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Shares of KeyCorp ( KEY) of Cleveland closed at $8.16 Wednesday, returning 6% year-to-date. Based on a three-cent quarterly payout, the shares have a dividend yield of 1.47%.

O'Connor's price target for KeyCorp is $9.00, and he estimated the company will post 2012 EPS of 75 cents in 2012, followed by 80 cents in 2013.

The analyst says that "KEY seems to be well best positioned to buy back stock (when it gets regulatory approval) given Tier 1 common of 11.3% (and growing)," and "little mortgage/litigation risk." O'Connor believes that the company's management would rather buy back shares than seek a merger deal, and that KeyCorp "(in 2012) and still generate enough capital to support balance sheet growth and maintain ~11% Tier 1 common."

KeyCorp' shares traded for 0.9 times tangible book value at Tuesday's market close, according to HighlineFI.

According to O'Connor, risks for KeyCorp include a slowdown in reserve releases, as well as some "acquisition risk" over the next two years. The company just agreed to purchase 37 Upstate New York branches from First Niagara Financial Group ( FNFG), to follow that company's pending purchase of roughly 200 branches from HSBC ( HBC).

Interested in more on KeyCorp? See TheStreet Ratings' report card for this stock.

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