This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

KeyCorp Grows Earnings 20.5% Year-Over-Year (Update 1)

Updated from 8:56 a.m. ET with market reaction and comment from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- KeyCorp (KEY - Get Report) of Cleveland on Thursday reported fourth-quarter operating results slightly ahead of expectations, but the real story is the company's significant increase in fee income and measures to trim expenses, which have more than offset net interest margin pressure.

The company reported fourth-quarter net income from continuing operations available to common shareholders of $229 million, or 26 cents a share, coming in a penny ahead of the consensus estimate among analysts polled by Thomson Reuters.  Those results compare to net income from continuing operations available to common shareholders of $229 million, or 25 cents a share, during the third quarter, and $190 million, or 20 cents a share, during the fourth quarter of 2012.  The higher fourth-quarter EPS reflected a lower share count.  KeyCorp repurchased $474 million worth of common shares during 2013, including $99 billion in buybacks during the fourth quarter.  This reduced the share count by 0.8% sequentially and 3.8% from a year earlier.

KeyCorp reported fourth-quarter net interest income of $589 million, increasing slightly from $584 million the previous quarter, but down from $607 million a year earlier, as the net interest margin narrowed.  The fourth-quarter margin was a tax-adjusted 3.01%, down from 3.11% in the third quarter and 3.37% in the fourth quarter of 2012.

Average total loans grew 0.6% during the fourth quarter and 3.4% from a year earlier to $53.608 billion.  Following the trend for many large regional banks, the strongest growth category was commercial and industrial loans, which were up 1.5% sequentially and 7.9% year-over-year to an average of $24.218 billion during the fourth quarter. 

The bank's noninterest income totaled $453 million during the fourth quarter, down slightly from $459 million the previous quarter, but up from $439 million a year earlier.  The sequential decline reflected a "decline of $19 million in gains related to leveraged lease terminations," according to the company.  The fee income category showing the largest increase was mortgage servicing fees, which rose to $22 million during the fourth quarter from $15 million in the third quarter and $7 million during the fourth quarter of 2012. 

"We also had a record year for investment banking and debt placement fees, with five consecutive years of growth," said KeyCorp CEO Beth Mooney in the company's earnings press release.

KeyCorp's noninterest expense totaled $712 million during the fourth quarter, declining from $716 million the previous quarter and $734 million a year earlier.

"We achieved the goal we set in June 2012, by implementing annualized cost savings of $241 million. With increased cost discipline embedded in our culture, we are poised to drive further improvements in efficiency and productivity," Mooney said.

KeyCorp's efficiency ratio -- overhead expenses as a percentage of revenue -- improved to 67.4% during the fourth quarter from 67.5% the previous quarter and 69.0% a year earlier.

The bank's shares were down 3.5% in premarket trading to $14.09, indicating disappointment with the bank's sequential results.

Jefferies analyst Ken Usdin in a note to clients Thursday wrote "For 4Q, loan, deposit, net interest income, and credit trends were positive, but expenses were higher-than-guided."

"Overall, Usdin added, "pre-provision [for loan losses] income was slightly softer-than-expected in 4Q due to the expense step-up, but the '14 outlook ([net interest income] stable, fees up low single-digits, costs down low single-digits) looks supportive of numbers."

Udsin rates KeyCorp a "hold," with a $14 price target.

The following table shows the performance of KeyCorp's stock against the KBW Bank Index (I:BKX) and the S&P 500 since the end of 2011:

KEY Chart data by YCharts

RELATED STORIES:

 
-- Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
KEY $14.02 0.65%
AAPL $129.09 0.49%
FB $79.75 0.99%
GOOG $571.34 2.32%
TSLA $197.32 -2.96%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs