KeyCorp Reports 18% Profit Increase -- 2nd Update
October 15 2015 - 4:25PM
Dow Jones News
By Lisa Beilfuss And Rachel Louise Ensign
Regional lender KeyCorp said third-quarter profit rose on strong
performance in the bank's corporate-focused businesses.
Revenue topped Wall Street expectations and Key shares, now down
about 13% over the past three months, rose about 4.5% in afternoon
trading.
"People thought we were going to be an underperformer this
quarter," Key Chief Executive Beth Mooney said in an interview.
Instead, she said the earnings report surprised by showing that the
company can grow across the board without the help of higher
interest rates.
The Cleveland-based bank reported a profit of $219 million, or
26 cents a share, up from $186 million, or 21 cents, a year
earlier. Revenue increased 7% to $1.07 billion. Analysts projected
27 cents in per-share profit on $1.05 billion in revenue, according
to Thomson Reuters. Key said a pension settlement charge reduced
earnings per share by one cent.
The bank's performance was aided by strong revenue from its
business banking segments. Noninterest income jumped 13% to $470
million in the latest quarter, aided by Pacific Crest Securities, a
technology-focused investment bank Key acquired last year. The bank
posted double-digit growth in investment banking, debt placement
and corporate-services income from the year prior.
Commercial lending rose 15% from a year earlier, offsetting
declines in other segments and pushing average loans up 6.2%
overall. Key executives say their firm has made a significant
investment in commercial bankers.
Deposits also increased and were up about 3% from the year-ago
period.
Like many other lenders hamstrung by low interest rates that
have made lending less profitable, Key has moved to cut costs and
has closed some branches. Despite those initiatives, the lender saw
noninterest expenses rise 2.5% from the year-ago quarter as it
spent more on banker salaries and due to costs associated with the
acquisition of Pacific Crest.
Still, KeyCorp managed to push its efficiency ratio, a measure
of costs as a percentage of revenue where lower is better, down to
66.9% from 69.7% a year earlier. On the earnings call, Chief
Financial Officer Don Kimble said Key still thinks it can get its
efficiency ratio to the low-60s range, despite the uncertainty over
when interest rates will rise.
KeyCorp's net interest margin, an important gauge of lending
profitability that measures how much a bank earns from the
difference between what it pays on deposits and what it takes in on
loans and investments, declined slightly. The metric edged down to
2.87% from 2.88% in the second quarter and fell from 2.96% a year
earlier.
Ms. Mooney said in an interview that she thinks it is time for
the Fed to raise interest rates, echoing recent comments from other
bank chief executives.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Rachel
Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
October 15, 2015 16:10 ET (20:10 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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