Fee Income & NII to Drive KeyCorp's Q3 Earnings, Provisions to Hurt

Core Viewpoint - KeyCorp is expected to report solid third-quarter 2025 results on October 16, with notable improvements in lending activities and fee income from various segments [1][11]. Loan Demand and Balances - Average loan balance for KeyCorp is projected at $106.2 billion, showing a slight year-over-year decline [2] - Demand for commercial and industrial (C&I) loans, which make up about 50% of average loan balances, was strong in the first two months of the quarter [1] - Consumer loans, accounting for nearly 31% of average loan balances, also maintained decent demand [1] Net Interest Income (NII) - The consensus estimate for NII is $1.18 billion, reflecting a year-over-year increase of 22.4% [4] - The projected NII is $1.17 billion, indicating a 21% rise from the previous year [4] - The Federal Reserve's recent 25-basis-point rate cut is not expected to negatively impact NII due to stable rates during most of the quarter [3] Non-Interest Income - Non-interest income is anticipated to benefit from improved mortgage banking income, with commercial mortgage servicing fees estimated at $73.6 million (1% increase) and consumer mortgage income at $15.8 million (31.8% increase) [6] - Total non-interest income is estimated at $704.5 million, indicating a year-over-year increase of 5.5% [10] Trading and Investment Banking - Increased client activity and market volatility are expected to positively influence KeyCorp's trading business [8] - Investment banking and debt placement fees are estimated at $181.3 million, reflecting a 6% rise [8] Expenses and Asset Quality - Total non-interest expenses are projected to be $1.2 billion, representing a 9.6% year-over-year increase [12] - Provision for credit losses is estimated at $105.7 million, indicating an 11.3% rise year over year [13] - Non-performing assets (NPAs) are expected to decline by 1.7% to $728.6 million [14] Earnings Expectations - The consensus estimate for KeyCorp's earnings is 38 cents per share, a 26.7% increase from the prior year [16] - Sales are expected to reach $1.88 billion, indicating a rise of 17.3% [16] Earnings Prediction Model - KeyCorp has a positive Earnings ESP of +2.64% and a Zacks Rank of 3, suggesting a high likelihood of beating the consensus estimate [15]