KEY - Earnings call transcript Q4 2024

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Operator

Good morning, and welcome to KeyCorp's Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Mauney, KeyCorp Director of Investor Relations. Please go ahead.

Brian Mauney

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

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

Christopher Gorman

and Brian, you, everyone. morning, good Thank

for results we earnings potential, quarter marked as journey realize of milestone loss share. EPS significant another $X.XX our Key to fourth per reported full our continue Our an

the we $XX quarter, not strategic the recur. for elevated the to second fourth to impact we our December, adjusting we that expenses positive of In expect a approximately incur in after was opportunity completed However, $X.XX. of which million took repositioning, would securities EPS

defined revenue Adjusting year. and and is the securities interest for income repositioning, net Both Our momentum XX% versus revenue grew fees was digits. double clearly sequentially XX% prior up significant up the and adjusted

from Deposit another rate been of soft, execute deposit demand than quarter X% remained cut. betas plan. rate our driving to we and fourth by first exceeded XX% X.X% stronger continue and loan our we while NII, Regarding have proactive expected, deposit strong year-over-year. Concurrently, growth, sequentially repricing the exit commitment disciplined client up quarter

we net the balance Criticized our remains to improved charge-offs constructive the be are were performance. of million consecutive for begin Nonperforming year, assuming $XX and another nonperforming assets encouraged midyear. macro peaking to loans loans decline quarter. Additionally, expect to fourth credit sequentially. the $XXX migration strong the million by and environment down I down continue by Credit were for

to that exit exceeded and in we households guidance. basis we the that targeted we to expected, Key with that continue was outsized we For our offsetting an We line the for am positions the in or rate in Throughout deliver full financial income operating year, achieved year, growth beginning X% on of excess targets growth of the interest groundwork year. grew stronger were net to leverage in relationship related continued our the positive lay proud consumer, middle of XXXX. In wealth met you in our consecutive the half substantial growth the to detailed charge-offs X% while grow penetrate including favorable. than at throughout markets, for expense and the the more second exists we markets. XXXX. markets. Net in our to Western the was I that Eastern of was year, Fee scaled, mature X% our meaningful than operating continuing year the to leverage of Full households In range second levels. continue opportunity operating

management affluent platform under X over last with to we and approximately hired Sales another [indiscernible] over our our AUM have $XX.X was quarter. Further, in production record we plan client $X.X assets. and affluent platform, $X million mass billion total segment reached assets billion year-end, added XXX wealth of of almost our As nearly $XXX or years, so clients hire segment added mass XXXX. and XX X professionals has in households the the enrolled another we our of XX,XXX to over onto Currently, X,XXX additional record-setting the in fourth of an also billion. in

disciplined were up on commercial digits rate for and being very year-over-year payments mid-single the relationship testament deposit year-over-year, deposits. fourth grew quarter, a revenue model. to and management to balances our Turning while Payments Commercial X%

Over of consistent of focus area investment. been an area the an last and payments decade, has

first X banks embedded were of capabilities. banking we example, to For build the

advisers We bankers, relationship More in digital in to invest will while enhanced continuing in expanded analytics California. and broadly, our Southern we continue develop tools, invest concurrently our middle software in with to plans platform and and recently market, embedded differentiated to banking. Chicago the presence additional

Our new ground running. teams have hit the

and growth confident third improved New loan nearly in for drive I am year our volumes loan those double are ability the ago. this quarter, consecutive year. our a of to pipelines commercial

across million, were results for in full fees for outstanding both banking quarter strongest quarter a fourth year. were the and history. Growth with was clients $XXX the quarter capital investment $XX fourth our the and and over quarter the year in second Finally, billion $XXX raised full we XXXX, were our robust Fourth fees alone. ECM. of broad-based for raised our DCM this loan M&A, syndications, billion

Importantly, we off strong in a are start XXXX. to

XX% caveats, historically market usual M&A, Our trajectory Subject levels. at in We to respect senior business. pipelines, plan the and year remain I our optimistic most with to another to the elevated notably bankers of recruited XXXX. banking hire last remain investment successfully

I'm of year. the of X major completed We we front just made the modernization core technological progress also to on last described, addition I In projects. investments proud a number

loan Our core derivatives commercial platform. our and platform

banking including online contact our We and significant to also progress consumer our cloud, center made on migration portal. our the technology

apps spend. about we a our journey X major XXXX, of expect tech all of and overall this or In successfully by spend by to cloud been our to plan million, hybrid $XXX year. At our to increase cloud half this environment. our migrated but have XX% the transform We complete driven systems point, bank to change

the it make our easier teammates clients. our and clients Our serve for ultimate objective needs key our better to to of to with easier for bank is

Directors. I'm Scotiabank also team X and technology minority commend Risk I financial Lard Mo new the successful a brings bank. pleased closing of strong industry Jackie broad-based our to of recently Relatedly, Deputy Chief our investment welcome believe the wealth to members, as Kano. at Finally, a serving Board of X large want welcome for and experience, Board I new Officer Key our that to Category and already Samesh Ramani also will Officer. to be to Jackie services, I Sameh Chief most prior Risk Mo year-end. additive bring background as want digital to

part turn the we and because page is to only grateful work for possible collective both to commitment our our of of ratio Key's CETX our our and reported their group. of hard dedication was team. We peer quartile former our of ratio anniversary. be of achievement I XXXX our entered we the Tier both At remarkable and their the equity marked top position from proud XX% shareholders. year-end, celebrate XXXth and XXXX, strength. X company clients, our their a This As our to in was teammates, am to X.X%, communities and current common

net across both businesses. interest high-priority income and tailwinds We our fee-based have pronounced our

remains Our profile credit strong.

we with remain low to make in respect expect we investments While in plan to our range. the capabilities disciplined overall which expenses, to targeted we mid-single-digit additional year, to will this grow

As will a in strong Clark? result, as the XXXX outsized the positioned XXXX. XX% call fee-based operating detail. leverage to In XXXX. With Key and overall we further in leverage a for as short, better turn I greater will both rate in financial to that review for outlook very in exit over operating Clark well again will growth XXXX and or an we year drive position results a that, our are well

Clark Khayat

the added points. was $X.XX an sales X impacted on some per just Scotiabank capital benefits previously We of X. both and that million charge-offs adjusted these repositionings of reserve running to almost lower securities positive Together, a a complete to over took in owned. was each revenue we Late in expectations achieved actions half the duration took and up allocated X million a securities quarter. net X%. X-year and a Expenses strength $XXX with will reported $XX of up fourth share. a detail loans million back and in approximately securities or in at their basis, in specifically of utilized third we injection release quarter Consistent criticized transaction market were million in offset billion the Starting we primarily roughly little yielding we in yield positive in to loss and strong $XXX sold Chris. interest million NII operating net basis, X.X% new over a XXXX.p I'll an These our and market average ground August, losses XX% and of of $XX another we EPS into The roughly and basis total costs portfolio on what the adjusted billion income. Revenue fee in $XX an XX% points to Thanks, provide Credit about relative average capital years. We later. loan basis to us year-over-year, long-dated $X the December, securities basis, income from with enable was to trends by securities year-end when of announced leverage release. to of function with the about portfolio will the loss loans AFS reflecting than value charges year-over-year. a in basis, quarter. We of reinvested up value decline duration XXX and net XX% were charge-offs of weighted XXXX with $X.X yield a $XX On an primarily to $XX Slide fees. of proceeds million these fourth we go hit included our adjusted On XXX X- pickup operating the an less more or securities roughly prior on quarter and XX% in by the described. XXXX add about interest X of sold with were liquidity sequentially fully $X.XX billion MBS

increased share XX% CETX increased to roughly value book Our ratio and per year-over-year. tangible XX%

basis Slide and or interest special for EPS was adjusted the repositioning, EPS X. these about Net XXXX $X.XX. impacted over late was Full by growth, near-term down an added in Turning the costs, impact decline X.X% we range and provided points last actions the middle about securities year. to offset assessment the was of income by portfolio course balances the XXX year in of FDIC $X rate investment-related billion target XXXX Scotiabank to benefits cuts from January. about loan

to up better X% $X had results. at set as Adjusted year, wealth fees ever. Commercial original costs of the Credit provided exit Our end that and meaningfully X% noted. servicing, the impacts. environment posted NII XX high we and improved, fee plus versus strong builds Scotiabank up were guide year and almost XXXX due loan target were compared second best for guidance we X% up XX of allowance points, part Investment to expenses and basis beginning reflecting at the hit the adjusting even in basis net of to XX also of X%, commercial start this its we points additional the Banking flat original due payments after in range strong the fourth to were our billion-plus primarily than rate our of the had quarter Expenses the the year charge-offs mortgage at lower year the denominator. to releases

the consumer markets and our to disciplined balance runoff loans declined Moving billion. the just reflects loans to they to ended Slide balance the X. willing demand, and down Decline X.X% pay approach sequentially of as $XXX mature. the sheet we're sheet capital tepid quarter client on what low-yielding on of put as north intentional Average and active

sheet. As execution capabilities, it's on provides best the model we've business our balance off clients or before, whether with our mentioned

reflecting our raised been of Slide reaching costs the quarter. was our income points quarter. sheet. On clients. fees. noninterest-bearing mentioned, year-over-year. by investment across X the XX% the we stronger for raised basis quarter as $XX deposits deposits increased in in XX December. Slide banking the interest-bearing have NIM than to through deposits. Similarly, from capital X.X% at in sequentially the XX% commercial our XX% the a up reported Deposit interest quarter, deposits. were deposits XX% increased balance X% adjusted billion net to fourth hybrid remained we the XX% had and Only quarter income XX a approximately the of for Client basis month capital Average consumer what closer provides and $XXX went basis, accounts, billion X. growth quarter drivers basis that net at This both percentage of deposits And points this and decreasing to of stable strong XX%. Deposit prior the expected, quarter. points interest of of nearly declined total very noninterest-bearing by with Chris Taxable during up interest net costs remained through XX margin equivalent betas On

Scotiabank investment lower near-term and interest-bearing the cuts client was basis XX and Fed higher funding deposit loans largely related beta able While from continued driven momentum, quarter. with points and were mitigate securities by the liabilities initiatives. optimization to increase deposit Overall, by growth rate other repositioning declined we impact this

to increase, and debt income nicely Indications servicing well. of strong fees to due XX% mortgage areas. as X%, while losses. Turning million, noninterest Reported XX% banking these fees this, prior management year-over-year. Slide increased over DCM, negative noninterest and wealth securities Investment from commercial $XX the and activity M&A grew most commercial was mortgage augur up that the up was grew income drove in reflecting Elsewhere, Adjusting over placement year-on-year X. for fees year. XX% business fees momentum ECM

expenses year assets management of in billion. On business, billion our quarter expenses unusually management adjusting elevated were XXXX up detail strong for year will $XXX As the this quarter. quarter higher of and driven to The sequentially other strong and and would disciplined and year-over-year, of in the of fourth selected of higher rate cover loans as we another serviced markets employee investment we the and and level and run compensation those I and very quarter. Sequentially, cost compensation, record shortly, mortgage related commercial in noninterest bottom ago quarter, XX%, miscellaneous noninterest Chris activity, million expenses we've higher quarter in other unusually environment, the growth remain both this business drivers XXXX. spend, primary expenses guide some driven the the level servicing ago items by page, investment spend guidance Slide right wealth the of provide elevated We referenced to XX, fourth a $X.X market the reflecting $XX and grew therefore, $XX.X expense not throughout was expect of the elevated would increase capital earlier. year Versus use said, in our that expense this but by benefits on XX/XX, seasonal under we as incentive a billion, roughly stock-based not was over year. I'll more efforts for some fee expenses. the

to of sequentially C&I no X% by basis is mid-XXXX, points were assuming at We up consecutive credit migration expect Slide assets on improvements remained changes macro quality low is Criticized charge-offs million, are the a fourth them real across back levels modest As XX% improved points annualized shown material ago. basis estate. Credit XX, with commercial adverse decline across NPAs to sequentially quarter down stable average and on XQ X improving. the in an were Net or a XX believe environment. $XXX Nonperforming X% loans. the and and by portfolio for in peaking loans. XX and loans broad-based and to declined entire years of

tailwinds clients' We here reflected expect statements. as decline cuts yet from not are continue recent criticized loans from in will financial to rate

XX. Slide to Turning

as X.X%, of top which of XX% and group. are peer AFS XX, at both near pension of to includes unrealized we CETX losses ratio or ratio, December March believe Our improved our reached the CETX which and our

XX Our of to XXXX full tangible and common are year basis. relative shown equity improved north to on provides XXXX, an outlook our ratio operating ranges also X%. Slide for

We XXXX. to year-end loans down flat ended X% to they XXXX to balances be where expect with X% average

a the a is over measure of we X% within average that to reduction approximately growth X% quarter a of be loans, straight by loans of guide, billion the exit to Embedded a income of rate to year and down expect roughly expected fourth up interest second Just this by $X XX% is basis. north end fourth XXXX reminder consumer course up decline year to quarter XX% not a the from offset for XXXX. commercial in be full on loans. Net and to

QX. to expect We by NIM be better X.X% or

expect We at least conditions capital X% with remain of be to constructive. noninterest income upside markets up

fee depending income committed on environment, expect $X.X year, fee X% operating percentage on We faster this billion meaning should remain basis, to to grow the leverage expenses. achieving a than up expenses be X% year's of this fee-based and we to

ratio over be criticized of the the to year. the levels net year We charge-off to quarter in expect point NPAs to course with XX or XX basis the and fourth stable improving range full loans

expect higher to or we taxable XX% Finally, tax expected rates. to on be and reflecting level XX% of equivalent uptick XX% to some a rate the the XX% basis, earnings tax state in

from on in XXXX quarter XX% Finally, the XX% we Slide net expectations interest for plus expectations XX, fourth growth out lay our quarter. income drivers behind to growth fourth and

and Our in in X May assumed assumptions X in December. X Friday's have conservative are cuts we this past and relative rate curve forward XXXX, to that

the You and terminated another swaps related can actions amortization growth comes in chunk the late of see and repricing. Scotiabank from half we fixed assets swaps rate from comes and from good over ongoing XXXX,

this, call. placement interest manage to degree Given the swing through will nature growth debt, not this fees drive these And degree if factors as yield it fund this better the instructions to strong option we commercial the Q&A our that, call deposit which a would capabilities to year the past betas debt year. With of we of to the continue did to a bank income structural relate have now and high loan as much net can key, year our and back we're this the operator clients portion markets relationships a their of fortunate provide of I'll we to monetize as for well and continue have turn confidence growth view to curve. capital of we quality, the materialize. to the shape Primary as

Operator

[Operator Instructions]

go please John, Our first with question John Pancari from ahead. today Evercore ISI. comes

John Pancari

steeper little outlook, stake in maintained curve. on the wanted the you XX% earlier Novoscotia despite it completing to bank NII Just color get the plus more a

could there gave, that I you least bit keeping I this give Is can the look out? where you XX%? as any appreciate other -- conservativeness built that could you expectation but know more walk the -- be and there rationale in alluded color this around conservative. at you a to little that assumptions, and be to Fed upside the your around into So

Brian Foran

Sure. Thanks, John.

me for which Slide walk on So maybe same benefit -- be just of X we're so through time, the go the page, XX. let would more all everybody, just the

'XX, the year you terminated of we swaps, chunk investment. Similarly, there in the of by full bucket big the And have flow year. fixed that's October bucket, the waterfall, If full full from back have bucket treasuries in asset get impact the on kind in you you you go repositioning U.S. the well. year year just just swap cash of pickup of increment as the incremental that repricing last a Scotiabank then the and securities matured incremental

year You have about of a mature forward throughout swaps referenced come about will that at the year you that year you in about this on X.X%. $X the flows cash later flows, some come rate. this We billion will off which in portfolio, put have investment at potentially on the plus higher reinvestments then starters other X.X%. And at cash

baked, that, fully feel pieces it's are it's plus pretty like there. The All we component. but really of or with minus activity not last business well X understood the some in

And that, deposit costs through from some other continue betas interest-bearing move costs fourth in down down into to total liabilities mentioned, to we deposits those rate a XX loan reminder we got quarter XX down and optimize we'll liability the total, to interest-bearing in grow consumer fixed ability basis as And loans. and then points, as year. on the quality customer loans So deposits quality deposit XX. We'll and as costs. we've remix portfolio away continue commercial manage just

year the rate to continued -- just relative with of the can and is piece rate size the then that. to average impacts the of on where pull we full impact that the we've there with sheet last balance So XXXX lever and associated

loan So on deposit to the noted, activity are growth and pricing balances, as we and deposits. going between really loan factors the business around loans, here be

a coming have positive, rate can that we good the we've more in to rates, through neutral a to and sheet had we a environments. said, than back cuts bit lean clean. The worked to things that namely into place portfolio get we're some hard trade resilient loan through I've of is more we we not conversely the counter effectively as rates call, As when earlier did the and first believe why today, to you If XX. manage We QX fewer That meaning closed September, the and our get planned, question on starting really done really tranche to having higher here. the than said, balances. of variety we second balance XXXX and we or second there noted, fairly go reinvestment 'XX repositioning

flat. we're would from So in about $X.X loans average to have billion close down that QX. We expected be to

through year. the that pulls So full

see I If in If get for be our there As loan loans manage to that demand. support by we're manifest we'll range been waiting of can level if though, we pull the looking good scenarios, mentioned, and we're levers demand, we through upside. and we that be that obviously other we and to shape we stronger quarters. in doesn't, NIM the to client rate XX%, reality should good very it hit some commercial a several close could to shape for XX%. as has to loan the can I And now to sure industry planned, relative have demand X.X% think make support to that will But year-end. is loan can grow

quickly. right last here environment on. optimism, touch take seat to to despite Chris in got the be And still improving is I'm a the we've bit XX work that new sure a uncertain very which administration Lastly, hours now appears client getting will administration

little market and in is it and all understand we'll think the But digest time confident of to as let I very to situated the well short we're we're guide, moves them. the market this the So say of we evolves. story advantage need bit think a I'd take

John Pancari

I more can guess, elaborate flat maybe first of you But your in there. little growth little about more had you assumptions. levers Clark. a EOP commercial loan a on conservative where just not on I believe more wrong borrowing you're guiding it the implies on appreciate I bit and related backdrop. if Correct to bit and seeing me an basis. that, indicated are I'm the color. Thanks, if there. wanted I you approach to take give demand a you're uncertain what the color activity given terms see the can loan in -- to

Clark Khayat

Yes.

a hit qualitative I'll probably I'll some So of of feedback. and provide client couple let kind Chris here, then numbers

So we did see fourth end of commercial through an loans stabilize and the actually loan even of pick right of end year. the on period up you're kind a bit the at flattish quarter.

that, underneath the consumer remember, Just increase $X commercial X% runoff of X% a about billion to loan loan portfolio. in and

fairly to robust. relative pull So commercial And pipelines again, Chris the a the side. And it's really question through loan I'm on this. point. think just to this continue sure will I on at touch very others, be that's consistent of

Christopher Gorman

Sure. Thanks the John. question, for

middle clients all to the interesting. a Most recently, they of it's of about of market confident talking did we prospects. our our survey clients very in were that time. XX% We're growth their XXX out So said them

was to going and people tax their investments be. is So when think in like on What which power And plant that's wanted of be were property, now, be which what we administration there's equipment. lag haven't seen front going the to administration yet about see going policy to XX-month edge investments was policies I And was that going an as they're to the that. really I and you you know, what all good. people think where, make making right in

thing mind, other at for about as I us has loan growth some opportunity artificially flat XX%. gives The in that utilization my think been,

data $XXX percent My us. actually personal -- accelerate XX, is would policy, worth economy outstandings about Our necessarily of starting buying complete isn't the also couple is do people tariff we for be yet. my a of personal kind give you of utilization typical from inflation that a is an view Every on view if that points. inventory apparent It's there'll be utilization of that also XX. control ahead is other that perspective. I'll million bit have under to

about Our M&A still it's backlog as is right whole on as capital been, of there's bunch sidelines. a now and ever the large

we loan reasons, all think we for will see So those growth.

You with of know, HX at John, outgrown where Key, RWAs. commercial the were 'XX here notable on the shrinking exception our Every year actually we've loans. data that we

we're than there So the that there clients opportunity more more ever, have discussion and than we that the having to fact I'm it's we'll it. confident more had, isn't ever be with clients when yet, but get

Operator

Our question Merrill with Lynch. of next Ebrahim from Bank comes Poonawala America

Ebrahim Poonawala

I just wanted to follow up, Chris.

think whatever the is this think transactions as large about seeing despite policy prevailing. announced I regarding pickup are M&A, in we still some being uncertainty -- we

we imply towards we up your when go a pick if up? I'm that around strong may pickup Given the statement kind at just wondering more where come of a that markets. correlation up as in capital look you sheets should well. Give that get pick or historical been, pickup on lending to in businesses bank your has about? if both ever M&A picks as But not any hear these them demand being without it customers us may and extremely they've think understand M&A should Can demand taking balance loan on leverage understanding M&A pipelines

Christopher Gorman

It does, stock Ebrahim, of actually is be deals. participating to but for stock a leverage. Yes, about will mind, they private delayed leverage sideline. what obviously, the lot trillion huge some $X there less equity the degree. there's that. with there'll and force No on are And a be still But in how question market keep

M&A a good a market of it's for robust lending good environment. usually, very and deals for no -- robust the lending the ecosystem so M&A have deals so to question large out and those that there's because is on And there's large smaller deals

Ebrahim Poonawala

Clarke. Got it. And maybe you, X for

Is Sorry deposits? specific how about? of remix doing in terms And guidance for you should about missed Give of us still quarter? think relative earning if a to on on funding gave the of average should side that what it, the average what sheet just fourth size think balance reported we we the assets a terms of there in deposit growth. I you're some if sense you

Clark Khayat

Sure.

on we expect So a stable good we We'd be balances deposit go with continued deposit continue side, client slightly job to customers year to, and I to with pricing. both growth. very through the as do think, up the that for

to quarters. continue makes now been we'll as remix doing, we've So out for you where of brokered sense, it several know, which

also goes where the sheet. the the and loan balance Some of overall that of depend on book size will just

our again, to again, to clients, translating feel and pricing So about on continue deposits. with balances good engagement how overall that's those really focus and primacy

Ebrahim Poonawala

Got it.

how we clarifying mind just should about here? don't you earning assets, average If from trending think that

Clark Khayat

flat to the it I'd year. throughout be expect relatively

Operator

next comes question Wolfe from with Our Research. Bill Carcache

Bill Carcache

the to trying just fee you're administration, time over sort talked Chris, level how income environment to that think in your guess, your balance in and you're less that could in clients? Is for investments you a the about if of a that impact of payments, think your of about maybe update on thinking past an about do how the banking those fee income making remixing? focusing key facilitator characterization? investment affect of envision a time, investments on I more just sort management, us fair operating And you've as generating more about high over and you trajectory risk the wealth pro-growth role credit sort mix given sheeting of, where

Christopher Gorman

a We're the you'll Sure. equation. make There's of open, think our we sides other. Right the are of that we in direction X us about question mix. of When job capital thanks where is where income. choppy our markets no really our Bill. on being wide get that I all question, serving sort like do these markets leaning Well, And in though flashing elsewhere. raising all, green by cycle, net grow I by clients interest see income, noninterest we sheet little you'll do sure the now, actually for and that balance the of to actually see a first us good What or want with both depending better I XX% clients our XX% prospects can is disproportionately. and serve growing

a question, clients, think administration. and our and your So the as good really larger part feeling travel to think around of customers I about talk I people are new our I

is to going environment improve. think people think I regulatory the that

relates Specifically, regulatory it the around business, our as M&A. to environment

speaking very get business. there. think you deals not significant think I there'll to M&A a and will banking speaking I'm been sector. know, I be As the unlock -- our I'm approved, of that of And pretty it's challenging

optimistic regulatory be people do to way front more, do a more but think So we'll are only the in I that faster. not on able that's

Bill Carcache

you Chris. advantage being spreads need really able fund around markets. think to helpful, to credit the That's to clients And extent continue on comments sort capital I we'll credit may fee given up, see what generate growth to and your mentioned, Do Clark, income of take greater time if long growth, via do themselves before your think tight see spreads loan -- to as specifically notable uptick been to I a you a for need widen guess, broadly you waiting are manifest? we'll to of see in extent yet more and key we've follow banks

Clark Khayat

Yes.

just clarification know maybe which but you stating. there, one, just look, think I it's So X worth know, I

landing best only balance is sheet serve to the our clients for or them. put on into they markets moving to serve of and capital happy to whether spot raised like capital we the continue we it's the When We'll quarter, XX% Our the them them, where find we get capital the were put that markets. the goal when we're balance markets, capital in fourth sheet.

talk much even get to continue this loan. and you deposits we we're so if why and importantly, the think about I getting that payments. is not hear business us

XX, thing. the in other The of going XX I which here years, is thing X Key, is, my would at kind time on say

Chris we is when available. us the consistently raised commercial noted already quality I've exception loans As earlier, to they're with do seen that grow noted

clients. the book. capital the build if near the is, for the and loan term, confidence what will But our thing and clients, if have continue to model we is the business that's most markets it's we'll I in there, place what for the market do. So out right bank that's advantageous are

Christopher Gorman

and out opportunity prospects customers. the blow really would public I Bill, as structures an we, to only is start that's markets And it's choppy the banks banks. will add, get banks, flexible. whether debt I serve things more an believe, clients to thing our I industry, And when their spreads really are think have private that's when lot think go and markets or always change, an when the advantage, a I where And and to capital when have

Operator

question next Our comes Gosalia from Morgan with Stanley. Manan

Manan Gosalia

is talk you're ability flat. your do that be to here CETX, close down, securities can to your about coming to Why the given from AOCI willingness ability? front? repositioning more growth not more talk you impacts are repositioning about XX%, to is and going you on do here? And more going securities Can capital including you're -- not be AOCI loan accreting

Christopher Gorman

It's Chris.

out not But do probably we've going that looking edges. to constantly around we'll either order there what's terms of we magnitude the or the and quarter. at repositioning, of things, did marketplace those the can fourth those. you're And in to we bunch at what quarter and major we're us third the a in done something in the see of of look securities do So continue

Manan Gosalia

it. want below? CETX you're Got go don't AOCI including to that ratio, that there a Is targeting you

Christopher Gorman

-- the as finalized. know, not the the I capital new come capital are is. out that of capital lot we not finalized, we'll we'll have the There's Obviously, But right reason not looking and with what targets constantly yet. rules of rules level after a rules is, say be now, -- are capital optimal And the we think at you

Manan Gosalia

Got up maybe question. follow just if And it. can on the securities I

yielding in that about matures than you of mentioned years securities Well, I think more large here? currently securities of you've X chunk are Is than long-dated about less sold XX% remaining a of long-dated yielding. there XX% XX% X%. that already from

Brian Foran

is still Yes, to that me, of percentage going have I to it's that, the work component there take some but front of exact through. some in time don't

Operator

with Matthew Deutsche The next question Bank. O'Connor from comes

Matthew O'Connor

if clarification. that. heard in think quarter in First, I reach NIM what X.X Maybe Clark, you deck. mention just I a loan quick but [indiscernible] But the the fourth just misheard, I I the you expecting. clarify think X.X% could growth you're tracks

Clark Khayat

I plus. with X.X consistent Clarification X.X, the the Yes. which I is say believe or to said approach said we'll intended I is,

I think if closer. we get more loan growth than planned, we have the get opportunity, obviously, to

Matthew O'Connor

bank more a you to had of the a of helpful. you That's all of diet, RWA much as have Key fee get and I back peers. on categories. growth. separately, got pull the as lending from kind and capital know some Okay. focus just that than the the then But front-footed wanted, picture. lot Like capital And this company of your didn't we've bigger more that loan went kind had "Hey, capital. conceptually, on like, how do impacted We've got just

just people have pause. on do of restart so the internally? maybe relationships Let's in of that How you been communicate positioned a you're you How some do customers kind these mobilize to that that such strongly environment? now competitive

Clark Khayat

Sure, Matt.

underway. process that So well is

what when RWAs our even were As and people, on business, to recategorization. front-end business. The was investing investing were shrinking heavily actually we wealth know, focusing through which our deposits call were some businesses, business our asset-light in able you going heavily were them of the in we of investment we shed and our banking that just we payments,

So other up. those to didn't Actually, free clients. were able RWA impact anyone. And non-relationship we that the were

California. They're Southern time, market. there hired message running. some sending We off to and out Chicago. troops. They're the out in We the aggressively in been in the we've team a a So team for hired there

because in engaged like question, changes what communicate that spent of sure of. doing I've ton field, we're and great So make that, very And obviously X time our them. you've capable making been to team sure it's focused a the on it's a you is you make we've there when out and got out

Matthew O'Connor

do Hakos. put over And how peg the your it growth X, X, as to quarters? next that would think age X? How Obviously, think you you about Okay. quarter-to-quarter. X when commercial then could But all loan growth the together, versus out your fluctuate you you just

Clark Khayat

Sure.

been growth. an -- for Matt, us many these outperformer because We've been the the Over years, years, on loan HA. commercial all this, been and following we've to you've you know

the I RWAs. exception was of think which shrinking the focus with specifically every on notable a single XXXX, year

We HA about. loan perspective, a expect from talk to commercial our team we what and to outperform them the that's

Operator

next Wells Mike The comes with from Mayo question Fargo.

Michael Mayo

call. I the what clients you'll through market every this through lending, care do. I if capital serve think you asked I -- it's is I the guys don't your -- your get whatever wants you client mean or

capital little a does fine NII Is a better, if maybe with bit that. worse markets statement? and just that so you're And do fair completely

Clark Khayat

you're our can spot do. feel a Mike, that, platform have best serve can that and served really fortunate be strongly really we that clients Yes, that's what they I we feel on. wherever -- we our we mean, we

Michael Mayo

your access how your And impacts do to So what market? think loan percent base capital has of much growth? you middle that market client

Clark Khayat

talked markets given closer industry the they're probably we a tell capital that's companies have people XX% all middle that in XXX surveyed. number on the that about my number by to of that I top market markets market the don't I middle are because actually you called can but head, any they all customers our verticals -- probably middle number off closer capital access I the XX%. year, it's is of in our our that to

Michael Mayo

NII would if And of go cut guide X X, rate Okay. XX% had your only in up for to you instead what roughly?

Clark Khayat

in Mike, Yes, second a that was not cup December. ton, because it's to going move

huge So full impact to a carry the that's year. to not going

Michael Mayo

you think plus on time. wrong, the XXXX think for it just just stronger, for higher was the correct just with banking I I'm your guide a wrong? know that. Clark, And and And I said me NII, this a lot there's I and -- that XX% might and clarify see call, if line investment Did XX% be of little be X X in lot bit item attention I might on a to line item but about weaker

Clark Khayat

Yes.

of to quarter. confusing we in, in think be quarter plus, So But think 'XX. came might I fourth maybe full confidence year Mike plus you XX% lots XX% above fourth

of NII quarter. XX% QX So to than Xth XXXX excess be XXXX higher we'd expect in

Michael Mayo

another Board of Board drive you bank besides to in stock that from What's to just ago, to I along the double there? a the name increase with months is ownership, you're competition the a -- the Board the separately, and maybe officers what call Scotiabank. the consider Compensation few the does then why be value mean the a Goldman named the last And help executive for with award this, I wondering of happening And Great. there's Committee, week retain just and terms for Key what the of or series third bonus, that. need I'm this -- talent? Truist just wonder special retention and granted What in XX Chris, see Sachs, to December competition? I a so months valuable. help then doing performance few

Clark Khayat

just of C&O our to rest all, of committee compensation. my first So of handled consultation any obvious, state zero the made the up on directors have with of exclusively obviously, by I in That's independent impact directors. the independent

So our speak. Having is Board of talked would to which question. out. touched happy have the out we've we retention, through worked said you the the put was 'XX, it and team was Board the that And this our in field, throughout Key come 'XX of about that team I where us, proxy notion refer have I runway that future. it in got comes mentioned I in X-K, great Thanks it. recognizes the And think front the think I on important that, on but this X-K, we a is you you think walk for in the when to hard position ourselves a will not-too-distant call. you so to to know, wanted And it make to sure the be I'd really as

Operator

UBS. with Erika The from next Najarian comes question

L. Erika Penala

up First is assuming clarification a beta NII you What Clark XX% that deposit are question just in question. guide?

Clark Khayat

Yes.

at to from hear year. quarter, would quarter, you. the XXs and end year mid-XXs expect closer XX% got the XX% to high fourth beta, the We the finished see to to throughout Eric, So of we

XX the year. a as we approaching go data So through

L. Erika Penala

have were is team But management previous more questions company I'm for an talent. is is is won't stock, maybe the feel give I question I'm just to XX% it's like I I so feel a just it I by made are doing. like like guess going decisions Got past just sheet aggressively that in now I book for a step the CETX, take there misdirected. a a guys adding it. environment what next feel appetite the And capital you consumer to for buy the and back and Chris. little right? larger the doing what And you And guess fix wondering, a balance is, you back.

not that's remarks, you sheet, capital adding I talked all an to given natural there's like there's that much balance if interest in be appetite, prepared think really growth? you But there's cure thinking managers. the forward for appetite adding and a if ask that given going this on to using aggressive commercial again, income, you I'm at an more wondering your deal capital to question, and but about this your have bankers I'm wealth on your net so

Christopher Gorman

all, 'XX. invest. That's the you of But business. question. to Sure. investment of turbulence way wealth by fact invested thank going that hired continue X remarks, we to advisers banking we all we platform Erika, that sort continue opening also the I'm going for mentioned Well, I our of first through the the grow And of to to of of really are many, to time. my in XX%. grow 'XX and We're period that we're our proud going during many businesses. had mentioned I absolutely,

year, where -- have every we've invested point to systems now couple. basically only We the in the also technology X I core platform. to migration a heavily the replaced cloud, we mentioned we our have

acquisitions. set When groups well. invest also by at of that hire I bolt-on So yes, that those question? opportunities we your what on work it vertical, up and continue on you see adjacencies We'll us answer the focus verticals, to continue to We'll gives will to as you'll people. business. Does to basically in really to industry look call continue you're

L. Erika Penala

It does.

Operator

question Brian Our Foran from Truist. with comes next

Brian Foran

couple of deem or one, at what range? X.X% 'XX us bottom the in do NIM, kind kind quick range? of When X% but as in normalized I past, ones. normalized just talked of think the as talked you 'XX, and up about the terms remind longer-term the quick that a you on can of Just maybe you about exact of where forget a wording, we about even we NIM a Or I a think that see X.X%, you've range? to Is

Clark Khayat

X% beyond, better over and balance maybe I question. as bit. get Look, as there's 'XX we even continues Good to why be at wouldn't a Yes. little turn think into reason we or sheet the no

Brian Foran

X in 'XX? or better even

Clark Khayat

Yes, I 'XX. in X some the see we when frame. think get NIM of that and But where we other and time think should get some goes, or the in -- depends other exactly it hitting that better time. equal, not market point X% 'XX at factors. through yes, we at during sure time obviously, should into things on curve all to we I'm But as yield progress macro something I 'XX, shape

Brian Foran

just beyond? about of in the we in out 'XX consumer is more model think Okay should over and loan then and as 'XX? runoff some growth, Or we

Clark Khayat

There's look, all vast lending some I consumer there. the Yes. rate in lien mean, sensitive. mortgage. book It's of student portion is that first

you'd rates continue the see can come as term. structurally to point, down, clients support see that, you But that that in them. near we'll continue come So At refinance. to refinancing in off think, I

we Now just things personal space. sheet. We're a to lending not that. happening it's to lending like There's an expect the or we're that think over is I products on other particularly not continuing focus at relationship over that time, But into in leaning of like at the lending lot that whether will so moment consumer important time, do balance that, do I would element the but moment.

Operator

RBC. Next question with Cassidy comes from Gerard

Unknown Analyst

relatively and to from expect current in you Gerard. flat With had XXXX? just for reserve see mind, is further guidance to this levels. XX bps in This for [indiscernible] Can a 'XX releasing in standing Thomas should lady we in XXXX release NCOs XX or

Clark Khayat

as how looking makes out. book through the on, now certainly some based stable shakes go the Clark. we expect to some or us year, the see on improving peak improvement But expect, constructive I'd to think to again, Tom, reserve see year. a the think Look, economy this releases. minus again, this But plus is expect metrics portfolio credit be you at see 'XX. could throughout we'd we don't Yes. massive macro I like given I to kind things the we're of everything I feel the think throughout is of

Unknown Analyst

a C&I just period loans this higher Can It on And ended looks you give seeing you're us helpful. bit then some C&I That's the little than on end in quarter quickly Okay. book? loans. last. color what like

Clark Khayat

Yes.

end said, I we did stabilization are tough the a pickup a mean, I great the the pipelines. we little see through part, and of bit Thomas, As year. is seeing slight

great We true That having are conversations a couple been with quarters. of has for now clients.

to sit mentioned, see activity we utilization things that like sort at relatively levels. hit. So just as low And see to continue Chris of need we historic

So it's hard us it to would everything expect to but we're hearing happen consistently, and seeing really to tell to it starts until call. grow,

Operator

are have Those questions for the today. we all

I'll Gorman, remarks. back for Chris So CEO, call the to closing turn

Christopher Gorman

thank much. call. Well, thank so you has Goodbye. free to our follow-up questions, team. anyone Emily, our out for you, to reach IR conference in all a day you participating If Thank any Have and all. good feel please

Operator

call, for lines. disconnect you, may This everyone, Thank joining you your us today. our concludes now and

KeyCorp (KEY) 21 Jan 252024 Q4 Earnings call transcript