KeyCorp (KEY) Q2 2024 earnings summary

Executive summary

• Q2 2024 net income was $237 million ($0.25 EPS), up from Q1 2024 but down from $250 million in Q2 2023, reflecting lower net interest income and higher funding costs, partially offset by higher noninterest income.

• Average deposits increased $1.3 billion year-over-year to $144.2 billion, with client deposits up 5% year-over-year and non-interest-bearing deposits stable at 20%.

• Expenses declined 6% sequentially and remained stable year-over-year, reflecting disciplined cost management.

• Wealth management, commercial payments, and commercial mortgage servicing showed strong momentum, with record production volumes and 9% commercial deposit growth year-over-year.

• CET1 ratio improved to 10.5%, up 20 bps sequentially and 120 bps year-over-year, reflecting enhanced balance sheet resiliency.

Financial highlights

• Net interest income (TE) was $899 million, up 1.5% sequentially but down 8.8% year-over-year; net interest margin was 2.04%, up 2 bps sequentially but down 8 bps year-over-year.

• Noninterest income was $627 million, up 3% year-over-year and representing 41% of total revenue, driven by trust, investment services, and commercial mortgage servicing fees.

• Total revenue (TE) was $1.53 billion, down 0.5% sequentially and 4.3% year-over-year.

• Noninterest expense was $1.08 billion, flat year-over-year and down 5.6% sequentially, including a $5 million pre-tax FDIC special assessment.

• Provision for credit losses was $100 million, down from $167 million in Q2 2023 and $101 million in Q1 2024.

Outlook and guidance

• Full-year 2024 guidance: average loans expected down 7–8%, ending loans down 4–5%, average deposits stable, net interest income (TE) down 2–5%, noninterest income up low single digits, noninterest expense stable, and net charge-offs to average loans at 30–40 bps.

• NII commitments for full-year and Q4 exit rate reaffirmed, with NII tailwinds expected in H2 2024 and into 2025.

• Management expects loan growth to improve in the second half of 2024, with optimism for increased demand.

• Strategic focus remains on fee-based initiatives, with momentum in Wealth Management and Commercial Payments.

• Noninterest expense expected to be relatively stable, excluding FDIC special assessments.