Barclays Global Financial Services Virtual Conference 2020
Chris Gorman | Don Kimble |
Chairman and | Vice Chairman and |
Chief Executive Officer | Chief Financial Officer |
November 6, 2019
FORWARD-LOOKING STATEMENTS
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp's expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as "believe," "seek," "expect," "a nticipate," "intend," "target," "estimate," "continue," "positions," "plan," "predict," "project," "forecast," "guidance," "goal," "objective," "prospects ," "possible," "potential," "strategy," "opportunities, " or "trends," by future conditional verbs such as "assume," "will," "would," "should," "could" or "may", or b y variations of such words or by similar expressions. These forward-looking statements are based on assumptions that involve risks and uncertainties, which are subject to change based on various important factors (some of which are beyond KeyCorp's control.) Actual results may differ materially from current projections.
Actual outcomes may differ materially from those expressed or implied as a result of the factors described under "Forward-looking Statements" and "Risk Factors" in KeyCorp's Annual Report on Form 10-K for the year ended December 31, 2019 and in other filings of KeyCorp with the Securities and Exchange Commission (the "SEC"). In addition to the aforementioned factors, the COVID-19 global pandemic is adversely affecting us, our clients, and our third-party service providers, among others, and its impact may adversely affect our business and results of operations over a period of time. Risks related to COVID-19 are more fully described under "Risk Factors" in KeyCorp's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. Such forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward- looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding KeyCorp, please refer to our SEC filings available at www.key.com/ir.
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Key: Strong, Resilient, and Well-Positioned
Pandemic Response
- Business resiliency and teammate support: operational effectiveness across the franchise with highly engaged workforce
- >10,000 team members working from home
- Supporting teammates through flexible work arrangements, pay incentives, temporary assistance loans, childcare credits, etc.
- Proactive client outreach and support: playing a critical role in providing capital and assistance to clients
- Processed >40,000 PPP loans, providing over
$8 B of funding
- Provided forbearance options and assistance for consumer and commercial clients: <5% of total loan balances in forbearance status as of 6/30
- Continued focus on credit: committed to moderate risk profile and strong underwriting standards
- Active portfolio surveillance; COVID-impacted industries performing in-line with expectations
Priorities to Drive Future Growth
- Distinctive strategy and business model: balanced, diverse and relationship-focused
- Significantly improved risk profile: committed to proactive credit risk management and strong underwriting standards
- Accelerate investments in digital across all client segments: expanded capabilities through Laurel Road
- Invest in talent and targeted capabilities: including capital markets, payments, residential mortgage, digital and analytics
- Focus on expenses: aligning expenses with revenue opportunities to drive positive operating leverage
- Strong capital management: committed to capital priorities, including quarterly dividend
Committed to achieving long-term targets:
Positive operating leverage | Moderate risk profile: | ROTCE: | Cash efficiency ratio: | |||
NCOs to avg. loans targeted range: | ||||||
16% - 19% | 54% - 56% | |||||
40-60 bps | ||||||
PPP= Paycheck Protection Program | 3 |
Loan Portfolio: Positioned to Weather Potential Stress
Loan Composition
(as of 6/30/20)
26%
Consumer
Commercial
- Target specific client segments focused on seven industry verticals
- Experienced bankers with deep industry expertise
- Focused on high quality clients (C&I: ~50% IG)
- Continuous ongoing portfolio reviews with business, as well as proactive case-by-case reviews with clients potentially impacted by pandemic
~50% C&I
investment
grade
Consumer
74%
Commercial
- Prime & super prime client base focused on relationships
- Local presence within retail footprint
- Heightened LTV / DTI / FICO requirements across all consumer products related to COVID-19
- Record consumer originations bring more balance to portfolio driven by Laurel Road and consumer mortgage
Average FICO scores at origination:
774 765 791
Total Consumer | Residential | Laurel Road |
Mortgage |
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Pandemic Credit Metrics: Outperforming Peers
2Q20 Deferrals (% of Total Loans)2Q20 Criticized Loans (% of Total Loans)(a)11.2% | 7.7% | |
Peer Median: 7.4% | Peer Median: 4.6% | |
3.3%
4.3%
KEY Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8KEY Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8
KEY COVID-19 Hardship Support
Commercial | Consumer | |||||
Deferral or forbearance options as of 6/30: 2% of | Deferral or forbearance options as of 6/30: 2% of | |||||
clients / 4% of balances | clients / 5.5% of balances | |||||
Second round deferral requests (August 2020): ~15% | Second round deferral requests (August 2020): | |||||
COVID-impacted industries performing in-line with | − Real estate: ~30% | |||||
expectations | − Non-real estate consumer: ~12% | |||||
Dynamic assessment of ratings migration | Focusing on loss mitigation and collection | |||||
strategies |
Note: Peer group includes peer banks that reported both deferral and criticized loan statistics in 2Q20: CMA, FITB, HBAN, PNC, RF, TFC, USB, and ZION | |
(a) Criticized figures derived from peer 10-Q filings; KEY includes commercial and consumer criticized; peers are commercial criticized only unless only total | 5 |
(inclusive of consumer) reported | |
Accelerating Digital Usage
Investing in digital and leveraging technology to create a seamless experience for our clients…
Digitizing client | Building differentiated | Enhancing digital | Leveraging analytics |
portals | capabilities | offerings | to provide insights |
… resulting in increased digital usage across | … and improved client | |||||
consumer client base… | satisfaction. | |||||
Laurel Road | Digital Deposits(a) | Net Promoter Score(b) | ||||
900 | $ in millions | 530 K | ||||
800 | ||||||
700 | $801 | |||||
600 | $706 | |||||
500 | $611 | 332 K | ||||
$552 | 11K | 262 K | 19% | |||
400 | $416 | |||||
300 | ||||||
200 | 10% | |||||
8% |
1007K
0
2Q19 3Q19 4Q19 1Q20 2Q20 | 2Q18 | 2Q19 | 2Q20 | Digital Total | Mobile | |||||||
Originations | Doctor/ Dentist Clients | Digital | Digital % of Total | 2Q18 | 2Q19 | 2Q20 | ||||||
(a) Total Mobile Remote Deposits Captured relative to the percentage of total (Branch + ATMs) | 6 |
(b) Promoters minus Detractors calculation for clients when asked "How likely are you to recommend Key to a friend or family member? (0-10 scale)" |
Disciplined Capital Management
Highlights
Disciplined in how we manage, invest, deploy, and |
return our capital |
Positioned to weather adverse operating environments: |
− Government-mandated and internal stress tests |
demonstrate Key would remain well-capitalized |
through periods of significant stress |
Capital Priorities
Supporting
Share
OrganicDividends
− | Announced preliminary stress capital buffer of 2.5% |
(minimum required) | |
− | 3Q20 quarterly common share dividend of $.185 |
(consistent with 2Q20) |
Growth
Repurchases
Common Equity Tier 1(a) | Dividend Growth | ||||
11.0% | |||||
Targeted CET1 range: 9-9.5% | Dividend yield: ~6% | ||||
10.0% | $0.74 | ||||
9.6%
9.0%
9.1%
8.0%
7.0% | $0.215 | |||||||||||||
6.0% | ||||||||||||||
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||
Annualized
Note: Dividend yield as of 8/31/20; assumes 4Q20 dividend of $.185 per common share (subject to Board approval) | 7 |
Focus Areas: Positioned to Outperform
I
Maintain moderate risk profile and proactively manage credit quality
II
Grow organically with a focus on targeted businesses and client segments
III
Manage expenses while continuing to invest for growth
IV
Continue disciplined capital management
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November 6, 2019
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KeyCorp published this content on 13 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 September 2020 15:54:00 UTC