KeyCorp Q4 FY2024 earnings call

• Financial Results: Reported EPS loss of $0.28, but adjusted for securities repositioning, EPS was $0.38. Revenue up 11% Q/Q and 16% Y/Y, with NII and adjusted fees growing double digits. Client deposits grew 1.5% Q/Q and 4% Y/Y, deposit betas stronger than expected. Strong credit performance with criticized loans down $500 million and net charge-offs down $40 million Q/Q. - Strategic Initiatives: Completed two major core modernization projects, made progress on cloud migration, expecting to complete cloud journey in 2025. Plan to increase tech spend by 10% to $900 million in 2025. Closed Scotiabank minority investment, welcomed new Board members and Chief Risk Officer. - Technology: Completed core commercial loan and derivatives platform modernization, migrated contact center and consumer online banking to cloud, with most systems and apps in hybrid cloud expected to be completed in 2025.

Consumer: Grew relationship households over 3% for second consecutive year, with 5%-8% growth in Western markets and continued growth in Eastern markets while penetrating wealth opportunities. Assets under management reached $61.4 billion. Mass affluent segment added 5,000 clients and over $500 million in Q4, with nearly 40,000 households and $2 billion+ AUM added in the last two years. Commercial Payments and Deposits: Commercial payments revenue grew mid-single digits Y/Y, deposit balances up 3% Y/Y. Expanded presence in Chicago and Southern California, new loan volumes improved for the third consecutive quarter, with pipelines nearly double year-ago levels. Investment Banking: Fourth quarter fees were $221 million, full-year fees the second strongest in history. Raised over $125 billion for clients in 2024, $54 billion in Q4 alone. Strong start in 2025 with elevated pipelines, hired senior bankers and plan to hire 10% more in 2025.

• 2025 Outlook: Average loans expected to be down 2%-5% full year, year-end balances flat to 2024. Net interest income up ~20%, NIM expected 2.7% or better by Q4. Noninterest income up at least 5% with upside if capital markets constructive. Expenses up 3%-5% depending on fee environment, aiming for fee-based operating leverage. Net charge-off ratio 40-45 bps, tax rate 21%-22% or 23%-24% taxable equivalent.

• Macro Environment: Uncertainties in the macro environment could impact credit performance and loan growth. - Regulatory Changes: Changes in regulatory environment could affect business operations, especially in M&A and investment banking. - Market Volatility: Fluctuations in capital markets could impact investment banking fees and capital raising activities.

Q: John Pancari from Evercore ISI asked about 20% NII outlook, conservativeness, and upside.

A: Clark Khayat discussed the waterfall of NII drivers, loan growth, and deposit management.

Q: Ebrahim Poonawala from Bank of America Merrill Lynch asked about M&A correlation with lending, deposit growth, average earning assets.

A: Chris Gorman and Clark Khayat talked about M&A impact on lending, deposit growth stability, and average earning assets being flat.

Q: Bill Carcache from Wolfe Research asked about fee income mix, impact of pro-growth administration, credit spreads and loan growth.

A: Chris Gorman and Clark Khayat discussed fee income mix, regulatory impact, and credit spreads and loan growth.

Q: Manan Gosalia from Morgan Stanley asked about securities repositioning, CET1 target, securities maturing.

A: Chris Gorman and Clark Khayat talked about securities repositioning limits, CET1 targets, and securities maturity.

Q: Matthew O'Connor from Deutsche Bank asked about NIM clarification, mobilizing people for growth, commercial loan growth vs H.8.

A: Chris Gorman and Clark Khayat discussed NIM targets, internal mobilization, and commercial loan growth.

Q: Mike Mayo from Wells Fargo asked about client access to capital markets, impact on loan growth, NII guide.

A: Chris Gorman and Clark Khayat talked about client access, NII guide, and compensation awards.

Q: Erika Najarian from UBS asked about appetite for aggressive talent addition, capital use.

A: Chris Gorman discussed investment in talent, wealth advisors, investment banking, and technology.

Q: Brian Foran from Truist asked about NIM normalized range, consumer loan runoff.

A: Clark Khayat talked about NIM reaching 3% or better in 2026 and consumer loan runoff.

Q: Thomas Leddy from RBC asked about reserve releases, C&I loan color.

A: Clark Khayat discussed reserve releases, C&I loan pipelines, and stabilization.