01—Abstract
Summary
Summary of the 10-K filed February 26, 2014. Cited figures are marked; the original filing is the authoritative source.
KeyCorp (KEY) reported its 2013 results in this Form 10-K, filed February 26, 2014.
The company is a bank holding company headquartered in Cleveland, Ohio, with consolidated total assets of $92.9 billiona at December 31, 2013, operating 1,028 full-service retail branches across 12 states through its principal subsidiary, KeyBank National Association. Its two business segments are Key Community Bank and Key Corporate Bank. For 2013, income from continuing operations attributable to Key common shareholders was $847 million, or $.93 per common share, compared with $813 million, or $.86 per share, in 2012.
Net income attributable to Key was $910 millionb. Credit quality and capital were central to the year. Net loan charge-offs fell to $168 million, or .32% of average loans, from $345 million, or .69%, in 2012.
Nonperforming loans declined to $508 millionc, or .93% of period-end loans. The allowance for loan and lease losses was $848 million, or 1.56% of period-end loans. The Tier 1 common equity ratio was 11.22%, and the company estimated a Common Equity Tier 1 ratio of 10.7% under the Basel III Regulatory Capital Rules.
Key returned approximately 76% of 2013 net income to shareholders through buybacks and dividends, and it completed $474 milliond of open market common share repurchases during 2013. The filing also reports a net interest margin of 3.12%, down nine basis points from 2012, which management attributes to lower asset yields and elevated liquidity. Noninterest income was $1.8 billion, down 4.8%, and noninterest expense was $2.8 billion, roughly flat.
Management reported annualized run-rate savings of $241 million from its efficiency initiative. The Federal Reserve's 2014 CCAR review was pending at the time of filing, and Key stated it could not implement its capital plan beyond the first quarter of 2014 until the review was complete.
02—Key points
Key Highlights
- Net income attributable to Key of $910 million for 2013, with income from continuing operations attributable to Key common shareholders of $847 million, or $.93 per common share.
- Net loan charge-offs declined to $168 million (.32% of average loans) from $345 million (.69%) in 2012; nonperforming loans fell to $508 million (.93% of period-end loans).
- Allowance for loan and lease losses of $848 million, or 1.56% of period-end loans, covering 166.9% of nonperforming loans.
- Tier 1 common equity ratio of 11.22% at December 31, 2013; estimated Common Equity Tier 1 ratio of 10.7% under the fully phased-in Basel III Regulatory Capital Rules.
- Net interest margin of 3.12%, down nine basis points from 2012, with management expecting continued margin pressure in 2014 from elevated liquidity and low rates.
- Annualized run-rate savings of $241 million from the efficiency initiative; 62 branches consolidated in 2013.
- Approximately 76% of 2013 net income returned to shareholders through common share repurchases and dividends; the Federal Reserve's 2014 CCAR review was pending at filing.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 26, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Operating Income | $870.00M$835.00M | +4.2% |
| Interest Expense | $295.00M$441.00M | −33.1% |
| Net Income | $910.00M$858.00M | +6.1% |
| EPS (Basic) | $0.98$0.89 | +10.1% |
| EPS (Diluted) | $0.97$0.89 | +9.0% |
| Shares Outstanding (Basic) | 906.52M938.94M | −3.5% |
| Shares Outstanding (Diluted) | 912.57M943.26M | −3.3% |
05—Questions
Frequently Asked Questions
How did KeyCorp perform in 2013 relative to 2012?
Income from continuing operations attributable to Key common shareholders was $847 million, or $.93 per share, up from $813 million, or $.86 per share, in 2012. Total net income attributable to Key was $910 million, compared with $858 million in 2012. Results were supported by lower credit costs and a 17.1% increase in Key Community Bank net income, partly offset by lower net interest income.
How strong is the company's credit quality?
Credit quality improved during 2013. Net loan charge-offs were $168 million, or .32% of average loans, down from $345 million, or .69%, in 2012. Nonperforming loans declined to $508 million, or .93% of period-end loans, from $674 million, or 1.28%. The company expects net loan charge-offs in 2014 to remain at the lower end or below its long-term target range of 40 to 60 basis points.
What is the company's capital position and how is it returning capital?
At December 31, 2013, the Tier 1 common equity ratio was 11.22% and the total risk-based capital ratio was 14.33%. The company repurchased $474 million of common shares during 2013 and paid quarterly dividends of $.055 per share in the second through fourth quarters after a $.05 payment in the first quarter. Future capital actions depend on the Federal Reserve's review of the 2014 capital plan under CCAR.
What risks does the filing highlight for investors?
The filing cites a net interest margin under pressure from low rates and elevated liquidity, the potential for a reversal of the U.S. economic recovery, and the extensive, evolving regulation of the financial services industry, including Dodd-Frank and Basel III. It also flags dependence on dividends from KeyBank for most of KeyCorp's funds, the potential effects of a credit rating downgrade on liquidity, cybersecurity threats, and the pending Volcker Rule compliance deadline, which may require divestiture of some indirect principal investments.
06—Continue