01—Abstract
Summary
Summary of the 10-K filed March 1, 2010. Cited figures are marked; the original filing is the authoritative source.
KeyCorp, organized in Ohio and headquartered in Cleveland, is a bank holding company with consolidated total assets of $93.3 billiona at December 31, 2009, operating through KeyBank National Association with 1,007 full-service retail branches in fourteen states and 1,495 ATMs in sixteen states.
The company reported a net loss attributable to Key of $1.335 billionb, or $2.34 per common share, for 2009, compared with a net loss of $1.468 billion, or $3.36 per share, in 2008. The loss was driven mainly by a provision for loan losses of $3.159 billion (up from $1.537 billion), noncash intangible asset impairment charges of $241 million, and commercial real estate write-downs. Net interest income was $2.380 billion and noninterest income was $2.035 billion, while noninterest expense rose to $3.554 billion.
Capital and liquidity were strengthened during 2009 in response to the Supervisory Capital Assessment Program, which required $1.8 billionc of additional Tier 1 common equity. Through an at-the-market common stock offering, preferred stock and capital securities exchanges, and other actions, the company reported Tier 1 common equity in excess of $2.4 billion and a Tier 1 common equity ratio of 7.50% at year end, compared with 5.62% a year earlier. The Tier 1 risk-based capital ratio was 12.75% and the total risk-based capital ratio was 16.95%.
Nonperforming assets rose to $2.5 billiond, or 4.25% of portfolio loans plus OREO and other nonperforming assets, and net loan charge-offs were $2.257 billion, or 3.40% of average loans. Investors should note that the company's ability to return capital is constrained.
The common dividend was reduced to $.01 per quarter in 2009, the U.S. Treasury holds $2.5 billion of Series B Preferred Stock with a warrant for 35,244,361 common shares, and KeyBank could not pay dividends to the parent without regulatory approval because of its net losses. The company also disclosed that its long-term debt is rated investment grade, with Moody's downgrading certain KeyCorp capital securities and Series A Preferred Stock on February 17, 2010.
02—Key points
Key Highlights
- Net loss attributable to Key of $1.335 billion, or $2.34 per common share, for 2009, versus a net loss of $1.468 billion, or $3.36 per share, for 2008.
- Provision for loan losses of $3.159 billion in 2009, up from $1.537 billion in 2008, with net loan charge-offs of $2.257 billion (3.40% of average loans).
- Tier 1 common equity ratio of 7.50% at December 31, 2009, up from 5.62% a year earlier, after raising more than $2.4 billion of Tier 1 common equity in 2009.
- Total assets of $93.3 billion, total deposits of $65.6 billion and total loans of $58.8 billion at year end, down from $72.8 billion of loans at December 31, 2008.
- Nonperforming assets of $2.5 billion, or 4.25% of portfolio loans plus OREO and other nonperforming assets, compared with 2.00% a year earlier.
- Common dividend reduced to $.01 per quarter in 2009; the U.S. Treasury's $2.5 billion Series B Preferred Stock and warrant limit increases in dividends and repurchases.
- Noncash intangible asset impairment charges of $241 million in 2009, including the write-off of all remaining goodwill assigned to the National Banking unit.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 1, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Operating Income | -$1.29B-$1.29B | +0.6% |
| Interest Expense | $1.42B$2.04B | −30.5% |
| Net Income | -$1.33B-$1.47B | +9.1% |
| EPS (Basic) | $-2.34$-3.36 | +30.4% |
| EPS (Diluted) | $-2.34$-3.36 | +30.4% |
| Shares Outstanding (Basic) | 697.15M450.04M | +54.9% |
| Shares Outstanding (Diluted) | 697.15M450.04M | +54.9% |
05—Questions
Frequently Asked Questions
Why did KeyCorp report a larger loss in 2009 compared with its 2008 results?
The 2009 net loss attributable to Key was $1.335 billion, compared with $1.468 billion in 2008, so the 2009 loss was smaller in total. Per common share, the 2009 loss was $2.34 compared with $3.36 in 2008. The filing attributes the 2009 decline mainly to a provision for loan losses that rose to $3.159 billion, intangible asset impairment charges, and write-downs of commercial real estate related investments.
How much additional capital did KeyCorp raise in response to the SCAP assessment?
The filing states that regulators required KeyCorp to generate $1.8 billion of additional Tier 1 common equity. Through the common stock offering, preferred stock and capital securities exchange offers, and other actions, the company reports total Tier 1 common equity generated in excess of $2.4 billion.
What restrictions limit KeyCorp's ability to pay dividends and repurchase shares?
Under the U.S. Treasury's Capital Purchase Program, KeyCorp cannot increase common dividends above the third quarter 2008 level and cannot repurchase common or preferred shares without Treasury approval, subject to limited exceptions, for three years or until the Treasury no longer holds the Series B Preferred Stock. KeyBank also could not pay dividends to the parent without prior regulatory approval because of its net losses, and KeyBank paid no dividends to KeyCorp in 2009.
How did KeyCorp's credit quality change during 2009?
Nonperforming loans rose to $2.187 billion at year end from $1.221 billion, and the allowance for loan losses increased to $2.534 billion, or 4.31% of loans, from 2.24% a year earlier. The filing attributes the deterioration primarily to commercial real estate, particularly nonowner-occupied properties, and expects net charge-offs to remain elevated in 2010 but lower than in 2009.
What did the filing say about KeyCorp's credit ratings?
KeyCorp's and KeyBank's long-term debt was rated investment grade by the major rating agencies at year end. The filing notes that further downgrades, particularly below investment grade, could adversely affect access to liquidity and increase funding costs. On February 17, 2010, Moody's downgraded KeyCorp's capital securities from Baa2 to Baa3 and its Series A Preferred Stock from Baa3 to Ba1.
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