01—Abstract
Summary
Summary of the 10-K filed February 22, 2022. Cited figures are marked; the original filing is the authoritative source.
KeyCorp (KEY), a bank holding company headquartered in Cleveland, Ohio, reported consolidated total assets of approximately $186.3 billiona at December 31, 2021.
Its principal subsidiary, KeyBank, operates 999 full-service retail banking branches and 1,317 ATMs across 15 states, and the company runs two business segments, Consumer Bank and Commercial Bank. Net income attributable to Key was $2.63 billionb in 2021 (diluted EPS of $2.63), up from $1.34 billion in 2020. The provision for credit losses was a net benefit of $418.0 million in 2021, compared with a $1.0 billion expense in 2020, driven by a $602 million reserve release, improved economic outlook, and lower net charge-offs.
Net interest income rose to $4.07 billionc (GAAP), with the TE net interest margin declining to 2.50% from 2.77%, reflecting elevated liquidity and lower reinvestment yields. Noninterest income rose to $3.2 billion from $2.7 billion, with investment banking and debt placement fees increasing 41.8% to $937 million, and noninterest expense was $4.4 billion versus $4.1 billion. Average deposits grew $17.7 billion to $145.0 billion, and total deposits reached $152.6 billion at year-end.
Management guided for 2022 TE net interest income and average loans to be relatively stable or up 1% to 3%, noninterest income and noninterest expense each to be down 1% to 3%, and an effective tax rate of approximately 20%. Capital and shareholder returns remained strong: Common Equity Tier 1 ratio was 9.48% under the Regulatory Capital Rules, and the company returned 75% of 2021 net income to shareholders through dividends and repurchases, including $1.2 billiond of gross common share repurchases.
The full-year dividend was $0.75 per share, and the company has authorization to repurchase up to $1.5 billion under its 2021 capital plan. Credit quality improved, with net loan charge-offs of 0.18% of average loans and nonperforming loans at 0.45% of period-end portfolio loans.
02—Key points
Key Highlights
- Net income attributable to Key of $2.63 billion in 2021, versus $1.34 billion in 2020, with diluted EPS of $2.63 versus $1.27.
- Provision for credit losses was a net benefit of $418.0 million in 2021, compared with a $1.0 billion expense in 2020, including a $602 million reserve release.
- Net interest margin (TE) declined to 2.50% from 2.77%; TE net interest income was $4.1 billion.
- Noninterest income rose to $3.2 billion from $2.7 billion, led by investment banking and debt placement fees up 41.8% to $937 million.
- Total deposits reached $152.6 billion, up $17.3 billion, and loans were $101.9 billion; loan-to-deposit ratio was 68.9%.
- Returned 75% of 2021 net income to shareholders; full-year dividend of $0.75 per share and $1.2 billion of gross common share repurchases.
- Common Equity Tier 1 ratio of 9.48% and Tier 1 risk-based capital ratio of 10.77% under the Regulatory Capital Rules at December 31, 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 22, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $7.29B$6.71B | +8.6% |
| Operating Income | $2.61B$1.33B | +96.5% |
| Interest Expense | $296.00M$651.00M | −54.5% |
| Net Income | $2.63B$1.34B | +95.5% |
| EPS (Basic) | $2.65$1.28 | +107.0% |
| EPS (Diluted) | $2.63$1.27 | +107.1% |
| Shares Outstanding (Basic) | 947.07M967.78M | −2.1% |
| Shares Outstanding (Diluted) | 957.41M974.81M | −1.8% |
05—Questions
Frequently Asked Questions
What drove the swing from a provision expense in 2020 to a net benefit in 2021?
The provision for credit losses was a net benefit of $418.0 million in 2021 versus a $1.0 billion expense in 2020. The filing attributes the decrease to a reserve release of $602 million, driven by improvements in the economic outlook and asset quality, along with lower net charge-offs. Net loan charge-offs fell to $184 million from $443 million.
Why did net interest margin decline in 2021 even as net interest income was stable?
TE net interest margin fell to 2.50% from 2.77%. The filing says the decline reflects a change in balance sheet mix, including elevated levels of liquidity, and lower reinvestment yields, along with the exit of the indirect auto loan portfolio. Higher loan fees from PPP forgiveness and lower deposit costs partially offset the decline.
What is management's outlook for 2022?
Management expects TE net interest income and the net interest margin to be relatively stable compared with 2021, average loans to be up 1% to 3%, average deposits to be up 1% to 3%, noninterest income and noninterest expense each to be down 1% to 3%, and net loan charge-offs to average loans to be in the range of 20 to 30 basis points. The GAAP tax rate is expected to be approximately 20%.
How much capital is Key returning to shareholders, and what is the remaining authorization?
In 2021 Key repurchased $1.2 billion of common shares, and it paid a full-year dividend of $0.75 per share. Under its 2021 capital plan, which is effective through the third quarter of 2022, Key has authority to repurchase up to $1.5 billion of common shares. The filing says the company returned 75% of its 2021 net income to shareholders.
How strong is Key's capital position?
At December 31, 2021, Key's Common Equity Tier 1 ratio was 9.48%, Tier 1 risk-based capital ratio 10.77%, total risk-based capital ratio 12.49%, and leverage ratio 8.47% under the fully phased-in Regulatory Capital Rules. The filing states that all capital ratios exceeded regulatory requirements and that KeyBank (consolidated) qualified as well capitalized.
06—Continue