. due expenses stock up quarter's driven lower million compensation incentive first This additional by and $X year-over-year by on

million expected, basis Slide deep following points. the few and at loans criticized low quarter. And of XX. points XX increase loans sequentially slowed or loans loans XX. solid. remains as to in and at of $XX XX our markedly a XQ, first pace points Credit only in up period-end were in the Net increased ticked average X% June dive basis of to quality X% basis delinquencies Outperforming remained Moving charge-offs

no material the assuming deterioration. by We expect flatten macro end to that to of continue out moderate year, the

to Turning XX. Slide

capital the continue to with to points up in XX second CETX position XX.X%. quarter our build basis We

ratio includes and our improved higher losses our the Our rates. equity past pension to capital we've The tangible common and over year to increases build March to CETX X.X% which exposure ratio, done AFS increased work to X.X%. unrealized and reduce reflect

about by the DVXX neutral effectively Despite was million XX-month reduced negative sheet by have at rates, balance end, our our XX, $X.X AOCI months. past our improved run. billion quarter interest June including XX% over a AFS. at related $XXX XX We rate And over to billion $X.X higher to

through the of we've right this side On AOCI slide, XXXX. our projections extended

showed scenarios: time horizon. where which As cuts and XX, at we've levels doing, as the another of held are June the forecasted we forward through curve been throughout scenario XX assumes XXXX June X X rates

would With given the would $X.X XXXX. still forward time. If by rates we place, curve, XX% flow or of improvement billion cash to in expect year-end we improve expect the AOCI maturities remain in by current billion $X.X

provides XXXX our XXXX. outlook XX Slide to relative for

major P&L remains all across line guidance Our items. unchanged

compared down quarter demand We average of XX year-end up have for X% X% XXXX to to level. loan be updated the loans fourth we to implies flat X% guidance $X of loans to from X% lack to the And are This expect down now billion XXXX. to the referenced, June our year XXXX. end we balances in be to loan reflect

guidance down growth our deposit client revised X%, single-digit average deposit positively low with also range. in to to from relatively flat We the stable

we our continue of fourth slightly full even if interest revised up year loan income can to net We volumes exit believe target. hit and XXXX our end rate commitments, quarter short

from forward Slide net we from a opportunity the at interest changed the about and cumulative June income maturing. update swaps quarter. little last XX, curve, On $XXX XX stood short-dated The using treasuries opportunity million

and left quarters which is of annualized the approximately X end quarter the we opportunity, about on we've the of meaningful second expect quarter capture side to This left, $XXX the which the bars. shown next to leaves fourth of in in XXXX. of XX% occur opportunity the gray benefits realized quarter, most with As NII expected first over this million the

relatively rate we of quarter by laid out second from Slide how in the path the about $XXX mix, intend veto. to impact we assumptions net from $X We've rate running number The of million swaps or rest fixed to growth, and a year believe to XX. believe are interest potential of $XXX a around rate million of have what negative tailwinds ] from for near-term [ we we income short, the assets get a Moving of loan net and scenarios. out In end includes you and largely under lower cut deposit funding and Fed billion higher modest off the from reported couple costs, X. plus NII the conservative

assuming the December. this In expect million the top out in In laid the the $XX walk, growth, once cuts scenario, U.S. treasuries. in drivers swaps we've about from benefit of Fed we

also to of We in security about back expect pickup cash consumer other maturing lower-yielding the from in $X.X count half billion million. billion some specifically, million loan other the of and of approximately drive fees $XX growth $XX year loans. redeployment more assets, the flows of $X and Day

exercise cuts and in assuming but XX December. time, points basis the same bottom this by in performed lock, September the Fed In the we again

we see this tighter While rate, NII this believe near-term NII still Keep fourth to liability full would it starting next in become think recapture $X as in XXXX. takes deposit time rate be mind, to would to balance of modestly ourselves we year do hit scenario, improved X sheet exit rate that our year quarter come to We swaps can while position as first beta, deploy also we expect on benefit receive as a in achieve that drive have on billion impact would XXXX a off we effect would the we guide. forward comfortably although sensitive we'll year. cuts that we target still approximately of little we dynamics the half fixed from in likely

beyond transaction -- of In NII, credit addition, benefits rate client demand higher cuts more transition for and would activity, provide most capital. likely improvements

would this trade-off. we welcome So

Operator? operator portion now for Q&A that, of the for the to turn call. back the With I'll call instructions our

Operator

America. One question. Poonawala with Ebrahim moment for we Bank the please Instructions] [Operator go to first of of line And the

Ebrahim Poonawala

with just the So for maybe, starting stock. focus Clark, out a huge NII, just

in Looking the locked at the XX, seems no like it matter is what. Slide million $XXX

fourth quarter works the is how So from part the NII, some upside And out. of driven there of second XXXX. then that by

NII, weaker downside more versus on if and give being of us sense a back growth the in negative I So so guess, half implications, risk 'XX. loan or ends the 'XX up for

a on growth rate. the we good in wondering the where of -- us NIM the what terms the just through you've talk Just given get and to scenario loan imply X.X. Fed X.X concern would I'm weaker versus

Clark Khayat

Yes.

your whole Okay. Thanks, Ebrahim. and And get maybe I'll just kind unique of reground for sure then -- everybody in to question thing, the fourth NII not this the the I'm in not quarter. because question is I'll you're

we half all, to see noted. of of which this the lot you or will slide, been will we've pull-through think 'XX, of consistent first and in tried a you So that really as the second I happen would materialize expect be on

So the treasury. talked and we've and lot a swaps structural about roll-off

the about average Billion yield to about half securities in treasury low maturing swaps reminder, billion points XX $X is at second then a $X.X and basis of points. of [ of XX yield. at of mid-X% ] repricing roughly at billion just So basis $X.X an

So the another just count million the referred fees. to. you that's that million to left in $XX piece There's day on and $XX

we So through. fairly pulling feel good that again, about

continue to do We to costs rise. deposit expect

if beta there's in So a December. to no coming guided let's mid-XXs cut assume We X cuts.

bit December, little of that materially. X If won't up. in drift there's a impacted So be cut

down, know, immediately, loan that, just a in will before will happen little but We the but loans of if will in SOFR reflect see yields a impact, that advance, also that on bit cut. not will we there's as because reprice see benefit some betas the cut you and coming obviously, September,

little So there's in drag bit if XXXX there's a negative first in cut a of September.

commented, will you the As be right, loan variable. balances

planned. So a little weaker been we've in than quarter the

said, Chris materially. As pipelines are our strengthening

that's with think function and with teams, our engagement I a ongoing of clients prospects.

side. As market is the pipeline middle you XX% plus on said, up

to it's And I see then and getting expect there's be still we if growth do conversation. back there. traction we lower, loan the guided if materially little than bit in lighter a okay different a to, starting that's So we'll are think some half what

probably What is, going think, size and book is, the XXXX and the and balance for the question that sheet of implication your mean where going there. real I loan does is the what

come, look, and rate interest in think do engagement So cuts, certainly I client rate create in talked think to more I'm about very to predicting dialogue do pipeline some expect But as I seeing will cuts that at we good that. client so get that. economy, should although we we all not won't We're already, try activity. we the do

and means lower XX In on on will that see even the me a I really couple loan XXXX going last different on content swaps rate a valuable I laser-focused Key than on we we we But of XXXX to into been I going will other been good cause the on if do leader think and a would XX growth, it's haven't we've treasury. I've forward. that pieces years months, XXXX maybe been don't see loans, strong anything add that to at be We've think start today growth exit believe on loans. covered. commercial that

And $XXX loan of something repricing about billion fixed and we've not swap unmeaningful meaningful some comprised levels, $XXX seeing at you not then fixed plus appendix that million. $XX that some repricing securities XX, million. off $X.X add we're X%, sense just of rate those are $XX are repricing are at let that 'XX as swaps billion in rate coming that yields ] coming of comes $X.X of Slide which $X.XX year. Those at off me asset maybe So that today, included billion in another opportunity what but gives additional is and [ more some on as as the of well. So next about of just that pickup, billion low

definite there. So opportunity

move fourth impact rate the to the we'll have and our in, come quarter deploy treasuries the that will as cuts and 'XX -- book. off the get You'll beta year books also as of then full full and year into consumer come that

are loans think think clients have we I commercial for us, So we'll as sorry, to get XXXX. or able do confidence And on the grow there side into add I tailwinds headwinds and as be well. we

Ebrahim Poonawala

That's good color.

sequentially. NPLs up and you just question at on look other The picking Slide criticized XX

are We talk seeing on your from what C&I about your where us degradation losses C&I. of seeing in outlook Remind to lot of you're coming and just a terms of credit charge-offs. forward higher NPLs specific seeing could lead banks sort on more areas customers from going you're any that

Christopher Gorman

So out nonperformers, Stepping things. we exactly it migration for have playing to A would it's couple Ebrahim, the to. back of a normal expected it's just Chris. One, criticized from as second.

Our XX% secured. XX% grade, book, is C&I investment it of is

low very And in most them have so utilization of terms of borrowing.

from So we place. a start pretty good

And seeing businesses. by business longer Your to services, one the people tell question some some of higher impacted some Consumer as where equipment scenario. you me good the though, where is a for goods, sort let we're action is.

the the side of other to On in the equation, sector. actually healing starting see care health we're

about seeing seniors So think going that the other direction. kind facilities-based of we're think housing, in about care health

upgrades downgrades the always still mix is we close. exceed that look thing is other what's to that starting The ratio and downgrades upgrades, but of at to

thinking about about it. that's category But of of very of in how Obviously, broad we're that's a is it. how general. kind we're thinking So C&I kind sort

Clark Khayat

might normalization. strongly quarter. months. provision in net came he on do the thing, from I the standpoint. and XX We charge-offs think, very financial some solidly the other in reserve in, expect the built follow last We only just We over the And

we've our charge-offs range. back So tend issue half. expect We're denominator point consistent fairly to with to higher I to last end did of net really That's, that's loans up than on comfortable where been. say on pick I expected. we XX basis charge-offs versus the a but more month, think, that, the XX we'd probably in

Operator

Siefers Scott Sandler. Piper with to go we Next,

Robert Siefers

spread have looks deposits that sort look appreciate the I of still going an it's going what previously. when Clark, and what of of so like anticipated the sort the that So question. of to Maybe had on looks through than -- Can better related you through of those. come on sort at NII. like sort maybe NII walk the in base deposit deposits you're kinds what you walk -- you

some of that but go growth So expectation, probably I funds we're what if back just there's in view. still loan your think sort looks question like into dial getting something, we in will that spread the

Clark Khayat

Yes.

question. So -- thanks, Scott, for the

look, grow say, trying we're we're and I'd accounts operating one, accounts. always checking -- So always to

of to of little intentionally bit balance sheet. the asset we're -- think of get we We on mention added So kind happening we we'll side CDs what to ahead that going regardless is of of just a do the whatever some CDs FHLB again, what see expectations. don't drive we reason, think whether have if We advances. expect do the don't are some continuing growth or And tightening it's optimization, liquidity that. to funding brokered did down we we loan for

think we have opportunity to we'll do So that. some

built We position. the cash have

the range. end in at quarter, $XX the we kind the So of were of billion

where that you moment. the maybe back I just But at couple where on that of the would deposits, a indication highlight of see So going. we on things half some cash is say gives sitting

positively and example. like. lot and active That really about continues as meaningfully accounts, of moved would clients our the sort clients percentage that with a product actually we've deem Key, for a think talked I we've pretty for hybrids, book, we of very continue clients commercial or for we good to about in have One, their index index to the be dialogue

anticipation been talk move as we've So obviously have product with structure to down rates. as more or them we index-like they a to able of dialogue about rates,

we when to will think So us that cuts start come. benefit

fourth reprice we higher, due have the maturities, the rates have pulling do down. in those and we been coming do continuing rates to amount have been prices we're come haven't decent so able the the as stayed to to driving be maturities, but shorten down, a active extent we here And CD that quarter in we'll

that, conservatively on cut pretty a the we'd tailwind in -- second betas. If one there's there's will view been bit, but but a long down more still we've that If So probably we'll and have we think on 'XX. to we'll clear cut. quarter, a opportunity for a lag little obviously be that's kind that deploy of expect fourth

Robert Siefers

Perfect.

Slide bit then of a ticky-tack And question Okay. the XX. on a on little commentary swaps

$XXX down was cite last opportunity, little $XXX -- million the annualized that's quarter. a which you So from million

So expectations? I've got a represent that just and reduction couple it of already a is in remaining that in that questions. is what's million the Or Does $XXX still absorbed we've difference the future?

Clark Khayat

That should that be detail are we follow little a bit, the that. can forward can we down would and function you has rates If of just impact do -- up that. come where give I on a but as calculation, the curve the

Operator

to go Ken Jefferies. we with Next, Usdin

Kenneth Usdin

Just a the loans on just balance of the in whole context sheet. the follow-up

like you your see a keep did just wondering little it give much a specifically bit your And of guys being can mentioned you versus Clark, this you we little just what areas more a where like coming the about you us we Did do how straight pipeline, So up color just that I'm how you talk more in? more see can the when And originated? is conservative? pipelines of if loan you in those just earlier, commercial. what growth Is peers, HA, much bit on see change? when

Christopher Gorman

Chris. it's Ken, Sure,

these the pretty is think significantly One keeping bps, as obviously, general. to cost is I funds of from kind talking by about to One, of we've on that, sharing just but because tepid XX-year. And things. out clients, in what rates across in start me -- the economy, Let what's with had of gone rose XXX the we're volatility just are board. next trajectory. the as capital there the lot from The I going XX loan here's and has what's you demand in the concern people borrowing it's of on the kind unknowns up are that is a X of top think marketplace Fed

in, Also, that But I property, down kind and talk if around precipitously. big make longer. And CapEx and think equipment to hold. have so kind go rates projects. and go I settles time putting I actually move. we'll of higher XX-month to it's And plant lead going down to think of once a think those for borrow. most people they they today, will it's And been to X.X%. that go there's inclined to a are as think around and less down XX- clients, people going They're on have

think policy also the just lot depreciation. to election, like closely think out I think the take that tax another I held they accelerated businesses is as things of ability variable there. and A these about

in So all mix. are those the I of think

impacts there's The that is next thing coming it down. that I think is also rate question no the of inflation

kind And so off. And motivated pandemic during of issues. to because the That's long were go first were people inventory wearing that supply motivated then inflation. long of they of the kind to go inventory of because

in rate point. contraction we percentage by was what utilization actually X a our So saw

customers, XX%. for typically, throughout Going is and on balance we And a on balance from benefit sheet it just question sheet. history, keep to would XX% the quarter ended, billion we what typically what kind $XX last XX% kept the of in raised our our we we and have of we your the bit -- our quarter. about place up of

share So that terms a of seeing kind are of of what's to of senior are don't in with is in degradation the on. structure. all. compete reach to like is We going going at need it's But there, lion's not we what's for of the credit sat flavor gives we as on. all structure you sort that. -- people that and I marketplace the loans yesterday, officers of And do not feel going some we for an clearly are our down that out element, There but

see the On starting the pipeline. to come positive transactional finance we're side, to starting into

business, change. For of big pipeline our XX% right is real a example, in transactional, which the is estate now

we're hopefully, terms that's about helpful, So in thinking of maybe Ken, going on it how out what's marketplace. and in the

Kenneth Usdin

the last over the And balance a about Great. have sheet, the we second question come just RWAs entirety think when year. the down your lot just is of

can we tougher. in to AOCI, X.X%. So CETX a Slide bit little even went with is see stress The test growing. XX, up CETX,

just to ] important just relative XX, [ position is all, AOCI and number, the So with loan if X vis-a-vis capital thinking just book managing that growth. how way? your managing about And that you're regular RWA at how to your

Christopher Gorman

the our Ken, Endgame, -- of pushed out, beginning position. we it Obviously, proposal we a feel about out the be comes we III initial to said when the CETX both and had since a where will since clearly, path changed. the that initially will Basel clear good be it marked less reproposal and a hasn't to CETX, wanted really severe. and that We get to had to on capital get

I've that of we've rules the there's We've question all applied, got long-term said Basel as and past the these got thing Endgame. other the because is, III marks are lot debt in proposal. I The think a

-- won't we we I are where know where be people think right sort to ratio. rules. it put mid-XXs all of a kind to a we'll when not plays yet of together, most these that seen to are now how on out of have remains you you surprised see I'm have because I be are loan-to-deposit if it But couple

Operator

UBS. next from Najarian with question Our is Erika

L. Erika Penala

XX. Slide on just question First

great have heard could So through guardrails is to saying pretty about macro I'm everything of the million, the to the good green. in for us So let's Chris in achieve a sort loan clear And and bit bat -- growth you in it's the about Chris how that and rate more those how bars, But theory that gave green perhaps last mix for X terms think to not improved little plan the improved growth pretty terms mix loan $XXX talk with those loan and we the $X.XX in billion of costs. us that deposit probability tell in you you call do of XXX-plus to how and of Clark 'XX. right? quote ] funding of about Obviously, us it XQ you've will walk curve, growth -- environment bars the [ got net funding to just wondering be green number. positive --

Clark Khayat

Sure.

Erika. one, So handle let first me the

on something we're funding $X kind the order billion of of So look, mix, on FHLB on advances. sitting improved of still

down to bring still to So that broker well. to but We that $X the over opportunity billion we opportunity have to as year, brought down. last manage close some some continue

on be of on and book. deposit will we we balance then the margin, the overall can And of size kind sheet loan think costs the where based the calibrate

we like opportunity think of a we and back half MMDAs. here around So the things of bit some have CDs on and maturities that the leverage do to year in do little

to pivot getting way We're looking So or dynamically. be based the like watching traction we on much loan as they we that at loans. materialize, our how and one able pipelines on we're we're other very feel should

Christopher Gorman

lot where of and and last market of And where consolidation. those the get Erika, get -- are financings a we're we growth of care where we've similarly affordable lot to sort able where we where are there's things been we project year. now aggressive like a leader were a are also And just not things always would expect loan growth in renewables areas loan to are like that area health

L. Erika Penala

it. And follow-up my is second Ken's a about question to capital. Got question

the really negative AOCI. the point a what's belly And the terms Slide here. time is XX the in that to how I'm basis bit don't by But different surprise. heal difference granted sure you although stress how much. only rate struck is, terms obviously, are me on think XX going scenario of a in was test not [indiscernible] decline have It versus treasuries the rate, of curve of I what of -- a Flat is

As back, Clark is a in comes commercial. position been that premier said, think grower if Key peers. a you to outperform you in macro guys have And would always

how flat adjusted So It sort terms at RMs growth end to going investor this all, -- assume the Clark, balance from the but versus impacting adjusted your be and, seems $XXX.X of And impacting, between of think in how sheet a of sort of that for difference market confirmation much if multiple your a reported. quick you, year? should is plans? how guess, are the to AOCI does your that and your the and we investors that the perhaps square through I just rate about

Christopher Gorman

start I'll of that. part the first with

-- million. only in the for all. the marketplace. $XXX on at is X different under a variable no rate That's at difference talked about, out scenarios just under your has AOCI position Our RRMs point, impact to them different not And the all we competing

of doesn't day day business run So it a how is out. function the but it and impact time, we in

Clark Khayat

there. that, Yes. in just liquidity to to redeploy add And gives would I have down, loans that capital us continue into that right. We consumer do commercial to and both come

limiter point, viewing field. we're that's as the in So a something right, not to Chris'

the far a of sheet start. the balance through flat I relatively the is place think to good rest year, As as

in on I response to expect As can around I optimization but be moves to bit, your to assets. question, earning little move your that a said large it meaningfully -- wouldn't

L. Erika Penala

were to So if impacted. go-to-market obviously, very confirm, Chris, it the firm, you just not that's strategy, feels like,

terms that's sheet do credit for very any at mitigation story risk feel a these XXXX In or transfers? should Or expect the much we this managing balance -- point? you of like wins RWA

Clark Khayat

of consistency It's and that -- we way, we made the your I spend peers which lot a did. obviously things a look, where mean moves. by some think at I in it's of We lot I and on had do -- some Yes. Erika. already appreciate time had particular us understanding places looking something item,

change, If know us additional we we where to particular, had value that back transaction exited we do 'XX. that. opportunities CETX like in getting that. frankly, in to the at are But a for the see auto There don't some execute something were huge to moment. how So in

that that's capital. likely candidates we drive have improved not couple that. But for to clear me We that at a moment lever prime this of need to pull portfolios a to that are it's

Christopher Gorman

Obviously, the expensive you the your transaction better is, is. think more the portfolio

Operator

Cassidy RBC. Gerard to with go we Next,

Gerard Cassidy

interest is obviously, time. quantifiable, took you Chris, quite this about Can not you've been I how know in this are. and But I but really at they pipelines strong some for your your comments that the over confidence pipelines XX through next months? and it How give look these at are -- pull confident real pipelines. could you on us there's as are there's that they you some

Christopher Gorman

imagine, combination Yes. for Well, of mentioned. a review they will will. at Will I'm We have time probability, pipelines at of we away And pipelines. sure a just look we times looking that fall some relatively -- our them. of fee. Will spend the lot pretty to detailed It's you as I reason you can a be things appear time time, that some as sometimes dated we'll more done from haven't we been That you. we tight, short to these away investment on sweat pipelines, good loan of as happen pipelines. that expeditiously. But But get banking pipelines Where people well. close and that been will the respect some has a in the our details deals few have just we're because those those with variables stead. on

a downturn have the have a sudden, feel can we changed go significantly, about huge if away. Now we good all of those markets if and obviously, But pipelines pipelines. the we

Gerard Cassidy

And then there guys seems on credit, number area in in the to I those concerns also on I part Obviously, any equity guys there or there's think of in borrowers. and the evidence you in as consumer. credit been the that mentioned that you to some that, be is care includes equity folks, have said use the XX, think from presume category. follow-up there to balance any you durable of for it your the it fees years. know loans that I loans? private tend the good. Slide might guys your very financials side a work a in And C&I, evidence been strong non-depository insurance companies And private improvement But Is category Very capital riskier earning and have that you that they I the your sponsors, the and health sheet. The question less of with on C&I portfolio. any markets

Christopher Gorman

those of and Are loans kind We're of concerned And migration, the Absolutely. this in literally universe are we're about every not rate issues? borrowers. loans, in the increase. asked private there specifically not. leverage some are those some there category there's we you Has literally of No, Obviously, about underwriting quarter. equity But been that community.

Clark Khayat

that drive that portfolio been We've would Gerard, in And kind of that that XX-ish financial years. concentration.

Blackstone, loss returns, flow it that agreement and with like was any maybe frame, portfolio that X actually clean, is think for the quality there's I the concentration, It's not and forward literally entered that to credit. concerns time entirely risk great one about super credit we manage portfolio. that of that in into the

Gerard Cassidy

coupon us it. received And you question have that the with Slide And rate just you, quick today, rate the same XXX thing would increase? to was refinancing 'XX gave I Clark, the Got technical a what you're XX receiving, on For where on if to on what's that amounts. while convert the example, the weighted the convert what loans? it average dollar fixed

Clark Khayat

Yes.

starters X% forward putting forward, So going bit liability of putting those on are and in the today, for sensitive range. purpose little XXXX. kind the we we're on a of in getting

favorably, long that obviously, but they So and in on that depends obviously. that to sits the compares -- starting how forward there even 'XX. XXX how the and quite are, XXX out

So benefit definite there.

of would market, those were comparison give from points. are loan X% to of moment kind for at you vibrant and just on But an variety that's government. you rates going and a the sort range, of XXX, rates if the isn't kind the the X.X% probably rate reasons, holiday well, is in in But your at on fixed -- to one, student overhang consumer put market either. those the -- be that the if the of loans C&I, you'd incredibly then there probably, forgiveness On mortgage X%. the at jumbo And the did yes, be but and

way that XX-ish today replacement be on range. about And probably So the would of that on that think $XXX rate. the coming is we'd then securities kind

Operator

John Evercore. we have from with question a Pancari Next,

John Pancari

of XXX we next ballpark just next think line. anywhere thinking in dynamic you focus basis so really believe NII, I terms of the and based type from growth, the the and at XXX the clearly, much on on impact rate to could looking looking what And know swap fall how like be on perspective, of to -- about a points given It how that revenue and be maturities I positive of XXXX pretty means. how bottom NII it. or Operating NIM the of year what positive it double-digit mid-teens treasury is could exit operating benefit and it leverage the impact revenue consensus has heavy that of in to leverage on and As benefit for year? looks XQ that the growth a about should a at you

If you're looking at X% expense growth rate.

allow materialize it allow you'll to the looking you think Or less positive at than be this leverage that is So operating and do that something line? could to wide bottom we follow the that? that

Christopher Gorman

your our disagree John, with out we're it's coming of is with -- view what Chris. assumptions. don't But of not I sort We yet obviously, XXXX..

John Pancari

increased actions Okay. look you that indicated you that little a I on costs, you front. less pressure they then All think and but quarter, you us Could than on think deposit likely assumption at expect help costs maybe here? know and bit quarter, right. upside separately, forward from that just first this And is incremental the cited CDs under that the from costs the about deposit you curve a when you maybe deposit incremental on

Clark Khayat

about data. talking say increase rates you or understand, just so when upside, And I you're in

John Pancari

rate, Increase. yes, sorry. Increase in

Clark Khayat

cut is, impact But there's minus yes. not I think have technically, cut you're the that still is minor of And may or stickiness definition we'd consumer technical really lot just December, data were flatten I the whereas September in so book, of not think of lot have be time again, if the guided that think bit bit. to of plus do December, a that. see as one we sort If just cut cut Yes, is you'd a that of I will December, X of If a be get in beta that. no coming positive you cuts, a in we ending. a cut into to does is the cost, the have nature is the of or What so well, implement a reality but question the Look, occurs, negative, little of beta we up cut guess, I as kind a it of on with by cut through is, first they half down. maybe cycles of think again, the said, would year, to to beta kind a XX the cycle on overall rates to start back in September of that -- on If impact. your get kind there mid-XXs. over in drift going I

Operator

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

Matthew O'Connor

Just month. the to of think strong million half the investment thinking the together million I bring last it banking revenues back the of pipeline. How kind year? $XXX of fees, $XXX talked on you about all to are you maybe about

-- do you So you feel still about comfortable that range?

Christopher Gorman

do half we've it's guided will That in $XXX around be of first that's will year. range ended the million, Matt, and our $XXX all Yes, believe the that Chris. is the unchanged. revenues -- right we $XXX the back We the half million, to along and year of million to

Matthew O'Connor

just that services, the Trust the But market. some investment sticking then boost might there drive going obviously, -- on what growth growth Management the beyond what market else us us from Investment And there, here. is giving Okay. nice is remind fees, with

Christopher Gorman

customers. Well, Key. mass new $X really billion about things assets business we're the to in that my And is That our business. initial XX,XXX about growing of was one where of clearly we brought total talked in the we -- affluent comments

So that's line. that that's a of really the -- big driver

Operator

with Next, we go Stanley. Manan to Gosalia Morgan

Manan Gosalia

perspective. dollar I ACL up ask I just the loans are ratio. results to ratcheting the mean a you're on wanted coming down, from

up the And if How going ACL fairly environment level the reserve do the what's So macro remains ratio about you those stable? here think levels? has right been steadily.

Christopher Gorman

macro drive still this first it. that take. only as reserve now is. we you of of a actual as out, economy premature growth, idiosyncratic evaluate unclear scenario and exactly think plays to continue But what the view are, out, to right question. your the I depending path more really credits. the that get what clarity, where on The evaluate to the it's X we it's we'll But could thank us loan is point I going total because Well, how Sure. see things then the all, economy for you to

Manan Gosalia

little can is bit there's down your rightsize So start to And fair? more your what a Is loan at to reserves you're and that that growth? until levels. bring the then these relative saying that you when keep I get guess uncertainty, you you certainty, probably

Christopher Gorman

Right. looking with shared at We've I of constantly just on X been view it macro economy. One, metrics that the the our adjusting it and you. based

Secondly, which and things the have and down so we also size nonperformers look in of instance in terms book, and of this obviously is like the forth. idiosyncratic migration going what the at just

Operator

with Alexopoulos to Steve go we JPMorgan. Next,

Steven Alexopoulos

for bit. we just that and December, disclosures assuming September -- I you'll where the terms you want on cuts the of to be this But in and range this keep NII horse likely bias year? obviously NII, detailed in thank on get for quite just a what's all X start year, say, of call your Clark, terms the we've that

Clark Khayat

Look, I to it to tell going be activity. cuts, I'd markets more I you think think X would the end bottom of of I our But the buys capital we're drives just health closer I demand, loan cut range. overall take from with an it because think second business, more the

it engaged think more economic in people investment. I gets

into quarter. So XXXX I what's think would the versus, fourth in make it's a going I guess, trade maximizing we certainly

Steven Alexopoulos

it. Got

what real ways row expense I curious follow-up this X And on you're any I you haven't had basically know I achieve go to guess at and point. we're my to think to back But years expenses. of lots And you outlook achieve if John's growth. the year, do Okay. little a it's give in expense outlook for ask I question different where there's bit that. want of going XXXX a not this question,

expense an multiple is the until understand there company. One to for environment gets just because have us help for a coming or you've projects just that like better, you and should deferring catch-up them looks normal expenses the is and growth revenue Key year expenses is environment is the expense as of a the -- better. And deferring more the been year next years that in

Christopher Gorman

in. a will the So forward, position answer company Steve, for to be the it more out the look we is, as year of normal we expense we're that continue as come

is been purpose expenses in private banking of to we took we're invest have out business. investment of grow being We in to to client we've our the business, though. $XXX like last million reason just technology invest people And payments able trying year. and in our the and businesses investing for able our the been business, that

up earnings migration but million see to that have you continued a in So starved the $XXX talking invest expenses to the we're tech the will we continued business. in cloud. the as in spend our We've go pull-through We've about, year to XXXX, of area. our not

will able up go you because just So because it's that -- deferred but in continue in of business business, But order to that I It's grow. not can expenses. invest be in to continues to imagine XXXX. the think to expenses

Clark Khayat

to reiterate lack that. a just investment up. to -- it's point takeout fund the just will It's And be to put Yes. it will there, Chris' difference. That the be just of stable clear

Steven Alexopoulos

Got Yes. it.

great color. That's Okay.

Operator

Fargo. go we Next, with to Mayo Mike Wells

Michael Mayo

fixed the repricing. asset something to very that you that is same think I have I'm -- and missing change no basic, the

loan growth you same still favorable yet less have have guidance. You guidance, the NII

So I in logic? what missing am my

Clark Khayat

Yes. Look, is of I mean range, part a -- it Mike. is there it's

you structural to where lot is we've that in talked of call, of as going part as fixed land a to of So that, the the range lot asset the about increase be repricing. the in A

of minus or bit loan a bit plus offset that, little loan that stronger is to the or a I not going by we So whether growth largely muted deposit have be pieces on performance. is growth, think, little but

one the somewhat negative, of And both the balance components, sheet we think offsetting. we of are So those hit positives. one of those

be loan half plus that So of second will of on or range. growth the amount the we see the in minus kind

Michael Mayo

are is You pipelines how commercial? quarter-over-quarter. said that middle of market And your market correct? much middle XX% up total Is

Christopher Gorman

total correct the would commercial, is quarter-over-quarter answer market XX%. probably and XX% be middle is The of

Michael Mayo

thought have So certain -- even loan though you like backlogs such conviction, should even guide had you growth strong you lower. have a Is seems correct? degree you though that you and of still it

Christopher Gorman

average there. felt way, our part loan did. we rate, of the one And Mike, of was was our rate We that which -- of our than is reasons things exit X that thinking lower the

Michael Mayo

And a Chris. separate just topic, then

the you you tone able died And Is but after another the of Niagara it the case? more think do likely what's I would said terms what down topics merger the it that pursue willing you D.C. the in become feel environment, deal. still to In you'd sort would and be likely, of is and that think election? here first do circumstances appetite? your under recently, be more What like

Christopher Gorman

Sure.

a So relates anything in I the as depository, it future. near see to don't happening

deal I is, approved. obstacles first of completing -- the a think to you it can get all,

and what's if you the left you take can't long get it approved, of it business after Secondly, get how approved. does it

As questions landing. soft some right. I mentioned not everyone real sure that's a hope the I earlier, I fatal to coalescing think are comply. there's on be around seems people I'm that,

become about And book, course, so and buying I business, buying as of you're think losses. thinking you're realized a unrealized their losses

see to people the and that's it the keep First that Niagara, good business. the on the take and clients model And the What in the of business call in XX% keep with industry. respect out we So of mentioned the were sponsored for pretty I you all able those I any cost a think to I near reasons, said, had had in I future. don't -- happening as

So What is there's a until any I think be team consolidation. to going that think I lot. I've -- don't consolidation I with be our shared think there will there's

see buy really niche is you entrepreneurial term. spending that them really near integrate businesses. businesses. us That's medium big and think would well, I things hard Where we'd will And the there done to do. will that time for we've So ability business. that it I a I'm of proud entrepreneurial be pretty think focused on be in And to be these our into -- consolidation. I and company think our on

Michael Mayo

then And mix banking, your question, different. investment know is last I

mergers, have them. to apples-to-apples but really compare banks, I favorably it completely, doesn't the so relative not You're more just to it's loan you big syndications, but know

backlogs the other said you you in investment banking. record On hand, have

banking record the So of investment what backlogs. areas you seeing are

Christopher Gorman

Sure.

divergence. with I'll So the divergence, the start

We are focused on certain industries.

We to our times. respect Where lot verticals be think in Mike, particularly backlog, strong pulls loans to is the have had place a certain through middle-market it's given issued pretty things important huge equities for quarter because we M&A M&A equities. a a secondly, not one, at with good people tend certain hedging. And teams business not of it's our franchise, did because, I just a for of and like us, lot business most in like a us.

that's our So pipelines are where strong.

I second that for see and terms going in you're -- business come down the talked And the out reasons come to all of think have a of and mortgage commercial that comes stabilize. both, earlier, we area, pipe other -- you're I rates down, need as see half the I in to think of rates about pick think really up going candidly. I The the year. what business you

Operator

we And Peter go with D.A. to Davidson. Winter next,

Peter Winter

the in quarter. loan business. was growth on under Consumer wondering about quite bit consumer the if talk I'm second a the just the you of pressure outlook could side lending of

Clark Khayat

loans. personal enormous the huge -- It's the balance nonconforming loan which equity, really for or amount we in an lending, mortgage, volume jumbo book. generally Peter, mortgage mortgage the been credit a on student home us. student what not as market, consumer is market market, you loan sheet card have our -- has don't market One, we of or know, Sure.

you'll continue you We those forward, little see and us those of -- businesses see more little clients where probably support a particularly would come off-balance suspect sheet. will but mortgages, we rates we very but to do stronger, support clients get can, that actively, down a in held-for-sale go I bit do as us and

a more view as service clients. fee those that as income little a So we we'll bit generators

-- clients in an the few good room will years. been nonconforming as so as accommodate on We less but than sheet it's example. structures will to last relates the that balance probably have to be always it some

Peter Winter

just the -- going on of the given a side? decline yields similar expect low you type Would forward consumer

Clark Khayat

In terms this year? seen of what we've

Peter Winter

Just quarter? the relative to second

Clark Khayat

have go mean, back paydowns have look to month. you every and mortgages, structural loans I right? and Yes. but have They sure, student I'd for just

unique you're think have know in quite a to more driven than you'd the as but a down, any to But of bit, [ come thing come continue see rate think So I at what definitely, down I will normalized for we'll frankly, it probably lot they what seeing I come book forward. that expected. down a sort ] accelerate rates that So refi. of of down loan have of happened would is consumer illustrative don't expect going second growth that quarter

Peter Winter

Okay. different just of at back Chris, are I'm year. a looking on back to to some what back there this wondering no just buy buybacks. just But know plans you're parameters are get on question, into -- stock? market the the to stock And buy then I

Christopher Gorman

been required. understanding where to Endgame have any approved balance appropriate us we, opportunity not it. everybody, revisit have firm for a until that's going know our really -- forward, first to that. parameter piece been a the -- at year is at the that's be III fact, be important period we're the clear, be mentioned and as by But I to had the phase-in will buybacks very Board. going Well, under look what obviously, we've going taking would the think of just is plan engage is in Basel that because like time equation. we've what obviously, a a And be we of sheet we to this very It's capital in going because us, for But the give we'll to an And earning. sure even don't heals

Peter Winter

Clark, question And on question, about the then Steve's range. just X NII last, just clarification

You closer X cuts mean the of closer the mentioned that with to down. rate X% bottom range. Does end to

Clark Khayat

X%. Closer to

So upper be it end... would the

Peter Winter

end down range? Upper the of

Clark Khayat

wrestle the Yes, we But those down. semantics. closer to on closer X% to can that yes,

Operator

conference And back I'll remarks. to Chris for Gorman now the turn closing

Christopher Gorman

participating for our call Again, thank you today. in

them This direct Brian our you. Thank Investor have and remarks. you If team. Relations to concludes questions, you follow-up our any can

Operator

for AT&T and Thank Ladies participation and you conference gentlemen, your that does today. conclude your Teleconference for for service. using

You may disconnect. now

KeyCorp (KEY) 18 Jul 242024 Q2 Earnings call transcript