KeyCorp's Q2 Earnings Beat Estimates, NII & Fee Income Rise Y/Y

Core Insights - KeyCorp's second-quarter 2025 earnings per share from continuing operations was 35 cents, exceeding the Zacks Consensus Estimate by one cent and reflecting a 40% increase year-over-year [1][10] - The results were driven by a rise in net interest income (NII) and non-interest income, although higher expenses and increased provisions posed challenges [1][10] Financial Performance - Net income from continuing operations attributable to common shareholders reached $387 million, marking a 63.3% year-over-year increase [2] - Total revenues rose 20.9% year-over-year to $1.83 billion, surpassing the Zacks Consensus Estimate of $1.80 billion [3] - NII (on a tax-equivalent basis) increased 27.9% year-over-year to $1.15 billion, with the net interest margin expanding 62 basis points to 2.66% [4] - Non-interest income was $690 million, up 10% year-over-year, driven by increases in most fee income components [6] - Non-interest expenses increased 7% year-over-year to $1.15 billion, attributed to rising costs across nearly all components [7] Loan and Deposit Trends - Average total loans at the end of the second quarter were $105.72 billion, up 1.3% from the previous quarter [8] - Average total deposits were $147.45 billion, showing a slight decline due to reduced higher-cost commercial client balances and retail CDs [8] Credit Quality - The provision for credit losses was $138 million, up 38% year-over-year, with net loan charge-offs as a percentage of average total loans rising to 0.39% [9][10] - The allowance for loan and lease losses decreased by 6.5% year-over-year to $1.45 billion, while non-performing assets as a percentage of total loans fell to 0.66% [11] Capital Ratios - KeyCorp's tangible common equity to tangible assets ratio improved to 7.8% as of June 30, 2025, up from 5.2% in the same period of 2024 [12] - The Tier 1 risk-based capital ratio increased to 13.4%, up from 12.2%, and the Common Equity Tier 1 ratio rose to 11.7%, up from 10.5% [12] Strategic Outlook - The company is expected to benefit from decent loan balances, balance sheet repositioning efforts, strategic buyouts, and relatively higher interest rates in the near term [13]