KeyCorp Q1 FY2026 earnings call

• Strong first quarter performance with disciplined execution and momentum. Earnings up, return on tangible common equity progressing towards goal. Revenue growth outpaced expenses. Net interest margin on track. Commercial loan growth broad-based. Disciplined funding cost management. Strong asset quality. Committed to return of capital with share repurchases. Encouraged by Basel III endgame proposal. Growing clients in commercial and relationship households. Priority fee-based businesses grew 12%. Raised significant capital for clients. Investment banking pipelines elevated but expecting second quarter fees to decline. Commercial loan pipelines healthy. Massive wealth strategy bringing in new households and assets. Hiring frontline bankers and investment bankers. Investing $1 billion in technology for new capabilities and AI use cases.

First quarter earnings per share were 44 cents, up 33% year over year. Return on tangible common equity exceeded 13%. Revenue grew 10% year over year. Adjusted pre-provision net revenue grew an additional $29 million sequentially for the eighth consecutive quarter. Net interest margin expanded five basis points sequentially to 2.87%. Commercial loan growth was strong, increasing $3.3 billion, or 4% sequentially. Total funding costs declined by 15 basis points, with interest-bearing deposit costs decreasing 22 basis points. Asset quality metrics remain strong with a net charge off ratio of 38 basis points. NDFI loans grew $2.4 billion, with a third of the growth from reclassification, and additional growth from real estate debt funds, insurance and finance companies, and specialty finance business. Private credit had approximately $10.9 billion of outstanding as of March 31. Average deposits decreased 2% sequentially. Non-interest income increased 8% year over year. Non-interest expenses of $1.2 billion improved 6% sequentially excluding prior quarter's FDIC special assessment and increased 4% year over year. Credit quality remains solid with net charge-offs at 38 basis points, non-performing assets at 63 basis points, and criticized loans down.

• Increased full-year net interest income and loan guidance. Now expects full year net interest income growth of 9 to 10% compared to prior guide of 8 to 10%. Expects net interest margin of approximately 3.05% by year end. Average loans expected to increase 2% to 4% vs previous 1% to 2%, and average commercial loans to grow 6% to 8% this year. Remains committed to other financial commitments. Expect to repurchase at least $1.3 billion of shares in 2026, up from previous $1.2 billion.

• Macro-economic environment dynamics could impact. Need to remain vigilant. Added qualitative loan loss reserves for wider macroeconomic outcomes. Potential impact of private credit redemptions. Geopolitical and other macro risks could affect investment banking fees.

Q: Given strength in lending and fees, talk about client sentiment and NDFI/sponsor activity.

A: Consumer in good shape with tax refunds, spending, wealth effect. Commercial has some puts and takes with deals pulled forward and M&A due diligence. NDFI spreads firming with private credit redemptions.

Q: On deposits, trend and NIB mix.

A: Seasonal decline in brokered CDs, expected to trough mid-May and grow. NIB stable with hybrids. Confident in liquidity and access to deposits.

Q: Competitive lending, loan spreads.

A: Excess capacity, may be at inflection point. Maintain credit standards, use other services to compete.

Q: Capital allocation priorities and buyback pace.

A: Priorities are support clients, invest in business, pay dividend, repurchase shares. Impacted by severe macro downturn.

Q: Loan growth drivers and upside.

A: Utilization spiked, broad-based growth, backlog increase, opportunities in utilities, healthcare, commercial real estate.

Q: Investment banking guide, M&A activity.

A: Mid-single-digit growth, M&A backlogs high but activity subdued, expecting matriculation to middle market.

Q: Capital management runway and deployment.

A: Comfortable with current capital levels, Basel III proposal provides more room. Thoughtful capital management.

Q: Wealth, payments, corporate services projections.

A: Wealth fees mid to high single digits, payments strong with fee equivalent revenue growth, corporate services affected by oil volatility.

Q: AI in wealth and payments, credit quality trends.

A: AI opportunity in wealth, payments has operational and reputational risks. Credit quality trends with no systemic issues, watching agriculture, transportation.

Q: Margin impact of higher for longer rate environment, private credit stack ranking.

A: Margin guidance incorporates no cut scenario, private credit not a top worry, watching oil and gas, transportation, consumer discretionary