10-Q: KeyCorp Reports Strong Q3 2025 Earnings, Boosts Outlook

KeyCorp announced robust third-quarter 2025 results, with net income and diluted EPS rising significantly, driven by strong net interest income and fee-based business growth.

Summary

• Net income from continuing operations attributable to Key common shareholders was $454 million for Q3 2025, with diluted earnings per share of $0.41.
• Client deposits and net new relationship households increased 2% year-over-year on an annualized basis.
• Assets Under Management (AUM) reached a record high of $67.9 billion for Q3 2025, an 11% increase year-over-year.
• Net interest income (TE) for Q3 2025 was $1.19 billion, with a net interest margin of 2.75%, up $229 million and 58 basis points, respectively, from Q3 2024.
• Noninterest income for Q3 2025 was $702 million, a significant improvement from a net loss of $269 million in Q3 2024, largely due to the absence of a prior-year securities repositioning loss.
• The Common Equity Tier 1 ratio was an estimated 11.8% as of September 30, 2025, an increase of over 100 basis points year-over-year.
• Total loans outstanding from continuing operations were $105.9 billion at September 30, 2025, an increase from $104.3 billion at December 31, 2024.
• Nonperforming assets decreased by $104 million to $668 million at September 30, 2025, compared to December 31, 2024.

Sentiment

Score: 8

Explanation: The filing presents strong financial performance with significant increases in net income, net interest income, and assets under management. Capital ratios are robust and well above regulatory minimums. While there are increases in provision for credit losses and personnel expenses, these are largely offset by positive revenue trends and improved asset quality metrics. The updated business outlook is generally positive, with upward revisions or tighter ranges for key financial metrics, indicating management confidence despite economic uncertainties and regulatory changes.

Positives

• Net income from continuing operations attributable to common shareholders increased to $454 million in Q3 2025 from a loss of $447 million in Q3 2024.
• Diluted EPS from continuing operations improved to $0.41 in Q3 2025 from a loss of $0.47 in Q3 2024.
• Net interest income (TE) increased by $229 million (23.8%) year-over-year for Q3 2025, reaching $1.19 billion.
• Net interest margin expanded by 58 basis points to 2.75% in Q3 2025 compared to Q3 2024.
• Assets Under Management (AUM) grew 11% year-over-year to a record $67.9 billion, driven by net positive cash inflows and market impacts.
• Investment banking and debt placement fees increased 7.6% year-over-year for Q3 2025, and 15.0% year-to-date.
• Trust and investment services fees increased 7.1% year-over-year for Q3 2025, and 4.8% year-to-date.
• Service charges on deposit accounts increased 11.9% year-over-year for Q3 2025, and 10.7% year-to-date.
• Common Equity Tier 1 ratio improved by over 100 basis points year-over-year to an estimated 11.8% at September 30, 2025, well above the regulatory minimum of 7.70%.
• Tangible common equity to tangible assets ratio increased to 8.1% at September 30, 2025, from 7.0% at December 31, 2024.
• Nonperforming assets decreased by $104 million from December 31, 2024, to $668 million at September 30, 2025.
• The allowance for loan and lease losses (ALLL) to nonperforming loans improved to 219.5% at September 30, 2025, from 205.2% at December 31, 2024.
• Available contingent liquidity increased to $100.2 billion at September 30, 2025, from $98.5 billion at December 31, 2024.
• The parent company maintains $5.4 billion in cash and short-term investments, sufficient to meet projected obligations for the next 24 months.

Negatives

• Average loans for Q3 2025 decreased by $17 million compared to Q3 2024, primarily due to a $2.4 billion decline in consumer loans.
• Provision for credit losses increased to $107 million in Q3 2025 from $95 million in Q3 2024, reflecting a higher reserve provision due to economic uncertainty.
• Personnel expense increased by $72 million (10.7%) in Q3 2025 compared to Q3 2024, driven by higher incentive compensation and investments in people.
• Consumer loans outstanding decreased by $1.8 billion (5.5%) from December 31, 2024, due to intentional run-off of lower yielding loans.

Risks

• Extensive regulation of the U.S. financial services industry.
• Complex and evolving laws and regulations regarding privacy and cybersecurity.
• Operational or risk management failures by KeyCorp or critical third parties.
• Breaches of security or failures of technology systems due to technological or other factors, cybersecurity threats, and increased risks from remote work.
• An ineffective risk management framework.
• Negative outcomes from claims, litigation, arbitration, investigations, or governmental proceedings.
• Failure or circumvention of controls and procedures.
• Exposure to a wide range of climate-related physical risks across different geographical areas.
• Evolving capital and liquidity standards under applicable regulatory rules.
• Disruption of the U.S. and global financial system and markets, including ongoing volatility in capital and bond markets, inflation, tariffs, prolonged U.S. government shutdown, and potential global economic downturn or recession.
• Unanticipated changes in liquidity position, including access to or cost of funding and ability to secure alternative funding sources.
• Ability to receive dividends from subsidiaries, including KeyBank.
• Downgrades in credit ratings for KeyCorp or KeyBank.
• Worsening of the U.S. economy due to financial, political, or other shocks.
• Ability to anticipate interest rate changes and manage interest rate risk.
• Deterioration of economic conditions in geographic regions of operation.
• Soundness of other financial institutions, including instability in the financial industry.
• Concentrated credit exposure in commercial and industrial loans.
• Deterioration of commercial real estate market fundamentals.
• Defaults by loan clients or counterparties.
• Adverse changes in credit quality trends.
• Declining asset prices.
• Deterioration of asset quality and an increase in credit losses.
• Geopolitical destabilization.
• Labor shortages and supply chain constraints, as well as the impact of inflation.
• Ability to develop and effectively use quantitative models in business planning.
• Ability to manage reputational risk, including related to corporate responsibility and sustainability efforts.
• Ability to timely and effectively implement strategic initiatives.
• Increased competitive pressure.
• Ability to adapt products and services to industry standards and consumer preferences.
• Ability to attract and retain talented executives and employees.
• Unanticipated adverse effects of strategic partnerships or acquisitions and dispositions of assets or businesses.
• Potential impact of Scotiabank's significant equity interest in the business.
• Inaccurate assumptions or estimates underlying consolidated financial statements.
• Changes in accounting policies, standards, and interpretations.
• Impairment of goodwill.

Future Outlook

KeyCorp updated its full-year 2025 guidance, expecting net interest income (TE) to be up 22% (previously 20%-22%), net interest margin to be 2.75%-2.80% in 4Q25 (previously ~2.75%), and adjusted noninterest income to be up 5-6% (previously 5%+). Adjusted noninterest expense is expected to be up ~4% (previously 3%-5%), and net charge-offs to average loans are projected at 40 to 45 basis points. The effective tax rate is anticipated to be ~21% (previously 21%-22%), with a tax-equivalent effective rate of ~22% (previously 23%-24%). Medium-term targets by the end of 2027 include a Return on tangible common equity of 15.0%+ and a Net Interest Margin of 3.25%+.

Management Comments

• Client deposits and net new relationship households increased 2% year-over-year on an annualized basis, reflecting strong client growth and relationship depth.
• Our Assets Under Management stand at a record high of $67.9 billion for the third quarter of 2025, up 11% year-over-year, driven by net positive cash inflows and market impacts on portfolios.
• Our continuous focus on maintaining our risk discipline has and should continue to position us to perform well through all business cycles.
• Net charge-offs are tracking in line with our current outlook for the year.
• Our noninterest income strength continues to be driven by differentiated fee businesses strategically focused on targeted scale.
• We ended the quarter with a Common Equity Tier 1 ratio of 11.8%, up over 100 basis points year-over-year, which positions us to continue to support existing and prospective clients.

Industry Context

The banking industry continues to navigate a complex economic environment characterized by resilient but slowing growth, persistent inflationary pressures, and policy uncertainty. KeyCorp's performance, particularly its strong net interest income and margin expansion, reflects effective asset/liability management in a dynamic interest rate environment. The growth in AUM and fee-based income suggests a successful diversification strategy, while the improvement in capital ratios positions the company favorably against evolving regulatory standards like Basel III and potential revisions to the LFI Rating System. The delays in CFPB's 1071 and 1033 rules indicate ongoing regulatory flux that could impact operational compliance across the sector.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• KeyCorp and its subsidiaries are subject to various litigation, investigations, and administrative proceedings in the ordinary course of business, including private civil litigation, putative class action lawsuits, arbitrations, mass arbitrations, and investigations by government agencies and self-regulatory bodies.
• These matters may involve claims for substantial monetary relief and may present novel claims or legal theories.
• Based on information presently known, KeyCorp does not believe any matter, individually or in aggregate, would reasonably be expected to have a material adverse effect on its financial condition, and established reserves are deemed adequate.

Related Party Transactions

• KeyCorp owns the outstanding common stock of business trusts that issued corporation-obligated, mandatorily redeemable, trust preferred securities, which are treated as Tier 2 capital. KeyCorp unconditionally guarantees payments or distributions on behalf of these trusts.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, EPS, AUM growth, improved capital ratios, and a $1.0 billion share repurchase program (began in Q4 2025).
• Employees: Increased personnel expense driven by higher incentive compensation and continued investments in people.
• Customers: Increased client deposits and net new relationship households, indicating strong client growth and relationship depth. Continued support for existing and prospective clients due to strong capital position.
• Creditors: Improved capital adequacy and liquidity position, including $100.2 billion in available contingent liquidity, enhances creditworthiness. Downgrades in credit ratings could increase cost of funds and trigger collateral requirements.
• Regulatory Authorities: Compliance with regulatory capital requirements (e.g., Common Equity Tier 1 ratio of 11.83% vs. 7.70% minimum) and ongoing monitoring of evolving regulatory frameworks (e.g., LFI Rating System, CFPB rules).

Next Steps

• KeyCorp will continue to monitor developments regarding the CFPB's Section 1071 and 1033 rules, which are undergoing revisions and delayed compliance dates.
• KeyCorp will continue to manage its balance sheet to maintain desired interest rate risk positioning in the current environment.
• KeyCorp began repurchasing shares under the $1.0 billion share repurchase program authorized by the Board of Directors in March 2025 during the fourth quarter of 2025.
• KeyCorp will incorporate new annual tax disclosures related to rate reconciliation and income taxes paid into its annual tax disclosures within the Form 10-K, applying the guidance on a retrospective basis.
• KeyCorp is evaluating the impact of ASU 2025-06 on its financial condition and results of operations, which revises accounting for internal-use software.

Key Dates

Recommendation

KeyCorp's Q3 2025 results demonstrate strong financial performance, with significant year-over-year improvements in net income, diluted EPS, net interest income, and net interest margin. The company achieved record Assets Under Management and showed robust growth in key fee-based businesses. Capital ratios are healthy and well above regulatory minimums, indicating financial stability and capacity for growth. While there's an increase in provision for credit losses due to economic uncertainty, overall asset quality metrics are improving, with a decrease in nonperforming assets and a higher ALLL to nonperforming loans ratio. The updated full-year 2025 outlook is generally positive, with upward revisions or tighter ranges for key metrics, reflecting management's confidence. The initiation of a $1.0 billion share repurchase program in Q4 2025 further signals a commitment to shareholder returns. These factors collectively suggest a strong operational and financial trajectory, making the stock an attractive 'buy' for seasoned investors.

Keywords

KeyCorp, Banking, Financial Services, SEC Filing, 10-Q, Earnings, Net Interest Income, Net Interest Margin, Loans, Deposits, Capital Ratios, Asset Quality, Noninterest Income, Wealth Management, Investment Banking, Commercial Real Estate, Consumer Banking, Credit Risk, Liquidity Risk, Market Risk, Regulatory Capital, Share Repurchase