01—Abstract
Summary
Summary of the 10-K filed March 22, 2000. Cited figures are marked; the original filing is the authoritative source.
KeyCorp, organized in Ohio and headquartered in Cleveland, reported in its 1999 Form 10-K that it was one of the nation's largest integrated multi-line financial services companies, with consolidated total assets of $83 billiona at December 31, 1999.
Net income for 1999 was $1.107 billionb, or $2.45 per diluted common share, up 11% from $996 million in 1998. Return on average total assets was 1.37% and return on average total equity was 17.68%. Excluding significant nonrecurring items, core net income was $1.051 billion, or $2.33 per diluted share.
Results were driven by fee-generating businesses, particularly investment banking, dealer trading, asset management and brokerage, and core noninterest income rose 31% to represent 41% of total core revenue. Management announced a three-year initiative in the fourth quarter of 1999 expected to improve pre-tax earnings by more than $370 millionc per year when fully implemented, including a planned reduction of about 3,000 positions, or 11%, by year-end 2000. Key also sold its Long Island business (28 KeyCenters with $1.3 billion of deposits) and completed the sale of its $1.3 billion credit card portfolio in January 2000, which the filing says will generate a $332 million pre-tax gain.
The company expects its shift away from securitizing home equity loans to reduce 2000 diluted earnings per share by approximately $.08. The filing also discloses litigation against McDonald Investments Inc., a subsidiary acquired in 1998, relating to Nakornthai Strip Mill securities.
Eight lawsuits seek at least $257 milliond in securities purchases, and management says it is vigorously defending the actions. Capital ratios remained above the well-capitalized thresholds, with a Tier 1 risk-adjusted capital ratio of 7.68% and a total risk-adjusted capital ratio of 11.66% at December 31, 1999.
02—Key points
Key Highlights
- Record 1999 net income of $1.107 billion, or $2.45 per diluted share, up 11% from $996 million in 1998
- Core net income of $1.051 billion, or $2.33 per diluted share, after nonrecurring items such as gains from branch divestitures and restructuring charges
- Core noninterest income rose 31% and represented 41% of total core revenue, up from 36% in 1998
- Total assets of $83.4 billion at year-end 1999; total deposits of $43.2 billion and loans of $64.2 billion
- Three-year profitability initiative expected to improve pre-tax earnings by more than $370 million per year when fully implemented
- Sale of the $1.3 billion credit card portfolio in January 2000, expected to generate a $332 million pre-tax gain
- Eight lawsuits related to McDonald's role in Nakornthai Strip Mill securities seek at least $257 million in purchases; the company is vigorously defending them
03—Questions
Frequently Asked Questions
How profitable was KeyCorp in 1999?
Net income was $1.107 billion, or $2.45 per diluted common share, up 11% from $996 million, or $2.23, in 1998. Return on average total assets was 1.37% and return on average total equity was 17.68%.
What drove the growth in KeyCorp's earnings?
The filing attributes earnings growth to fee-generating businesses, particularly investment banking, dealer trading services, asset management and brokerage. Core noninterest income rose 31%, with investment banking and capital markets up $115 million, trust and asset management up $108 million, and brokerage up $85 million.
What restructuring is KeyCorp undertaking?
In the fourth quarter of 1999 KeyCorp announced a three-year initiative expected to improve pre-tax earnings by more than $370 million per year when fully implemented, including more than $170 million of expense reductions per year. The actions are expected to reduce the employee base by about 3,000 positions, or 11%, by year-end 2000. The company recorded $145 million of restructuring and other special charges in the fourth quarter.
What litigation risk does KeyCorp face?
Subsidiary McDonald Investments Inc. was an initial purchaser of Nakornthai Strip Mill securities in 1998. Eight lawsuits by purchasers allege misstatements and omissions and seek at least $257 million in securities purchases, plus other relief. The filing says management believes the legal actions will not have a material adverse effect on Key's financial condition, and McDonald is vigorously defending them.
How well capitalized is KeyCorp?
At December 31, 1999, the Tier 1 risk-adjusted capital ratio was 7.68%, the total risk-adjusted capital ratio was 11.66%, and the leverage ratio was 7.77%. Each KeyCorp insured depository institution subsidiary met the requirements for the well-capitalized category.
04—Continue