Keyp(US:KEY) ZACKS·2026-01-14 17:00Core Viewpoint - KeyCorp (KEY) is expected to report strong fourth-quarter and 2025 results, driven by robust lending activities and solid demand for commercial and industrial loans, as well as consumer loans [1][11]. Lending and Earnings - The demand for commercial and industrial (C&I) loans, which constitute about 50% of KeyCorp's average loan balances, was solid in the quarter [1]. - The Zacks Consensus Estimate for KEY's average earning assets for the fourth quarter is $171.65 billion, reflecting a slight increase from the previous year [2]. - Management anticipates a 2% increase in period-end loans for 2025, with commercial loans expected to rise by 5% [1]. Net Interest Income (NII) - The consensus estimate for fourth-quarter NII (on a fully tax-equivalent basis) is $1.21 billion, indicating a year-over-year increase of 14% [4]. - Management expects NII to grow by 13% or more year-over-year, with a projected 22% increase for 2025 [4]. - Despite interest rate cuts, the company's net interest margin (NIM) is expected to improve, supported by loan growth and stabilizing deposit costs, with an expected NIM of 2.75-2.8% in the fourth quarter of 2025 [5][4]. Non-Interest Income - Mortgage rates declined significantly in the fourth quarter, leading to improved refinancing activities and origination volumes, positively impacting KeyCorp's mortgage banking income [6]. - The consensus estimate for commercial mortgage servicing fees is $69 million, reflecting a 1.5% year-over-year increase, while consumer mortgage income is estimated at $13.99 million, indicating a 12.6% decline [7]. - The total non-interest income estimate is pegged at $748 million, showing improvement from negative income reported in the prior year [13]. Investment Banking and Trading - The investment banking business is expected to benefit from robust deal-making activities, with a consensus estimate for investment banking and debt placement fees of $230 million, indicating a 4.1% year-over-year rise [9]. - Increased trading activities, influenced by market volatility and a significant U.S. government shutdown, are anticipated to positively impact KeyCorp's trading business [8]. Expenses and Asset Quality - KeyCorp's cost-saving measures and operational efficiency initiatives are likely to have curbed expense growth, although investments in technology may lead to a rise in total non-interest expenses [14]. - The consensus estimate for non-performing assets (NPAs) is $689 million, indicating a 10.8% year-over-year decline, while non-performing loans (NPLs) are estimated at $691 million, reflecting an 8.8% decline [16]. Earnings Expectations - The Zacks Consensus Estimate for fourth-quarter earnings is 38 cents per share, unchanged from the prior year, while the estimate for 2025 earnings is $1.47, indicating a 26.7% increase [18]. - The consensus estimate for quarterly sales is $1.94 billion, reflecting a year-over-year rise of 10.3%, with full-year sales estimated at $7.43 billion, indicating 16% growth from 2024 [19].