On July 18, 2024, KeyCorp (KEY, Financial) released its 8-K filing for the second quarter of 2024, reporting net income of $237 million, or $0.25 per diluted common share. This performance aligns with the analyst estimates of $0.25 earnings per share and $1,525.23 million in revenue.
Company Overview
With assets of over $180 billion, Ohio-based KeyCorp's bank footprint spans 16 states, but it is predominantly concentrated in its two largest markets: Ohio and New York. KeyCorp is primarily focused on serving middle-market commercial clients through a hybrid community/corporate bank model.
Performance and Challenges
KeyCorp's net income from continuing operations attributable to common shareholders was $237 million, or $0.25 per diluted common share, for the second quarter of 2024. This compares to $183 million, or $0.20 per diluted common share, in the first quarter of 2024, and $250 million, or $0.27 per diluted common share, in the second quarter of 2023. The performance is significant as it reflects the company's ability to maintain profitability amidst a challenging economic environment.
However, the company faces challenges such as lower loan balances and higher deposit costs due to the current high-interest-rate environment. These factors have impacted net interest income and net interest margin, which decreased year-over-year.
Financial Achievements
KeyCorp's disciplined expense management resulted in a 6% decline in expenses from the prior quarter, and expenses remained stable compared to the year-ago period. The Common Equity Tier 1 ratio rose by 20 basis points to 10.5%, indicating a strong capital position.
"This was a solid quarter for Key as we continued to execute on our clearly defined path to enhanced profitability," said Chairman and CEO Chris Gorman.
Income Statement Highlights
| Metric | 2Q24 | 1Q24 | 2Q23 | Change (2Q24 vs. 1Q24) | Change (2Q24 vs. 2Q23) |
|---|---|---|---|---|---|
| Net Interest Income (TE) | $899 million | $886 million | $986 million | 1.5% | -8.8% |
| Noninterest Income | $627 million | $647 million | $609 million | -3.1% | 3.0% |
| Total Revenue (TE) | $1,526 million | $1,533 million | $1,595 million | -0.5% | -4.3% |
Balance Sheet Highlights
Average loans were $109.0 billion for the second quarter of 2024, a decrease of $11.7 billion compared to the second quarter of 2023. This decline is reflective of KeyCorp's balance sheet optimization efforts. Average deposits totaled $144.2 billion, an increase of $1.3 billion compared to the year-ago quarter, driven by growth in retail deposit balances.
Cash Flow and Credit Quality
KeyCorp's provision for credit losses was $100 million, down from $167 million in the second quarter of 2023. Net loan charge-offs for the second quarter of 2024 totaled $91 million, or 0.34% of average total loans. The allowance for credit losses was $1.8 billion, or 1.71% of total period-end loans.
Capital Position
KeyCorp's regulatory capital position remained strong, with an estimated Common Equity Tier 1 ratio of 10.5% and a Tier 1 risk-based capital ratio of 12.2%. The tangible common equity ratio was 5.2% at June 30, 2024.
Conclusion
KeyCorp's second-quarter performance demonstrates its resilience and strategic focus amidst a challenging economic landscape. The company's disciplined expense management, strong capital position, and steady growth in deposits are positive indicators for future profitability. However, challenges such as lower loan balances and higher deposit costs remain areas to watch.
Explore the complete 8-K earnings release (here) from KeyCorp for further details.
