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KeyCorp's Shares Rise as Bank Cuts Costs

  • First-quarter net income from continuing operations of $196 million, or 21 cents a share
  • Earnings beat the consensus EPS estimate of 20 cents
  • $37 million, or 3 cents a share, in costs for efficiency initiative
  • Excluding the efficiency initiative costs, second-quarter noninterest expense down $45 million from Q2 2012

Updated from 9:19 a.m. ET with midday market action, information on the effect of the Federal Reserve's final rules on KeyCorp's Tier 1 common equity ratio and comment from Jefferies analyst Ken Usdin.

NEW YORK (TheStreet) -- KeyCorp (KEY) on Thursday reported continued progress in its efforts to trim expenses in a difficult operating environment.

The Cleveland-based regional lender reported second-quarter net income from continuing operations attributable to common shareholders of $193 million, 21 cents a share, compared to $196 million, or 21 cents a share in the first quarter, and $217 million, or 23 cents a share, during the second quarter of 2012.

Second-quarter earnings came in ahead of the 20-cent EPS estimate among analysts polled by Thomson Reuters.

The second-quarter results included $37 million, or 3 cents a share, in charges related to the company's expense reduction initiative. KeyCorp said it had achieved annualized cost savings of roughly $171 million through its "Fit for Growth" efficiency program.

KeyCorp's second-quarter noninterest expense totaled $711 million, increasing from $681 million the previous quarter and $693 million a year earlier. However, second-quarter noninterest expense totaled $674 million, excluding the $37 million in extraordinary costs.

Investors were pleased with the bank's continued efforts to trim expenses, sending KeyCorp's shares up 2.5% in midday trading, to $11.95.

Second-quarter net interest income was $586 million on a tax-adjusted basis, declining slightly from $544 million in the first quarter, but increasing from $544 million during the second quarter of 2012, "which included $30 million associated with Key's third quarter 2012 branch and credit card portfolio acquisitions," according to the company.

Average loans increased slightly during the second quarter to $52.7 billion, but were up 7% year-over-year. KeyCorp CEO Beth Mooney said the company was making significant investments to ramp up loan growth. "We are in the process of acquiring a commercial mortgage servicing portfolio and special servicing business that will significantly enhance our scale and presence in the market. We also launched new mobile capabilities that add accessibility and functionality for both our consumer and commercial clients."

The second-quarter net interest margin was 3.13%, narrowing from 3.24% the previous quarter, but widening from 3.06% a year earlier.

Second-quarter noninterest income totaled $429 million, increasing from $425 million the previous quarter, but declining from $457 million a year earlier, "primarily due to a gain on the early terminations of leveraged leases one year ago."

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