01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
KeyCorp reported a first-quarter 2024 net income of $219 milliona, or $0.20 per common share, compared with $312 million, or $0.30 per share, in the first quarter of 2023.
Net interest income (TE) was $886 millionb with a net interest margin of 2.02%, down $220 million and 45 basis points from a year earlier, reflecting higher funding costs and planned reductions in loan balances. Noninterest income rose to $647 million, representing 42% of total revenue, supported by a record first-quarter performance in investment banking and debt placement fees of $170 million. Average loans fell to $111.0 billion, while average deposits totaled $142.9 billion.
Credit metrics moved modestly higher. Net loan charge-offs were $81 millionc, or 0.29% of average loans, versus $45 million and 0.15% a year earlier. Nonperforming assets rose $83 million from December 31, 2023 to $674 million, and the provision for credit losses fell to $101 million from $139 million.
The company also recorded an incremental $29 milliond pre-tax FDIC special assessment expense in the quarter. Capital strengthened, with the Common Equity Tier 1 ratio at an estimated 10.27% at March 31, 2024, up from 10.02% at December 31, 2023, and KeyCorp paid a quarterly common dividend of $.205 per share.
Management's full-year 2024 guidance calls for average loans to decline 5% to 7% and net interest income (TE) to decline 2% to 5% versus 2023, with noninterest income up 5% or more and net charge-offs of 30 to 40 basis points. Tangible book value per common share was $9.87 at March 31, 2024, compared with $10.02 at year-end 2023.
02—Key points
Key Highlights
- Net income of $219 million ($0.20 per common share) for Q1 2024, down from $312 million ($0.30 per share) in Q1 2023.
- Net interest income (TE) of $886 million, down $220 million year over year, with net interest margin of 2.02%, down 45 basis points.
- Noninterest income of $647 million, or 42% of total revenue, up from $608 million, led by investment banking and debt placement fees of $170 million.
- Net loan charge-offs rose to $81 million (0.29% of average loans) from $45 million (0.15%) a year earlier; nonperforming assets increased $83 million to $674 million.
- Common Equity Tier 1 ratio estimated at 10.27% at March 31, 2024, versus 10.02% at December 31, 2023.
- Full-year 2024 guidance: average loans down 5% to 7%, net interest income (TE) down 2% to 5%, and noninterest income up 5% or more versus 2023.
- Deposits totaled $144.2 billion at March 31, 2024, down $1.4 billion from year-end 2023; uninsured deposits were 43% of total deposits.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.53B$1.71B | −10.6% |
| Operating Income | $219.00M$311.00M | −29.6% |
| Interest Expense | $1.16B$725.00M | +59.6% |
| Net Income | $219.00M$312.00M | −29.8% |
| EPS (Basic) | $0.20$0.30 | −33.3% |
| EPS (Diluted) | $0.20$0.30 | −33.3% |
| Shares Outstanding (Basic) | 929.69M926.49M | +0.3% |
| Shares Outstanding (Diluted) | 937.01M933.80M | +0.3% |
05—Questions
Frequently Asked Questions
Why did KeyCorp's net interest income decline so sharply year over year?
The filing attributes the $220 million decline in net interest income (TE) to a higher interest rate environment in which funding costs rose faster than earning asset yields, a shift in funding mix from noninterest-bearing deposits to higher-cost deposits and borrowings, and planned reductions in loan balances from balance sheet optimization efforts.
How is credit quality trending?
Net loan charge-offs increased to $81 million, or 0.29% of average loans, from $45 million, or 0.15%, a year earlier. Nonperforming loans rose to $658 million, and nonperforming assets to $674 million. The provision for credit losses decreased to $101 million from $139 million, and the ALLL increased $34 million to $1.54 billion.
What is the outlook for 2024?
Management expects full-year 2024 average loans to be down 5% to 7%, net interest income (TE) down 2% to 5%, noninterest income up 5% or more, and noninterest expense relatively stable compared with 2023. Net charge-offs are expected to be 30 to 40 basis points for the year.
How strong is KeyCorp's capital position?
All capital ratios exceeded regulatory requirements at March 31, 2024. The Common Equity Tier 1 ratio was an estimated 10.27%, Tier 1 risk-based capital was 11.97%, and total risk-based capital was 14.54%. Tangible common equity to tangible assets was 5.0%.
What did the FDIC special assessment cost KeyCorp?
Key recorded approximately $190 million in pre-tax expense in the fourth quarter of 2023 for the FDIC special assessment tied to the SVB and Signature Bank failures. In the first quarter of 2024, it recorded an incremental pre-tax expense of $29 million after the FDIC increased its loss estimate.
06—Continue