[KEY] KeyCorp: Q3 2026 earnings preview on margin repricing and deposit costs

KeyCorp is a Cleveland-based US super-regional bank that gathers deposits and makes loans through KeyBank across 15 states and serves middle-market companies nationwide through KeyBanc Capital Markets; it is scheduled to report its Q3 2026 earnings, covering the third quarter of 2026, ending September 30, 2026, before the market opens on 2026-10-20[1]. In the latest disclosed quarter, the second quarter of 2026, taxable-equivalent net interest income was $1.258 billion, the net interest margin was 2.89%, noninterest income was $706 million, diluted earnings per share were $0.44 and return on tangible common equity (ROTCE) was 12.9%[2]. At the Barclays conference on September 14, the company maintained its guidance for 2026 net interest income to grow 9% to 11% from the FY2025 base of $4.671 billion and for a fourth-quarter net interest margin exit rate of 3.00% to 3.05%, while raising full-year revenue growth to about 8% and noninterest income growth to 4% to 5%[3]; on the July earnings call, management guided third-quarter investment banking fees up more than 20% from the prior quarter[4], and in September it signaled that the total cost of deposits would rise modestly in the third quarter from 1.63% in the second[5]. As of October 16, Yahoo Finance showed an average third-quarter EPS estimate of $0.46 from 14 analysts (range $0.45 to $0.48, versus $0.41 a year earlier) and an average revenue estimate of $2.05 billion from 11 analysts (versus $1.9 billion a year earlier)[6].

Three things matter most in this report, and each corresponds to a link the data has not yet confirmed. The first is margin progress: the second-quarter net interest margin was only 2 basis points above the first quarter[7], while full-year guidance implies second-half net interest income of $2.603 billion to $2.697 billion, above the first half's $2.488 billion, so whether the third quarter can push the margin above 2.93% while deposit costs edge up determines whether the 3% fourth-quarter exit is reached steadily or requires a large jump. The second is the volume-price relationship in commercial lending: average commercial loans rose $6.67 billion year over year in the second quarter, but the commercial and industrial loan yield fell to 5.78%[8], so the third quarter needs to show loan interest income rising alongside balances rather than growth bought by giving up spread. The third is whether investment banking fees arrive: investment banking and debt placement fees fell to $169 million in the second quarter[9], and management's guidance of more than 20% sequential growth implies about $203 million, a direct test of whether a record M&A pipeline turns into recognized fee income.

Company Background and Business Structure

KeyCorp is a long-established bank holding company built around KeyBank, with operations spanning retail banking, commercial banking and a national middle-market investment bank. It was organized in 1958 under Ohio law, is headquartered in Cleveland and operates mainly through its wholly owned subsidiary KeyBank National Association; at the end of 2025 it had consolidated total assets of about $184.4 billion and operated 940 full-service retail branches and 1,120 ATMs in 15 states[10]. Through KeyBanc Capital Markets (KBCM), KeyCorp also provides syndication, debt and equity underwriting, M&A advisory, derivatives and foreign exchange, and it is a national commercial real estate lender and a third-party master and special servicer of commercial mortgage loans[11].

Over the past two years the company went through a balance sheet repositioning, and its current earnings recovery is the payback period for that move. In 2024 it sold about $10 billion of low-yielding available-for-sale securities in two steps and reinvested at higher yields, recognizing about $1.86 billion of securities losses[12] and a net loss for the year[13]; in the same year Scotiabank took a minority stake of about $2.8 billion under an investment agreement signed in August 2024[14]. Net interest income then grew 23% in 2025, and the taxable-equivalent net interest margin rose to 2.69%[15]. At the end of the second quarter of 2026, the company had total assets of $191.3 billion, loans of $110.4 billion, deposits of $153.1 billion, assets under management of $74.2 billion and 939 branches[16]; on August 4, 2026, it completed the acquisition of Clearwater Corporate Finance, a UK middle-market M&A advisory firm[17].

The company reports two client-based segments, Consumer Bank and Commercial Bank, with swaps, the securities portfolio and funds transfer pricing held in Other. Consumer Bank serves individuals and small businesses through branches and digital channels, offering deposits, residential mortgages, home equity loans, credit cards and small-business credit, as well as wealth management and trust services for high-net-worth clients, and it is the company's main source of low-cost deposits; in 2025 the segment earned net interest income of $2.709 billion, noninterest income of $957 million and net income of $527 million[18], and in the second quarter of 2026 it earned net interest income of $757 million and net income of $203 million[19]. Commercial Bank combines the Commercial business serving middle-market companies with the Institutional business serving large corporations and institutions nationwide; in 2025 it earned net interest income of $2.294 billion, noninterest income of $1.745 billion and net income of $1.447 billion[20], and in the second quarter of 2026 it earned net interest income of $697 million and net income of $423 million on average loans of $76.2 billion and average deposits of $58.9 billion[21].

Viewed through assets, liabilities and revenue, KeyCorp is a commercial-loan-led bank with an above-average share of fee businesses. Of the $110.4 billion in loans at the end of the second quarter, commercial and industrial loans were $62.7 billion, or 56.8%, commercial real estate was $16.8 billion and consumer loans were $28.9 billion, including $18.2 billion of residential mortgages[22]. On the liability side, second-quarter average deposits were $147.6 billion, including $61.0 billion of interest-bearing checking, $42.8 billion of money market deposits and $27.6 billion of noninterest-bearing deposits[8]. On the revenue side, second-quarter taxable-equivalent revenue was $1.964 billion, with net interest income at 64% and noninterest income at 36%[2]; in noninterest income over the 12 months through the second quarter, investment banking and debt placement contributed 27%, trust and investment services 21%, cards and payments 12%, service charges on deposit accounts 11%, corporate services 10% and commercial mortgage servicing 9%[23].

Financial History and Current Position

The annual figures for 2024 and 2025 show the repositioning first costing money and then paying it back. In 2024 the company recognized about $1.856 billion of losses on selling low-yielding securities and posted a net loss of $161 million; in 2025 net income was $1.829 billion and diluted EPS from continuing operations was $1.52[13]. GAAP net interest income for 2025 was $4.636 billion, up 23% from $3.765 billion in 2024, and the taxable-equivalent net interest margin was 2.69%, up 53 basis points[15]; that year noninterest income was $2.842 billion, including $780 million of investment banking and debt placement fees and $591 million of trust and investment services income, noninterest expense was $4.703 billion and the provision for credit losses was $471 million[13].

The first half of 2026 extended the improvement, but margin gains slowed noticeably in the second quarter. First-half taxable-equivalent net interest income was $2.488 billion, up 10% year over year, and the margin was 2.88%; noninterest income was $1.429 billion, up 5%; noninterest expense was $2.398 billion, up 5%; and diluted EPS was $0.88, up 28%[2]. In the second quarter alone, taxable-equivalent net interest income was $1.258 billion, up 2% sequentially, and the net interest margin was 2.89%, up only 2 basis points[7]; noninterest income was $706 million, down 2.4% sequentially, mainly because investment banking fees fell from $197 million in the first quarter to $169 million[9]; and noninterest expense was $1.217 billion[24]. The second-quarter provision was $92 million, net income available to common shareholders was $473 million, diluted EPS was $0.44, ROTCE was 12.9% and the cash efficiency ratio was 61.9%[2].

Second-quarter balance sheet and credit metrics show the bank growing while its nonperforming ratio stepped up noticeably. Average loans were $110.1 billion and average deposits $147.6 billion in the second quarter, and the total cost of deposits was 1.63%, down 2 basis points from the first quarter, with interest-bearing deposit costs flat at 2.01%[25]. The second-quarter net charge-off ratio was 0.42%, and the nonperforming asset ratio rose from 0.63% in the first quarter to 0.74%[26]; nonperforming loans rose from $682 million at the end of the first quarter to $809 million, and the allowance for credit losses was 1.56% of loans[2].

Capital and shareholder returns are still advancing, but the capital ratio that includes unrealized losses now sits in the middle of the target range. At the end of the second quarter the CET1 ratio was 11.2%, CET1 marked for AFS and pension AOCI was 9.8%, the tangible common equity ratio was 7.7%, and the company repurchased $341 million of stock in the quarter at an average price of $21.95 per share[27]; tangible book value per share was $13.62 and the quarterly dividend was $0.205 per share[2]. On September 14 the company maintained full-year net interest income growth of 9% to 11% and a fourth-quarter margin of 3.00% to 3.05%, while raising adjusted noninterest expense growth from 3% to 4% to about 4% and keeping its full-year net charge-off guidance at 40 to 45 basis points[3].

Operating Model

KeyCorp's revenue is the sum of net interest income and noninterest income, and net interest income equals average earning assets multiplied by the net interest margin. Second-quarter taxable-equivalent net interest income of $1.258 billion came from $171.8 billion of average earning assets and a 2.89% margin; average loans of $110.1 billion comprised $81.0 billion of commercial loans and $29.1 billion of consumer loans, alongside about $48 billion of securities and $10.7 billion of short-term investments, with an earning-asset yield of 4.75%, a cost of interest-bearing liabilities of 2.37% and about $27.6 billion of noninterest-bearing deposits contributing the rest of the margin beyond the spread[8]. Margin upside comes mainly from the asset side: in the second half, about $4.1 billion of receive-fixed swaps (weighted average receive rate about 2.78%) and maturing fixed-rate loans and securities can be reinvested at higher yields, an effect released quarter by quarter as assets mature[28]; the opposing force on the liability side is deposit cost, with a cumulative interest-bearing deposit beta of about 56% in this easing cycle and a company signal that the total cost of deposits will rise modestly in the third quarter[5]. In noninterest income, corporate clients pay for M&A advice, syndication and underwriting, and second-quarter investment banking and debt placement fees were $169 million, trust and investment services $159 million, cards and payments $94 million, deposit service charges $77 million, corporate services $80 million and commercial mortgage servicing fees $49 million[9]; investment banking fees are recognized when deals close, lagging pipeline changes by one to two quarters.

Profit equals net interest income plus noninterest income, minus noninterest expense and the provision for credit losses, and both expenses and credit costs are currently contained. Second-quarter noninterest expense was $1.217 billion, with personnel costs of $786 million the largest item, up $81 million year over year because of hiring front-line bankers and investment bankers and higher incentive pay[24]. The second-quarter provision of $92 million consisted of $115 million of net charge-offs less a $23 million net reserve release[29]. By segment, Commercial Bank generated most of the second-quarter pre-tax profit, Consumer Bank came second, and Other absorbed the gap from funds transfer pricing and swaps[21][19]; the company measures its profit model by positive operating leverage, with full-year revenue growth of about 8% against adjusted expense growth of about 4%[3].

For a bank, "cash" shows up as capital and liquidity: retained earnings add common equity tier 1 capital, loan growth consumes risk-weighted assets, and the remainder funds dividends and buybacks. The CET1 ratio of 11.2% at the end of the second quarter was 20 basis points lower than at the end of the first quarter because of higher risk-weighted assets and repurchases, partly offset by retained earnings[27]; marked CET1 was 9.8%, inside the company's 9.5% to 10% target range[30]. The board authorized up to $3.0 billion of repurchases in May 2026[14], and the company plans to buy back at least $1.3 billion for the full year[27]. On liquidity, the company chose to add short-term wholesale funding rather than reprice client deposits to get through the seasonal deposit trough in May[31]; it reported a 73% loan-to-deposit ratio at the end of the second quarter and said third-quarter average client deposits were on pace to outgrow loans by more than $1 billion[5].

This operating model has three points that current disclosures cannot verify directly. First, the company discloses only the maturing amounts and yields on swaps and fixed-rate assets, not the reinvestment yields or the quarterly net interest income uplift, so the repricing effect can only be tested indirectly through the consolidated earning-asset yield and margin[28]. Second, the company does not split the decline in commercial loan yields between lower rates and spread concessions, and the payback period for cross-sold fees is 12 to 18 months, which a single quarter cannot verify[31]. Third, the investment banking pipeline is disclosed only as percentage changes, up 31% year over year and 9% sequentially, without amounts, and Clearwater's contribution is given only as $60 million to $70 million of revenue in 2027, leaving its third-quarter consolidated contribution unknown[17].

Industry and Competitive Position

KeyCorp sits in the middle of the US super-regional bank group by size, and its distinguishing feature is a scaled investment banking and payments platform. With total assets of about $190 billion, it competes with regional banks such as Huntington, Fifth Third, PNC, M&T, Citizens, Regions and Truist for middle-market companies and retail deposits; the company says it raised more than $172 billion for clients over the 12 months through the second quarter[16], payments penetration among middle-market clients is about 90%[23], and 2025 investment banking and debt placement fees of $780 million marked the second-strongest year in its history[17].

A relationship-based deposit structure is another advantage, but the margin still trails the company's own target. The company says 82% of commercial deposit balances sit in operating accounts and 96% come from clients with an operating account, noninterest-bearing deposits were 19% of second-quarter total deposits, and the loan-to-deposit ratio was 73%[5]. The 2024 securities repositioning and Scotiabank's investment improved capital and liquidity, and the margin has recovered on plan since then, but the 2.89% second-quarter margin remains below the company's 4Q27 target of 3.25% or more[3].

Industry-level pressures apply to KeyCorp as well, and the available material sets clear limits on any competitive comparison. On the July call, management said deposit competition remains intense with modestly increased pricing pressure versus earlier in the year, and that middle-market M&A has lagged the large-cap recovery[32]. The available material does not provide bank-by-bank comparable margins, deposit costs or investment banking fees, so this competitive position rests mainly on the company's own disclosures and cannot be used to rank peers.

Core Debates

Can the repricing of low-yielding fixed-rate assets push the margin toward 3% even as deposit costs tick up?

This debate governs about two-thirds of KeyCorp's revenue. Net interest income made up about 64% of second-quarter revenue, at $1.258 billion on a taxable-equivalent basis[2]; the maintained guidance for 9% to 11% full-year growth and a fourth-quarter margin of 3.00% to 3.05%[3] arithmetically implies second-half net interest income of $2.603 billion to $2.697 billion, above the first half's $2.488 billion. Because the second-quarter margin was only 2 basis points higher than the first quarter's[7], the question of whether margin progress is lagging growth now centers on the third quarter.

The evidence so far includes both support for upside and sources of drag. The second-quarter margin was 2.89%, up 23 basis points year over year, the total cost of deposits was 1.63% and interest-bearing deposit costs were flat at 2.01%[25]; the company gave two reasons for the small second-quarter margin gain: commercial loan growth exceeded expectations while new high-quality loans carried thinner spreads, and when deposits hit their seasonal low in May the company filled the gap with short-term wholesale funding instead of repricing client deposits[31]. The case for upside rests on the maturity schedule: about $4.1 billion of receive-fixed swaps (weighted average receive rate about 2.78%) plus fixed-rate loans and securities mature in the second half[28], and management said about $9 billion of low-yielding assets will reprice in the second half[4].

An alternative explanation is equally supported, so this debate remains open. The company signaled in September that the total cost of deposits would rise modestly in the third quarter[5], and second-quarter wholesale funding was also relatively expensive; if client deposit growth falls short, liabilities would absorb the asset-side gains and margin expansion could slip to the fourth quarter or even 2027. The direction of financial transmission is clear: reinvesting low-yielding assets at higher yields lifts the earning-asset yield, and if deposit costs rise only modestly while average earning assets grow $1 billion to $2 billion from the second quarter as guided[3], a wider margin translates directly into net interest income growth, with the lag set by the maturity schedule and deposit pricing.

In the third quarter, the test is whether the margin, deposit costs and net interest income move in the same direction. Specifically, watch whether the margin reaches 2.93% or higher and how the company describes the fourth-quarter exit target, how far the total cost of deposits rises from 1.63% and whether interest-bearing deposit costs stay near 2.01%, whether taxable-equivalent net interest income exceeds the second quarter's $1.258 billion, and whether average deposits grow while wholesale funding declines. The observable falsifiers are these: if deposit costs rise more than 7 basis points while the margin stays at 2.89%, second-half guidance depends on a large fourth-quarter jump; if the company cuts full-year net interest income guidance, the repricing logic has not failed but its timing has moved later.

Can thinner-spread, investment-grade commercial lending keep replacing consumer runoff and still grow loan interest income in the third quarter?

Commercial loans dominate KeyCorp's asset side, and their volume-price relationship decides whether loan interest income keeps growing. Commercial loans were 73.9% of total loans at the end of the second quarter[22], and second-quarter commercial loan interest income was $1.159 billion[8]; the company has raised its full-year average commercial loan growth guidance twice, from 6% to 8%[33] to 8% to 10%[3], while low-yielding consumer loans continue to run off as planned. Growth is also highly concentrated: at the end of the second quarter, utility loans were $10.1 billion and finance loans $13.7 billion, or 12.4% and 16.8% of commercial loans, respectively[34].

The evidence so far shows volume growth being partly offset by lower yields. Second-quarter average commercial loans were $80.98 billion, up $6.67 billion year over year, while average consumer loans were $29.09 billion, down $2.31 billion; commercial loan interest income rose $49 million year over year, with balances contributing $99 million and lower yields subtracting $50 million[8]. Management said 58% of commercial and industrial loans are investment grade, with the largest contributions from utilities, power and renewables, real estate and technology[35], and it plans to offset thinner spreads with cross-sold payments, advisory, hedging and wealth fees over 12 to 18 months[31].

What remains unresolved is whether growth reflects genuine client demand or spread concessions. One explanation is that power buildout and relationship-client expansion are producing durable loan demand; the other is that growth partly comes from ample bank loan supply in the market and spread concessions, so the yield decline is not entirely due to lower rates. In terms of financial transmission, growth in commercial and industrial loans tied to utilities, power, non-depository financial institutions and real estate offsets consumer runoff, and with stable yields balance growth directly adds loan interest income; if growth is bought with thinner spreads, the interest income gain will be smaller than the balance gain, and cross-sold fees will only show up more than a year later.

In the third quarter, the test is whether balances, yields and interest income improve together. Specifically, watch whether average commercial loans reach the roughly $81.39 billion implied by the low end of full-year guidance, whether the commercial and industrial loan yield holds near 5.70%, whether commercial loan interest income exceeds the second quarter's $1.159 billion, and how utility and finance loan balances and related criticized assets change. The observable falsifiers are these: if balances grow but loan interest income does not, growth is being bought with price; if credit migration appears in the concentrated industries, the assumption about the quality of growth needs revision.

Will a record M&A pipeline turn into investment banking fees in the third quarter and keep fee income on track with the raised guidance?

Investment banking fees are the largest and most volatile item in KeyCorp's fee income, and they decide whether the raised noninterest income guidance can be met. Noninterest income made up about 36% of second-quarter revenue[2], and investment banking and debt placement fees accounted for 27% of noninterest income over the 12 months through the second quarter[23]; second-quarter investment banking fees were $169 million, down 14% sequentially and 5% year over year[9], after which the company guided to third-quarter growth of more than 20% sequentially[4] and in September raised full-year noninterest income growth guidance to 4% to 5%[3].

The evidence so far shows deal delays weighing on the second quarter while the pipeline and recurring fees grew. The 10-Q attributed the year-over-year decline in second-quarter investment banking fees to lower M&A advisory fees, commercial mortgage gains on sale and syndication fees, as well as uneven middle-market transaction activity and delays in M&A closings, while debt and equity issuance increased[36]. Management said the investment banking pipeline was up 31% year over year and 9% sequentially, that about 40% of investment banking fees are tied to private equity sponsors, and that sponsors need to exit holdings to raise new funds[31]; among recurring fees, trust and investment services income rose 9% year over year and assets under management reached a record $74.2 billion, while the main drag was commercial mortgage servicing fees, down $21 million year over year to $49 million[35].

An alternative explanation is that a high pipeline may simply reflect deals being pushed out repeatedly, so this debate cannot be settled before the third quarter. Management acknowledged that the middle-market M&A recovery has lagged large-cap deals and that sponsor-related activity has been slow to rebound[32]; if third-quarter investment banking fees fall short, the raised full-year guidance would rely mainly on other lines. In terms of financial transmission, the pipeline converts into completed deals when sponsors accelerate exits, investment banking fees are recognized as deals close, and together with wealth fees from asset growth and payments fees they lift noninterest income, which is about 36% of revenue; if middle-market M&A keeps slipping, incremental noninterest income would depend mainly on recurring fees.

In the third quarter, the test covers investment banking fees, total fee income and commercial mortgage servicing fees. Specifically, watch whether investment banking and debt placement fees reach about $203 million, whether noninterest income reaches about $763 million, the low end of the implied second-half quarterly average, whether commercial mortgage servicing fees return to the $50 million to $60 million per quarter range management described[4], and what management says about the pace of pipeline conversion and Clearwater's consolidated contribution. The observable falsifiers are these: if investment banking fees grow less than 10% sequentially, the pipeline-conversion assumption needs to move later; if fee growth comes only from one-time other income, the view on recurring fees needs revision.

Risks and Falsifiers

The focus of credit risk is whether the second-quarter rise in nonperforming loans stays confined to a few large individual credits. Nonperforming loans were $809 million at the end of the second quarter, up $127 million from $682 million at the end of the first quarter, the nonperforming asset ratio rose from 0.63% to 0.74%, and the allowance for credit losses was 1.56% of loans[2]; management attributed the increase to three idiosyncratic credits in real estate, consumer goods and agriculture, and said criticized assets were stable at 4.9%[30]. If migration spreads to more borrowers, credit costs would exceed the full-year net charge-off guidance of 40 to 45 basis points and directly reduce pre-tax profit; a flat or lower nonperforming asset ratio in the third quarter, a net charge-off ratio within 40 to 45 basis points and the large individual nonperforming loans beginning to resolve before year-end would falsify this risk.

Expense risk lies in faster spending on people and technology, which would narrow positive operating leverage if revenue growth falls short. Second-quarter noninterest expense was $1.217 billion, including personnel costs of $786 million, up $81 million year over year[24]; full-year adjusted expense is guided to grow about 4% from the FY2025 base of $4.729 billion, which after subtracting the first half's $2.398 billion implies a second-half quarterly average of about $1.26 billion (arithmetic derivation)[3]. This risk hits pre-tax profit and progress toward ROTCE, where the company targets 15% or more by 4Q27; if third-quarter revenue grows faster sequentially than expenses and the cash efficiency ratio falls below 61.9%, the risk has not materialized.

Capital risk lies in marked CET1 already sitting in the middle of the target range, so continued commercial loan growth would consume risk-weighted assets and squeeze buybacks. At the end of the second quarter the CET1 ratio was 11.2% (11.4% at the end of the first quarter), marked CET1 was 9.8% and the company repurchased $341 million of stock in the quarter[27], and the board authorized up to $3.0 billion of repurchases in May[14]. This risk affects the pace of shareholder returns rather than the income statement; if marked CET1 stays at 9.5% or higher at the end of the third quarter while buybacks proceed toward the plan of at least $1.3 billion for the year, the risk is falsified.

Funding cost risk lies in deposit competition or the wholesale funding substitute performing worse than planned, offsetting the gains from asset repricing. Second-quarter taxable-equivalent net interest income was $1.258 billion with a 2.89% margin, and full-year guidance implies a second-half total of $2.603 billion to $2.697 billion; each 1 basis point rise in interest-bearing deposit costs adds about $12 million of annualized expense on roughly $120 billion of average interest-bearing deposits[8]. The company states in its 10-Q that its full-year outlook assumes a stable competitive deposit environment[37]; if the third-quarter margin reaches 2.93% or higher, the total cost of deposits stays at or below 1.68% and the company maintains full-year guidance, this risk is falsified.

Concentration risk lies in commercial loan growth clustering in utilities, power and non-depository financial institutions, with thinner spreads and rising industry concentration. At the end of the second quarter, utility loans were $10.1 billion and finance loans $13.7 billion[34], private-credit-related exposure was about $10.9 billion at the end of the first quarter[38], and the second-quarter commercial and industrial loan yield was 5.78%, down 26 basis points year over year[8]. If demand falls or credit migrates, loan growth and interest income would come under pressure together; if third-quarter commercial loan interest income rises sequentially, the commercial and industrial yield stays at or above 5.70% and the concentrated industries show no new nonperforming loans, the risk has not materialized.

Fee risk lies in middle-market M&A and sponsor exits slipping further, leaving investment banking fees short of third-quarter guidance. Second-quarter investment banking and debt placement fees were $169 million, and third-quarter guidance implies about $203 million or more[4]; full-year noninterest income guidance implies a second-half total of $1.527 billion to $1.555 billion, and about 40% of investment banking fees are tied to private equity sponsors[32]. This risk affects noninterest income and the full-year revenue growth target of about 8%; if third-quarter investment banking fees reach $203 million or more and the company maintains mid-single-digit full-year growth, the risk is falsified.

What to Watch Next

• Margin repricing versus deposit costs: from a second-quarter net interest margin of 2.89%, watch whether the third quarter reaches 2.93% or higher and how the company describes its 3.00% to 3.05% fourth-quarter exit; a deposit cost increase of more than 7 basis points with the margin stuck at 2.89% would mean guidance depends on a fourth-quarter jump.
• Deposit costs and net interest income: from 1.63% and $1.258 billion, watch the size of the deposit cost increase and whether net interest income exceeds the second quarter; deposit costs at or below 1.68% with full-year guidance maintained would confirm the path.
• Commercial loans replacing consumer runoff: from $80.98 billion of average commercial loans and $1.159 billion of commercial loan interest income, watch for about $81.39 billion and matching interest income growth; balance growth without interest income growth would show growth bought with price.
• Commercial yields and concentration: from a 5.78% commercial and industrial yield, $10.1 billion of utility loans and $13.7 billion of finance loans, watch whether the yield holds 5.70% and how criticized assets in those industries move; credit migration there would require revising the quality-of-growth assumption.
• Investment banking fees: from $169 million, watch for about $203 million; sequential growth below 10% would push the pipeline-conversion assumption later.
• Noninterest income and commercial mortgage servicing: from $706 million and $49 million, watch for about $763 million and a return to $50 million to $60 million per quarter; growth coming only from one-time other income would require revising the view on recurring fees.

Conclusion

KeyCorp's results are driven by two forces: margin repair as low-yielding assets mature quarter by quarter and are reinvested at higher yields after the 2024 securities repositioning, and a fee business centered on middle-market investment banking and payments. With a 2.89% second-quarter margin, $1.258 billion of taxable-equivalent net interest income and 12.9% ROTCE[2], earnings have recovered clearly from the 2024 loss, but full-year guidance requires second-half net interest income to accelerate meaningfully from the first half. The key unresolved relationship is whether repricing of about $9 billion of low-yielding assets[4] can outrun modestly rising deposit costs and thinner commercial loan spreads, while the record M&A pipeline turns into actual fees in the third quarter.

Only one qualifying independent outside interpretation has appeared since the second-quarter results, so coverage is thin and cannot be treated as a broad consensus. American Banker's September 23 report cited Truist Securities bank analyst Brian Foran's estimate that KeyCorp's loans to utility companies rose almost 40% in three years to $10.1 billion in the second quarter of 2026, accounting for 61% of the bank's loan growth over the past year, much of it driven by AI-related power demand, and it framed that concentration under the question of whether AI may be in a bubble phase[39]. That reading matches the company's own account on the facts, since management likewise names utilities, power and renewables as the largest source of commercial loan growth[35]; the difference lies in the implication, as the company stresses that these loans are mostly investment grade and support cross-selling, while the report highlights that both the durability of growth and its credit quality hinge on power buildout demand in a single industry. It speaks directly to the commercial-lending volume-price debate and connects to the concentration risk, but it does not address the margin or investment banking fee debates.

The combination that would materially strengthen the current understanding is a third-quarter margin of 2.93% or higher with the total cost of deposits at or below 1.68%, commercial loan interest income rising with balances and the commercial and industrial yield holding near 5.70%, investment banking fees of about $203 million, a nonperforming asset ratio that stops rising and marked CET1 holding at 9.5% or higher. Conversely, a stalled margin, a deposit cost increase of more than 7 basis points, loan balance growth that fails to produce interest income, investment banking fees growing less than 10% sequentially, or credit migration in utility and finance loans would materially weaken or delay the current understanding of repricing and fee recovery.

Sources

[1] KEY earnings calendar · 2026-10-20 third quarter 2026 results before market open (calendar last updated 2026-10-16) · 2026-10-16 · Drillr earnings calendar

[2] KEY 8-K filed 2026-07-21 · 2Q26 financial highlights · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[3] KEY 8-K filed 2026-09-14 · Barclays conference 2026 outlook · 2026-09-14 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[4] KEY earnings call 2026-07-21 · guidance · 2026-07-21 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[5] KEY 8-K filed 2026-09-25 · investor meetings deposit franchise · 2026-09-25 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[6] Yahoo Finance KEY analysis (accessed 2026-10-16) · 2026-10-16 · Yahoo Finance · https://finance.yahoo.com/quote/KEY/analysis/

[7] KEY 8-K filed 2026-07-21 · NII and NIM walk · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[8] KEY 10-Q filed 2026-08-04 · 2Q26 average balance sheet and yields · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[9] KEY 8-K filed 2026-07-21 · noninterest income by line · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[10] KEY 10-K filed 2026-02-23 · business overview · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[11] KEY 10-K filed 2026-02-23 · segment descriptions · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[12] KEY 10-K filed 2025-02-21 · 2024 securities repositioning · 2025-02-21 · 10-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=10-K&dateb=&owner=include&count=40

[13] KEY 10-K filed 2026-02-23 · FY2025 income statement · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[14] KEY 10-Q filed 2026-08-04 · share repurchase authorization · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[15] KEY 10-K filed 2026-02-23 · FY2025 net interest income and margin · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[16] KEY 8-K filed 2026-09-25 · investor meetings business mix · 2026-09-25 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[17] KEY 8-K filed 2026-09-25 · investor meetings investment banking · 2026-09-25 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[18] KEY 10-K filed 2026-02-23 · Consumer Bank FY2025 results · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[19] KEY 10-Q filed 2026-08-04 · Consumer Bank 2Q26 results · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[20] KEY 10-K filed 2026-02-23 · Commercial Bank FY2025 results · 2026-02-23 · 10-K · https://www.sec.gov/Archives/edgar/data/91576/000162828026010546/

[21] KEY 10-Q filed 2026-08-04 · Commercial Bank 2Q26 results · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[22] KEY 10-Q filed 2026-08-04 · loan composition · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[23] KEY 8-K filed 2026-09-25 · investor meetings wealth and payments · 2026-09-25 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[24] KEY 8-K filed 2026-07-21 · 2Q26 income statement · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[25] KEY 8-K filed 2026-07-21 · deposit franchise slide · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[26] KEY 8-K filed 2026-07-21 · credit quality slide · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[27] KEY 8-K filed 2026-07-21 · capital and repurchases slide · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[28] KEY 8-K filed 2026-07-21 · fixed-rate asset repricing schedule · 2026-07-21 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000091576&type=8-K&dateb=&owner=include&count=40

[29] KEY 10-Q filed 2026-08-04 · provision for credit losses · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[30] KEY earnings call 2026-07-21 · management highlights · 2026-07-21 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[31] KEY earnings call 2026-07-21 · analyst questions and answers · 2026-07-21 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[32] KEY earnings call 2026-07-21 · risks · 2026-07-21 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[33] KEY earnings call 2026-04-16 · guidance · 2026-04-16 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[34] KEY 10-Q filed 2026-08-04 · commercial loans by industry · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[35] KEY earnings call 2026-07-21 · business line performance · 2026-07-21 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[36] KEY 10-Q filed 2026-08-04 · investment banking fee discussion · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[37] KEY 10-Q filed 2026-08-04 · business outlook · 2026-08-04 · 10-Q · https://www.sec.gov/Archives/edgar/data/0000091576/000162828026052671/key-20260630.htm

[38] KEY earnings call 2026-04-16 · first-quarter performance · 2026-04-16 · earnings-call · https://investor.key.com/events-and-presentations/default.aspx

[39] American Banker 2026-09-23 · AI bubble exposure of banks · 2026-09-23 · American Banker · https://www.americanbanker.com/news/ai-might-be-in-its-bubble-phase-how-exposed-are-banks