01—Abstract
Summary
Summary of the 10-Q filed November 6, 2024. Cited figures are marked; the original filing is the authoritative source.
KeyCorp reported a net loss from continuing operations of $411 milliona for the third quarter of 2024, compared to income of $302 million in the year-ago quarter, driven by a $935 million pre-tax loss on sale of securities available for sale, of which $918 million was tied to a strategic repositioning of the securities portfolio.
Excluding the repositioning, the filing shows net interest income (TE) of $964 millionb for the quarter, a net interest margin of 2.17%, up 16 basis points from the year-ago quarter, and provision for credit losses of $95 million. Total noninterest expense was $1.09 billion, and the company stated that expenses were down approximately 1% year over year. Net loan charge-offs rose to $154 million, or 0.58% of average loans, and nonperforming assets were $741 million at September 30, 2024.
The filing highlights the Scotiabank strategic minority investment: Scotiabank completed an initial purchase of 47,829,359 common shares for approximately $821 millionc in gross proceeds on August 30, 2024, bringing its ownership to approximately 4.9%. The parties expect a second closing of approximately $2.0 billion in the first quarter of 2025, subject to Federal Reserve approval, which would bring Scotiabank to approximately 14.9% pro forma ownership and grant it the right to designate up to two directors. Common Equity Tier 1 ratio was an estimated 10.8% at September 30, 2024, and book value per common share rose to $14.53 from $13.02 at December 31, 2023.
Full-year 2024 guidance calls for average loans to decline 7% to 8% and noninterest expense to rise about 2%. Total deposits reached $150.4 billiond, up $4.8 billion from year-end 2023, and the company replaced about $4.5 billion of FHLB advances with lower-cost client deposits during the quarter. Total loans outstanding from continuing operations were $105.3 billion, compared with $112.6 billion at December 31, 2023, reflecting balance sheet optimization and tepid client loan demand.
02—Key points
Key Highlights
- Net loss from continuing operations of $411 million for Q3 2024, versus income of $302 million in Q3 2023, driven by a $935 million pre-tax loss on sale of securities, of which $918 million related to the strategic securities repositioning.
- Securities repositioning sold approximately $7.0 billion in low-yielding mortgage-backed securities with an average book yield of about 2.3%; reinvestment in October was at an average book yield of about 4.95%.
- Net interest income (TE) was $964 million for Q3 2024, up $41 million from Q3 2023, with net interest margin of 2.17%, up 16 basis points year over year.
- Scotiabank completed an initial $821 million purchase of 47.8 million common shares (about 4.9% ownership); a second closing of approximately $2.0 billion is expected in Q1 2025, subject to Federal Reserve approval.
- Common Equity Tier 1 ratio was an estimated 10.8% at September 30, 2024, and the stress capital buffer was set at 3.1%, effective October 1, 2024.
- Deposits totaled $150.4 billion, up $4.8 billion from year-end 2023, while average loans declined to $106.2 billion in Q3 2024 from $117.6 billion a year earlier.
- Net loan charge-offs rose to $154 million (0.58% of average loans) in Q3 2024 from $71 million in Q3 2023, including about $80 million tied to three large credits.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 6, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $695.00M$1.57B | −55.6% |
| Operating Income | $81.00M$899.00M | −91.0% |
| Net Income | -$410.00M$303.00M | −235.3% |
| EPS (Basic) | $-0.47$0.29 | −262.1% |
| EPS (Diluted) | $-0.47$0.29 | −262.1% |
| Shares Outstanding (Basic) | 948.98M927.13M | +2.4% |
| Shares Outstanding (Diluted) | 948.98M931.74M | +1.8% |
05—Questions
Frequently Asked Questions
Why did KeyCorp report a net loss in the third quarter of 2024?
The net loss from continuing operations of $411 million was driven by a $935 million pre-tax loss on the sale of securities available for sale, of which $918 million was associated with the strategic repositioning of the investment portfolio. The company recorded an income tax benefit of $95 million for the quarter, primarily due to that loss.
What is the Scotiabank investment and what remains to be completed?
KeyCorp entered into an Investment Agreement with Scotiabank on August 12, 2024, for a strategic minority investment of approximately $2.8 billion at a fixed price of $17.17 per share, representing about 14.9% pro forma ownership. The initial purchase of about $821 million closed on August 30, 2024, giving Scotiabank about 4.9% ownership. The final purchase of approximately $2.0 billion is expected in the first quarter of 2025, subject to Federal Reserve approval.
How did the company's capital position change?
The estimated Common Equity Tier 1 ratio was 10.8% at September 30, 2024, and the company stated it was up approximately 100 basis points from a year earlier, including the balance sheet repositioning and the Scotiabank investment. Book value per common share was $14.53 at September 30, 2024, compared with $13.02 at December 31, 2023.
What is the company's full-year 2024 outlook?
KeyCorp expects full-year 2024 average loans to decline 7% to 8% versus 2023, average deposits to rise 1% to 2%, net interest income (TE) to decline 2% to 5%, noninterest income to rise 6% or more excluding the $918 million securities loss, and noninterest expense to rise about 2%. Net charge-offs are expected to be 35 to 40 basis points for the full year.
How is credit quality trending?
Net loan charge-offs were $154 million, or 0.58% of average loans, in Q3 2024, up from $71 million in Q3 2023, with about $80 million from three large credits. Nonperforming assets were $741 million at September 30, 2024, compared with $591 million at December 31, 2023, and the allowance for loan and lease losses was $1.49 billion.
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