KeyCorp’s Solid Financial Performance in Q1 2025

KeyCorp, a major U.S. financial services company, has reported strong financial results for the first quarter of 2025. The company’s net income from continuing operations attributable to common shareholders was $370 million, or $0.33 per diluted share. This represents a solid performance that builds on the company’s long-term strategic priorities.

Relationship-Focused Business Model Pays Off KeyCorp’s relationship-based business model and commitment to serving as the primary bank for its clients continues to serve the company well. This is evidenced by a 4% year-over-year increase in client deposits and 2% net new relationship household growth. The company’s Assets Under Management also grew to $61.1 billion, as new client enrollments added to the platform.

Maintaining Risk Discipline KeyCorp’s focus on maintaining risk discipline has positioned the company to perform well through various economic cycles. Net charge-offs remain at the low-end of the company’s long-term target range, and nonperforming loans are down 9% quarter-over-quarter. This disciplined approach helps the company navigate uncertain times.

Strong Performance in Capital Markets Activities Investment banking and debt placement fees had a record first quarter, driven by strong syndication and debt capital markets activity. This demonstrates the company’s ability to capitalize on opportunities in the capital markets to generate additional revenue streams.

Capital Position Remains Robust KeyCorp ended the first quarter with a Common Equity Tier 1 ratio of 11.8%, up approximately 150 basis points year-over-year. This strong capital position allows the company to continue supporting existing and prospective clients, as well as provide flexibility for future strategic initiatives.

Outlook for 2025 Looking ahead, KeyCorp provided guidance for the full year 2025 compared to 2024. The company expects average loans to decline by 2-5%, while ending loans are expected to be flat. Net interest income is projected to increase by around 20%, and adjusted noninterest income is expected to grow by 5% or more. Adjusted noninterest expense is anticipated to rise by 3-5%, and the net charge-off ratio is expected to be in the 40-45 basis point range. The effective tax rate is estimated to be 21-22%, with a taxable-equivalent effective rate of 23-24%.

Segment Performance KeyCorp’s two main business segments, Consumer Bank and Commercial Bank, both contributed to the strong quarterly results.

The Consumer Bank reported net income of $118 million, up from $41 million in the year-ago quarter. Taxable-equivalent net interest income increased by 21.8%, driven by higher deposit balances and lower funding costs. Provision for credit losses increased, reflecting changes in the economic outlook and higher net charge-offs.

The Commercial Bank reported net income of $321 million, compared to $205 million in the first quarter of 2024. Taxable-equivalent net interest income grew by $137 million, benefiting from the repositioning of the investment portfolio and an improved funding mix. Provision for credit losses decreased, as asset quality migration slowed, though the economic uncertainty had a partial offsetting impact.

Loan Portfolio and Asset Quality KeyCorp’s total loans outstanding from continuing operations were $104.8 billion at the end of the first quarter, up slightly from $104.3 billion at the end of 2024. The commercial loan portfolio increased by 1.7%, primarily driven by growth in commercial and industrial loans. The consumer loan portfolio declined by 2.1%, reflecting the intentional run-off of lower-yielding loans.

Asset quality metrics remained strong, with net charge-offs at the low-end of the company’s long-term target range and nonperforming loans down 9% quarter-over-quarter. This demonstrates KeyCorp’s disciplined approach to credit risk management.

Funding and Liquidity KeyCorp’s highly diversified deposit base, which totaled $150.7 billion at the end of the first quarter, is the primary source of funding for the company. Uninsured deposits, which are not covered by federal deposit insurance, represented 43% of total deposits.

The company’s liquidity position remains robust, with a liquid asset portfolio that exceeds the amount estimated to be necessary to manage through an adverse liquidity event. KeyCorp maintains a strong contingent liquidity position, with access to various funding sources, including unpledged securities, Federal Reserve balances, and unused borrowing capacity.

Capital Management KeyCorp’s capital position remains strong, with all regulatory capital ratios well above the required minimums. The company’s Common Equity Tier 1 ratio of 11.8% at the end of the first quarter positions it to support organic growth and pay dividends.

During the quarter, KeyCorp’s Board of Directors authorized a $1 billion share repurchase program, which the company expects to commence in the second half of 2025. The pace and magnitude of share buybacks will depend on various factors, including market conditions, the stock price, regulatory requirements, and corporate priorities.

Regulatory Environment KeyCorp and its subsidiary, KeyBank, operate in a highly regulated environment. The company is subject to regulatory capital requirements based on the Basel III international capital framework, as implemented in the United States. As of March 31, 2025, KeyCorp’s capital ratios exceeded the minimum requirements, with the Common Equity Tier 1 ratio at 11.78%.

The company is also subject to the Federal Reserve’s Prompt Corrective Action framework, which categorizes banks based on their capital levels. As of March 31, 2025, KeyBank satisfied the requirements to be considered “well capitalized” under this framework.

Additionally, KeyCorp is subject to capital planning and stress testing requirements. The company’s capital plan and stress test results are used by the Federal Reserve to determine its stress capital buffer requirement, which was 3.1% as of October 1, 2024.

The regulatory environment also includes developments related to deposit insurance assessments, the Community Reinvestment Act, and the Consumer Financial Protection Bureau. KeyCorp is monitoring these regulatory changes and their potential impact on the company.

Conclusion KeyCorp’s strong financial performance in the first quarter of 2025 demonstrates the company’s ability to execute on its long-term strategic priorities. The relationship-focused business model, disciplined risk management, and diversified revenue streams have positioned KeyCorp to navigate the current economic environment effectively.

Looking ahead, the company’s guidance for 2025 suggests continued growth in key areas, such as net interest income and noninterest income, while maintaining a focus on cost management and credit quality. With a robust capital position and ample liquidity, KeyCorp is well-equipped to support its clients, pursue strategic initiatives, and deliver value to its shareholders.