8-K: KeyCorp Reports Fourth Quarter 2024 Net Loss Amid Strategic Repositioning, Adjusted Income Shows Strength

KeyCorp announced a net loss of $(279) million for the fourth quarter of 2024, impacted by a loss on securities sales, but adjusted net income reached $378 million, with revenue up 16% year-over-year.

Summary

• KeyCorp reported a net loss of $(279) million, or $(0.28) per diluted share, for the fourth quarter of 2024.
• This loss includes $(657) million in after-tax charges from the sale of securities.
• Adjusted net income for the quarter was $378 million, or $0.38 per diluted share.
• Revenue reached $865 million, with adjusted revenue up 16% year-over-year.
• Net interest income increased by 10% compared to the previous quarter.
• Fees from investment banking, payments, and wealth management grew by 27% year-over-year.
• The Common Equity Tier 1 ratio improved to 12%, a 120 basis point increase quarter-over-quarter.
• Assets under management reached a record $61 billion in 2024.
• Net charge-offs decreased by 26% and criticized loans were down 7% on a linked quarter basis.

Sentiment

Score: 6

Explanation: The sentiment is mixed. While the company reported a net loss, adjusted figures show positive growth and strong performance in key areas. The strategic repositioning and its impact on earnings are a concern, but the company's future outlook is positive.

Positives

• Adjusted revenue increased by 16% year-over-year, indicating strong underlying business performance.
• Net interest income saw a significant 10% increase quarter-over-quarter.
• Strategic fee-based businesses showed strong growth, with a 27% year-over-year increase in fees.
• The Common Equity Tier 1 ratio improved significantly, reaching 12%.
• Client deposits increased by 4% year-over-year, demonstrating customer confidence.
• Assets under management reached a record level of $61 billion in 2024.
• Net charge-offs decreased by 26% and criticized loans were down 7% on a linked quarter basis.

Negatives

• KeyCorp reported a net loss of $(279) million for the fourth quarter of 2024.
• The net loss was significantly impacted by a $(657) million after-tax loss from the sale of securities.
• Noninterest income decreased by $806 million compared to the fourth quarter of 2023.
• Average loans decreased by $9.2 billion compared to the fourth quarter of 2023.
• Noninterest expense increased by $135 million compared to the third quarter of 2024.

Risks

• The company experienced a significant loss on the sale of securities, impacting overall profitability.
• Lower loan balances and the impact of lower interest rates on repricing earning assets could affect future revenue.
• Increased personnel expenses due to incentive and stock-based compensation may impact profitability.
• The company is exposed to potential risks from changes in the interest rate environment.
• The company is exposed to potential risks from deterioration of commercial real estate market fundamentals.

Future Outlook

KeyCorp is well-positioned for sound, profitable growth in 2025 and beyond, with strong performance momentum and a leading capital position. The company anticipates continued growth in net interest income and strategic fee-based businesses.

Management Comments

• Our fourth quarter results marked a strong finish to the year.
• EPS and revenue were impacted by the previously communicated completion of our securities portfolio repositioning.
• On an adjusted basis, revenues were up 16% year-over-year and 11% sequentially.
• Net interest income was up 10% quarter-over-quarter and fees (as adjusted), were up meaningfully versus comparable periods.
• We achieved year-over-year positive operating leverage for a second consecutive quarter.
• Our strong financial results are a function of continued client momentum.
• With strong performance momentum and a leading capital position, we are well positioned for sound, profitable growth in 2025 and beyond.

Industry Context

The results reflect a challenging environment for banks, with interest rate fluctuations and strategic repositioning impacting earnings. However, KeyCorp's growth in fee-based businesses and capital position indicate a focus on long-term sustainability and profitability.

Comparison to Industry Standards

• KeyCorp's Common Equity Tier 1 ratio of 12% is above the regulatory minimums, indicating a strong capital position compared to many regional banks.
• The 16% year-over-year adjusted revenue growth is a positive sign, suggesting KeyCorp is outperforming some peers in revenue generation.
• The net loss, however, highlights the impact of strategic repositioning, which is a common theme among banks adjusting to the current economic environment.
• Compared to larger national banks, KeyCorp's focus on regional markets and middle-market companies provides a different risk profile and growth trajectory.
• The growth in assets under management to $61 billion is a positive indicator of KeyCorp's wealth management business, which is a key area of focus for many financial institutions.

Stakeholder Impact

• Shareholders experienced a net loss for the quarter, but adjusted figures and future outlook are positive.
• Employees may see continued investment in technology and potential for incentive compensation.
• Customers will benefit from the company's focus on relationship households and deposit growth.
• Creditors will be reassured by the company's strong capital position.

Next Steps

• KeyCorp will continue to focus on driving growth in its strategic, fee-based businesses.
• The company will continue to optimize its balance sheet and funding mix.
• KeyCorp will celebrate its 200th anniversary in 2025.

Key Dates

Keywords

KeyCorp, Financial Results, Net Loss, Adjusted Income, Net Interest Income, Investment Banking, Wealth Management, Commercial Payments, Common Equity Tier 1, Asset Management, Securities Repositioning