KeyCorp (KEY) Investor Update summary

Strategic rationale and transaction overview

• Announced a $2.8 billion capital raise via a strategic minority investment from Scotiabank at an 11% premium to the 20-day average share price, resulting in Scotiabank owning 14.9% pro forma, with a fixed price of $17.17 per share.

• The investment accelerates capital and earnings momentum, improves tangible book value per share by over 10%, and enhances strategic flexibility.

• The transaction was initiated by Scotiabank as a reverse inquiry and is structured to maintain full strategic agility for the company.

• Scotiabank will receive two board seats, customary governance protections, and a five-year standstill, capping ownership at 19.9%.

• The deal is structured in two tranches: $800 million closing in August 2024 (4.9% stake), and $2 billion pending regulatory approval, expected in Q1 2025.

Capital and financial impact

• Capital raise increases CET1 ratio by 195–200bps, with pro forma CET1 of 11.3–12.4% and AOCI-adjusted CET1 at 9.1–9.4%.

• About half the new capital will be used to reposition the securities portfolio, pulling forward $400 million in net interest income in year one.

• The transaction is projected to be low single-digit accretive to consensus EPS in 2025 and slightly accretive in 2026, even after accounting for share dilution.

• Tier 1 capital and leverage ratios will improve, positioning above peer medians and among the highest for Category III/IV banks.

• Tangible book value per share is expected to increase by over 10% due to the premium paid for the new shares.

Securities portfolio repositioning

• Plan to sell low-yield, long-duration AFS securities and reinvest in higher-yield, more liquid assets.

• One-time after-tax loss expected, using about half of the capital raised.

• Reinvestment projected to generate $400 million in additional net interest income.

• Anticipated improvements in 2025 and 2026 net interest margin (NIM), return on average assets (ROAA), and EPS.