What Falling Interest Rates Mean for KeyCorp's Net Interest Income

Core Insights - KeyCorp (KEY) has experienced a volatile trend in net interest income (NII), with increases in 2020, 2021, and 2022, followed by declines in 2023 and 2024, but a rebound in the first nine months of 2025 due to lower deposit costs and asset repricing [1][11] Group 1: Net Interest Income Trends - In 2025, KeyCorp's NII is expected to rise by 22% year over year, with fourth-quarter NII projected to grow by 13% or more [5][11] - The net interest margin (NIM) is anticipated to be between 2.75% and 2.8% in the fourth quarter of 2025, with expectations to exceed 3% by the end of 2026 [5][11] - The decline in interest rates has led to a narrowing of the spread between earnings and costs, impacting NII, but lower funding costs and increased loan volumes are expected to support NII growth [2][3] Group 2: Peer Comparison - Fifth Third Bancorp (FITB) has shown a five-year compound annual growth rate (CAGR) of 4.2% in NII, with a 6.2% year-over-year increase in the first nine months of 2025 [7] - U.S. Bancorp (USB) has also demonstrated consistent NII growth, with a five-year CAGR of 4.4% and a 2% increase in NII year over year in the first nine months of 2025 [8] Group 3: Market Performance - KeyCorp's shares have increased by 16% over the past six months, slightly underperforming the industry growth of 17.4% [10]