01—Abstract
Summary
Summary of the 10-K filed February 22, 2021. Cited figures are marked; the original filing is the authoritative source.
KeyCorp reported consolidated total assets of approximately $170.3 billiona at December 31, 2020, and operates through two business segments, Consumer Bank and Commercial Bank, with 1,073 full-service KeyBank branches across 15 states.
Net income attributable to Key was $1.343 billionb in 2020, down from $1.717 billion in 2019. Net interest income was $4.034 billion, while the provision for credit losses rose to $1.021 billion from $445 million, reflecting the COVID-19 pandemic and the January 1, 2020 adoption of CECL. Noninterest income increased to $2.652 billion from $2.459 billion, and noninterest expense rose to $4.109 billion from $3.901 billion.
Net interest margin (TE) declined to 2.77% from 3.04%. Capital remained above regulatory requirements at year-end, with a Common Equity Tier 1 ratio of 9.73% and a Tier 1 risk-based capital ratio of 11.11%. KeyCorp repurchased $170 millionc of common shares in 2020 and then suspended repurchases from March 17, 2020 in response to the pandemic.
The Federal Reserve restricted capital distributions for the third and fourth quarters of 2020 and extended those limits into the first quarter of 2021. In January 2021, the Board authorized up to $900 milliond in share repurchases, effective through the third quarter of 2021. The full-year dividend was $.74 per share, up from $.71 in 2019.
Management guided for 2021 with expectations of relatively stable TE net interest income, average loans relatively stable, average deposits up 1% to 3%, noninterest income up 1% to 3%, and noninterest expense down 1% to 3%. Net loan charge-offs are expected to be in the range of 50 to 60 basis points, and the GAAP tax rate is expected to be approximately 19%.
02—Key points
Key Highlights
- Total assets of $170.3 billion at December 31, 2020, up from $145.0 billion a year earlier, with deposits of $135.3 billion.
- Net income attributable to Key fell to $1.343 billion from $1.717 billion, mainly because the provision for credit losses more than doubled to $1.021 billion.
- Net interest margin (TE) compressed to 2.77% from 3.04%, reflecting lower interest rates, PPP participation, and elevated liquidity.
- Noninterest income rose 7.9% to $2.652 billion, driven by record consumer mortgage income, cards and payments income, and investment banking fees.
- Loans grew to $101.2 billion, including $6.7 billion of PPP loans, while the ALLL increased to $1.6 billion, or 1.61% of period-end loans, from 0.95%.
- Common Equity Tier 1 ratio of 9.73% and Tier 1 risk-based capital ratio of 11.11% at year-end, with an 8.94% leverage ratio.
- The Board authorized up to $900 million of share repurchases in January 2021, while the full-year 2020 dividend rose to $.74 per share from $.71.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 22, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $6.71B$6.40B | +4.9% |
| Operating Income | $1.33B$1.71B | −22.2% |
| Interest Expense | $651.00M$1.33B | −50.9% |
| Net Income | $1.34B$1.72B | −21.8% |
| EPS (Basic) | $1.28$1.63 | −21.5% |
| EPS (Diluted) | $1.27$1.62 | −21.6% |
| Shares Outstanding (Basic) | 967.78M992.09M | −2.5% |
| Shares Outstanding (Diluted) | 974.81M1.00B | −2.7% |
05—Questions
Frequently Asked Questions
Why did KeyCorp's net income decline in 2020?
Net income attributable to Key was $1.343 billion, down from $1.717 billion in 2019. The main driver was a provision for credit losses of $1.021 billion, up from $445 million, which reflected economic stress from the COVID-19 pandemic and the adoption of CECL. Net interest margin also compressed to 2.77% from 3.04%.
How strong is KeyCorp's capital position?
At December 31, 2020, the Common Equity Tier 1 ratio was 9.73%, the Tier 1 risk-based capital ratio was 11.11%, the total risk-based capital ratio was 13.40%, and the leverage ratio was 8.94%. KeyBank was categorized as well capitalized, and all capital ratios exceeded regulatory requirements.
What are KeyCorp's share repurchase and dividend plans?
KeyCorp suspended share repurchases on March 17, 2020, and repurchased $170 million of common shares during 2020. In January 2021, the Board authorized up to $900 million of repurchases, effective through the third quarter of 2021. The 2020 dividend was $.74 per share, and the Federal Reserve restricted capital distributions for several quarters during the pandemic.
What guidance did management give for 2021?
Management expects TE net interest income to be relatively stable compared with 2020, average loans to be relatively stable, and average deposits to rise 1% to 3%. Noninterest income is expected to increase 1% to 3%, noninterest expense to decrease 1% to 3%, and net loan charge-offs to fall within 50 to 60 basis points of average loans. The GAAP tax rate is expected to be approximately 19%.
How did the COVID-19 pandemic affect KeyCorp's loan portfolio?
Loans from continuing operations totaled $101.2 billion at year-end. Loans with payment deferrals or forbearance totaled $4.65 billion, of which $575 million was in active relief. The ALLL increased to $1.626 billion from $900 million, and nonperforming loans rose to $785 million from $577 million. Oil and gas loans were 2.8% of the commercial portfolio.
06—Continue