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KeyCorp Annual Report, Year Ended Dec 31, 2019

Filing Date
Filed February 26, 2020
Period End
December 31, 2019
In the record · 2016–202610-K1110-Q348-K141

KEY filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 141 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’16Aug ’16
  2. Leadership change8-K · Dec ’21Dec ’21
  3. Leadership change8-K · May ’26May ’26

01—Abstract

Summary

Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.

KeyCorp reported consolidated total assets of approximately $145.0 billiona at December 31, 2019, and operates as a bank holding company through KeyBank National Association, with two business segments, Consumer Bank and Commercial Bank.

For 2019, net income attributable to Key was $1.717 billionb, compared with $1.866 billion in 2018, and income from continuing operations attributable to Key was $1.708 billion. Net interest income was flat at $3.909 billion, while noninterest income fell to $2.459 billion from $2.515 billion. Noninterest expense declined to $3.901 billion from $3.975 billion, with the company citing completion of a $200 million cost reduction program.

The provision for credit losses rose to $445 millionc from $246 million, primarily reflecting a $139 million loss from a previously disclosed fraud incident. Capital and shareholder returns remained central to the filing. The Common Equity Tier 1 ratio was 9.44% at year end, and the company repurchased $868 million of common shares during 2019.

The full-year dividend was $0.71d per share, compared with $0.565 in 2018. Book value per common share rose to $15.54 from $13.90. Management guided for 2020 tax-equivalent net interest income to rise 1% to 3%, and disclosed that Christopher Gorman will succeed Beth Mooney as Chairman and Chief Executive Officer effective May 1, 2020.

The company also disclosed that it expects to adopt the CECL accounting standard on January 1, 2020, with its allowance for loan and lease losses expected to increase by approximately 20% to 25%. The filing also highlights the company's exposure to commercial real estate and commercial and industrial loans, which together represent a large share of the loan book, and the ongoing transition from LIBOR to alternative reference rates.

Key's regulatory position as a Category IV firm under the Tailoring Rules reduces some compliance requirements. Investors should weigh the year's flat revenue and the higher credit provision against the company's continued capital return and efficiency gains.

02—Key points

Key Highlights

  1. Net income attributable to Key was $1.717 billion in 2019, down from $1.866 billion in 2018.
  2. Net interest income was $3.909 billion in both 2019 and 2018, and noninterest income declined to $2.459 billion from $2.515 billion.
  3. Noninterest expense fell to $3.901 billion from $3.975 billion, and the cash efficiency ratio improved to 59.6% from 60.0%.
  4. The provision for credit losses rose to $445 million from $246 million, including a $139 million loss from a previously disclosed fraud incident.
  5. Key repurchased $868 million of common shares in 2019, and the full-year dividend increased to $0.71 per share from $0.565.
  6. Common Equity Tier 1 ratio was 9.44% at December 31, 2019, and the company stated that all capital ratios remained in excess of regulatory requirements.
  7. Christopher Gorman will succeed Beth Mooney as Chairman and Chief Executive Officer effective May 1, 2020.

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2019filed February 26, 2020
Revenue$6.40BNet Income$1.72B26.8% Net MarginEPS (Diluted)$1.62Total Assets$144.99BCash & Equivalents$732.00MFree Cash Flow$2.91B

Financial Statements

FY2019 against FY2018

Line itemFY2019FY2018Change
Revenue$6.40B$6.46B−0.9%
Operating Income$1.71B$1.86B−8.1%
Interest Expense$1.33B$969.00M+36.8%
Net Income$1.72B$1.87B−8.0%
EPS (Basic)$1.63$1.73−5.8%
EPS (Diluted)$1.62$1.71−5.3%
Shares Outstanding (Basic)992.09M1.04B−4.7%
Shares Outstanding (Diluted)1.00B1.05B−5.0%

05—Questions

Frequently Asked Questions

  1. How did KeyCorp's profitability change in 2019?

    Net income attributable to Key was $1.717 billion in 2019, compared with $1.866 billion in 2018. Income from continuing operations attributable to Key was $1.708 billion, down from $1.859 billion. Lower noninterest income and a higher provision for credit losses offset a decline in noninterest expense.

  2. What drove the increase in credit loss provisions?

    The provision for credit losses was $445 million in 2019 compared with $246 million in 2018. The filing attributes the increase primarily to the realization of $139 million from a previously disclosed fraud loss.

  3. What did management guide for 2020?

    Management expects tax-equivalent net interest income to be up 1% to 3% compared with 2019, average loans to be up 4% to 6%, average deposits to be up 1% to 3%, and noninterest expense to be relatively stable. The company also expects its GAAP tax rate to be in the range of 17% to 18%.

  4. How is KeyCorp returning capital to shareholders?

    During 2019 KeyCorp repurchased $379 million of common shares under its 2018 capital plan and $489 million under its 2019 capital plan. The 2019 capital plan authorizes up to $1.0 billion in share repurchases through the second quarter of 2020. Quarterly dividends rose to $0.185 per share in the third and fourth quarters of 2019.

  5. Who is leading KeyCorp, and when does the leadership change take effect?

    Beth Mooney will retire as Chairman and Chief Executive Officer effective May 1, 2020. Christopher Gorman, who was appointed President and Chief Operating Officer in September 2019, will succeed her on that date.

06—Continue

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