Moving away from higher price-to-earnings multiples, Mutascio considered whether a significant earnings increase was built into KeyCorp's valuation. Like many regional banks, KeyCorp is focused on cutting expenses in order to improve profitability, in a difficult environment for interest spreads and for loan growth.

KeyCorp reported a first-quarter efficiency ratio of 66.0%, improving from 67.7% a year earlier. The efficiency ratio is, essentially, the number of pennies of overhead expenses incurred for each dollar of revenue.

According to Mutascio, "If we reverse engineer the $12 valuation level by assuming a P/E multiple of 10.1x (our group's current 2014 P/E median of 10.1x), it implies 2014 EPS of $1.19."

That would make for earnings 31% higher than Mutascio's 2014 estimate, and 24% higher than the consensus estimate. "We would have to shock our EPS model by reducing the company's operating efficiency ratio to 58.3% for the full year 2014 in order to generate EPS of $1.19 -- all else being equal," Mutascio said.

That efficiency ratio would be a very tall order for KeyCorp. Then again, KeyCorp CFO Dan Poston said during the bank's first-quarter earnings call on April 13 that "we expect our efficiency ratio to approach 60% at the end of the year."

KEY Chart KEY data by YCharts

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

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

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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.

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