Keyp-Fee Income & NII to Aid KeyCorp's Q1 Earnings, High Provisions to Hurt

Core Viewpoint - KeyCorp is set to announce its first-quarter 2025 results on April 17, with expectations of improved lending activities despite a decline in commercial and industrial loan demand [1][2]. Lending Activities - Demand for commercial and industrial (C&I) loans, which make up about 50% of KeyCorp's average loan balances, decreased in the first quarter, while consumer loans, accounting for roughly 31%, saw significant improvement [2]. - The average loan balance for KeyCorp is projected to be $103.6 billion, reflecting a 6.7% year-over-year decline [2]. Earnings and Income Estimates - The Zacks Consensus Estimate for KeyCorp's average earning assets is$ 172 billion, indicating a 1.2% increase from the previous year [3]. - The consensus estimate for net interest income (NII) is $1.10 billion, suggesting a year-over-year increase of 25.8%, with projections at$ 1.12 billion [5]. - Total non-interest income is estimated at $653.8 million, indicating a 1.1% year-over-year increase, with projections at$ 661.6 million [10]. Interest Rates and Economic Factors - The Federal Reserve maintained interest rates at 4.25%-4.5%, which is expected to support KeyCorp's NII and net interest margin (NIM) through higher yields on interest-earning assets [4]. - The yield curve steepened during the first quarter, further aiding NIM and NII growth [4]. Mortgage and Non-Interest Income - Mortgage rates declined, leading to improved mortgage originations and refinancing activities, which are expected to positively impact KeyCorp's mortgage banking income [6]. - The consensus estimate for commercial mortgage servicing fees is $59.7 million, indicating a 6.7% year-over-year rise, while consumer mortgage income is expected to reach$ 15.3 million, reflecting a 9.1% increase [7]. Trading and Investment Banking - Increased client activity and market volatility are anticipated to have positively influenced KeyCorp's trading business, with a consensus estimate for investment banking and debt placement fees at $156.8 million, indicating a 7.8% decline [8]. Expense and Asset Quality - Total non-interest expenses are projected to be$ 1.19 billion, reflecting a 4.2% year-over-year increase [11]. - KeyCorp is expected to build reserves for credit losses, with an estimated provision of $104.8 million, suggesting a 3.8% rise year over year [12]. Non-Performing Assets - The consensus estimate for non-performing assets (NPAs) is$ 773.1 million, indicating a 14.7% increase, while non-performing loans (NPLs) are estimated at $760.9 million, reflecting a 15.6% rise [13]. Earnings Expectations - The Zacks Consensus Estimate for KeyCorp's first-quarter earnings is 32 cents, representing a 45.5% increase from the prior year, with sales expected to reach$ 1.76 billion, indicating a 15.4% rise [15].