Why was the third-quarter 2024 result a net loss?

The net loss was driven by a $918 million pretax loss on the sale of securities, or $(737) million after tax and $(.77) per diluted share. The company describes this as part of a previously communicated securities portfolio repositioning intended to enhance future earnings, capital, and liquidity starting in the fourth quarter.

What is the status of the Scotiabank investment?

KeyCorp received the initial $821 million tranche this quarter. The company continues to work toward the $2.8 billion capital raise and expects to complete the final tranche in the first quarter of 2025, subject to Federal Reserve approval.

How did net interest income and the margin change?

Taxable-equivalent net interest income was $964 million, up 7% from the second quarter. The net interest margin was 2.17%, up from 2.04% in the second quarter, reflecting reinvestment of maturing securities into higher-yielding investments, the maturity of lower-yielding interest rate swaps, and an improved funding mix.

How is credit quality trending?

The provision for credit losses was $95 million, compared with $100 million in the second quarter. Net loan charge-offs rose to $154 million, or 0.58% of average total loans, from $91 million, or 0.34%, in the second quarter. Nonperforming loans were $728 million, or 0.69% of period-end portfolio loans, compared with 0.66% at June 30, 2024.

KeyCorp 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 17, 2024. Cited figures are marked; the original filing is the authoritative source.

KeyCorp reported a third-quarter 2024 net loss from continuing operations attributable to common shareholders of $(447) million, or $(.47) per diluted common share.

Excluding the $(737) million after-tax loss on the sale of securities, or $(.77) per diluted share, adjusted net income was $290 million^a, or $.30 per diluted share. The loss stemmed from a securities portfolio repositioning that the company says will enhance future earnings, capital, and liquidity starting in the fourth quarter. The press release states that the sale produced a $918 million pretax loss, recorded in other income.

Underlying metrics were mixed but mostly stable. Net interest income rose 7% quarter-over-quarter, and average deposits increased 2.5%, while average total loans declined 2.5% to $106.2 billion^b. Investment banking and debt placement fees rose to $171 million from $126 million in the second quarter.

Net loan charge-offs were $154 million^c, or 0.58% of average total loans, and the provision for credit losses was $95 million. Nonperforming loans were $728 million, or 0.69% of period-end portfolio loans. Capital improved.

KeyCorp received the initial $821 million^d tranche of a strategic minority investment from Scotiabank, and its estimated Common Equity Tier 1 ratio rose to 10.8% and its tangible common equity ratio to 6.2%. The company expects to complete the final tranche of the $2.8 billion equity financing in the first quarter of 2025, subject to Federal Reserve approval. Shares outstanding rose to 991,251 thousand at period end from 943,200 thousand at June 30, 2024, and the company declared a quarterly dividend of $.205 per common share.

02—Key points

Key Highlights

Reported net loss from continuing operations attributable to common shareholders of $(447) million, or $(.47) per diluted share; adjusted net income was $290 million, or $.30 per diluted share, excluding the $(737) million after-tax securities sale loss.
Recorded a $918 million pretax loss on the sale of securities as part of a strategic repositioning of the portfolio, recognized in other income.
Net interest income (TE) of $964 million, up 7% quarter-over-quarter, with net interest margin of 2.17%, benefiting from reinvestment of maturing securities and a shift to lower-cost deposits.
Received the initial $821 million tranche of Scotiabank's strategic minority investment; final tranche expected in the first quarter of 2025, subject to Fed approval.
Common Equity Tier 1 ratio of 10.8% and tangible common equity to tangible assets of 6.2% at September 30, 2024, with the CET1 ratio estimated and reflecting the CECL optional transition provision.
Credit quality stable to improved: provision for credit losses of $95 million, net loan charge-offs of $154 million (0.58% of average total loans), and nonperforming assets of $741 million (0.70%).
Average deposits of $147.8 billion, up 2.5% quarter-over-quarter, and investment banking and debt placement fees of $171 million, up from $126 million in the second quarter.

03—Questions

Frequently Asked Questions

Why was the third-quarter 2024 result a net loss?
The net loss was driven by a $918 million pretax loss on the sale of securities, or $(737) million after tax and $(.77) per diluted share. The company describes this as part of a previously communicated securities portfolio repositioning intended to enhance future earnings, capital, and liquidity starting in the fourth quarter.
What is the status of the Scotiabank investment?
KeyCorp received the initial $821 million tranche this quarter. The company continues to work toward the $2.8 billion capital raise and expects to complete the final tranche in the first quarter of 2025, subject to Federal Reserve approval.
How did net interest income and the margin change?
Taxable-equivalent net interest income was $964 million, up 7% from the second quarter. The net interest margin was 2.17%, up from 2.04% in the second quarter, reflecting reinvestment of maturing securities into higher-yielding investments, the maturity of lower-yielding interest rate swaps, and an improved funding mix.
How is credit quality trending?
The provision for credit losses was $95 million, compared with $100 million in the second quarter. Net loan charge-offs rose to $154 million, or 0.58% of average total loans, from $91 million, or 0.34%, in the second quarter. Nonperforming loans were $728 million, or 0.69% of period-end portfolio loans, compared with 0.66% at June 30, 2024.

04—Continue

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