By Ben Fox Rubin
KeyCorp's (KEY) second-quarter profit fell 14% as the lender saw
higher noninterest expense and loan-loss provisions mask a small
improvement in revenue.
Like many regional banks, KeyCorp has struggled to increase
revenue in recent years. The slow-growing economy hasn't enticed
enough consumers and businesses to take out new loans, and low
interest rates are putting pressure on profit margins. KeyCorp, a
Cleveland-based lender, has said it intends to continue to invest
in future growth and has resorted to cost cuts and deals to improve
its results.
As part of those growth efforts, the company in May agreed to
acquire the rights to service a $110.5 billion commercial loan
portfolio from Bank of America Corp. (BAC), more than doubling its
servicing business. Last year, the bank bought back a credit-card
business it had outsourced and purchased 37 HSBC Holdings PLC (HBC,
HSBA.LN, 0005.HK) branches in upstate New York.
KeyCorp, which has been working to wind down commercial
real-estate loans that turned sour in the financial crisis,
reported a loan-loss provision of $28 million, versus a provision
of $21 million a year earlier and $55 million in the prior
quarter.
Net charge-offs, or loans lenders don't think are collectible,
were 0.34% of average loans, compared with 0.63% a year earlier and
0.38% in the prior quarter.
KeyCorp reported a profit of $204 million, versus $236 million a
year earlier. Per-share earnings, reflecting the payment of
preferred dividends, were 22 cents, down from 24 cents.
Total revenue was up 1.4% at $1.02 billion.
Analysts polled by Thomson Reuters expected a per-share profit
of 20 cents on $1.02 billion in revenue.
Average total loans rose 6.6% from a year earlier to $52.7
billion, benefiting from growth in commercial, financial and
agricultural loans.
The net interest margin was 3.07% versus 2.99% a year ago and
3.16% in the prior quarter.
Noninterest expense rose 2.6% to $711 million.
Shares closed Wednesday at $11.66 and were inactive in recent
premarket trading. The stock has risen 38% so far this year.
Write to Ben Fox Rubin at ben.rubin@dowjones.com
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