Yahoo Finance KeyCorp (KEY) Q1 2024 Earnings Call Transcript Highlights: Navigating Through Economic ...
Earnings: $183 million
Earnings Per Share (EPS): $0.20, including a $0.02 impact from FDIC special assessment
Revenue: Flat sequentially, strong investment banking performance
Net Interest Income: $886 million, down 4.5% sequentially
Noninterest Income: $647 million, up 6% year-over-year
Expenses: $1.1 billion, well controlled
Common Equity Tier 1 Ratio: 10.3%, up 120 basis points year-over-year
Assets Under Management: Surpassed $57 billion
Provision for Credit Losses: $101 million, roughly flat to the previous quarter
Net Loan Charge-offs: $81 million
Credit Reserve Build: $20 million
Customer Deposits: Up 2% year-over-year
Release Date: April 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Clark, can you start where you just finished and just looking at those two scenarios on Slide 15? A: Clark Harold Ibrahim Khayat, CFO of KeyCorp, explained that the swap and UST roll-off are predictable and the range of outcomes on loan growth is not a huge driver in the net interest income number for the year. He confirmed that the $886 million net interest income for Q1 was within the guide and reaffirmed the ability to meet the fourth quarter exit rate.
Q: Chris, can you discuss the new agreement with Blackstone and how that plays into the combination of loan growth, investment banking fees, and the originate-to-distribute model? A: Christopher Marrott Gorman, CEO of KeyCorp, highlighted that the partnership with Blackstone allows KeyCorp to manage credit concentration risk and accelerate growth. It is part of KeyCorp's strategy to focus on capital-light businesses such as payments, investment banking, and wealth management.
Q: On the topic of loan growth, where do you see better opportunities emerging through 2024? A: CEO Christopher Gorman mentioned areas like renewables, affordable housing, and strategic investments as key opportunities for loan growth, driven by capital-intensive industries and potential investments in property, plant, and equipment.
Q: Can you address the decision to build the reserve a bit more in detail? A: CEO Christopher Gorman clarified that the decision was proactive, driven by the anticipation of a higher-for-longer rate environment and a potential recession, focusing on the most vulnerable parts of the portfolio such as leveraged loans and real estate.
Q: How are you thinking about expenses for the year, especially with a normalizing investment banking environment? A: CFO Clark Khayat expressed confidence in maintaining the expense guide, incorporating the progression towards normalization in investment banking. He noted that unexpected charges like the additional FDIC assessment have been absorbed, and a strong investment banking year can be covered within the current expense outlook.
Q: Regarding the Blackstone partnership, how does it impact the underwriting and terms of loans? A: CFO Clark Khayat explained that KeyCorp manages the underwriting and servicing of loans in the partnership, with Blackstone having the option to participate. The partnership is primarily aimed at managing credit concentrations and supporting more clients without needing to grow the balance sheet significantly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
