KeyCorp's Q1 Earnings Beat Estimates, NII & Fee Income Rise Y/Y

Core Viewpoint - KeyCorp reported strong first-quarter 2025 adjusted earnings per share of 33 cents, exceeding estimates and reflecting a 50% increase year-over-year, driven by higher non-interest income, net interest income, and lower expenses, despite a decline in loan and deposit balances [1][2]. Financial Performance - Net income from continuing operations attributable to common shareholders was $370 million, significantly up year-over-year, excluding a$22 million after-tax loss on the sale of securities [2]. - Total revenues rose 15.7% year-over-year to $1.77 billion, surpassing the Zacks Consensus Estimate of$1.76 billion [3]. - Net interest income (NII) increased 24.7% to $1.11 billion year-over-year, with net interest margin (NIM) rising 56 basis points to 2.58$668 million, up 3.2% year-over-year, driven by increases in most fee income components [5]. - Non-interest expenses declined 1% to $1.13 billion, attributed to reductions in operating lease expenses and professional fees [6]. Loans and Deposits - Average total deposits were$148.54 billion, slightly down from the previous quarter, primarily due to seasonal decreases in commercial deposit balances [7]. - Average total loans were $104.35 billion, also down from the past quarter, mainly due to decreases in commercial mortgage real estate loans and consumer loans [7]. Credit Quality - Net loan charge-offs as a percentage of average total loans rose 14 basis points year-over-year to 0.43$1.43 billion, down 7.3% [8]. - Non-performing assets increased to 0.67%, up 6 basis points year-over-year, with the provision for credit losses rising 16.8% to $118 million [8]. Capital Ratios - KeyCorp's tangible common equity to tangible assets ratio improved to 7.4% as of March 31, 2025, up from 5% in the same period of 2024 [9]. - The Tier 1 risk-based capital ratio increased to 13.5%, up from 12%, and the Common Equity Tier 1 ratio rose to 11.8%, up from 10.3% [9]. Strategic Outlook - The company anticipates that decent loan balances, balance sheet repositioning efforts, strategic buyouts, and relatively higher interest rates will support revenues in the near term, although rising funding costs may exert pressure [10].