KEY Q4 Earnings Beat as NII Jumps, Stock Down on Rise in Provisions

Core Insights - KeyCorp's fourth-quarter 2025 adjusted earnings per share from continuing operations were 41 cents, exceeding the Zacks Consensus Estimate of 38 cents, reflecting a 7.9% increase from the prior-year quarter [1][9] - Despite better-than-expected results, KeyCorp's shares fell over 2% in early trading due to bearish market trends and a significant rise in provisions [1] Financial Performance - The quarterly results were bolstered by higher net interest income (NII) and non-interest income, alongside an increase in average loans and deposits [2] - Total revenues for the fourth quarter reached $2 billion, a 12.5% year-over-year increase, surpassing the Zacks Consensus Estimate of $1.94 billion [4] - For the full year 2025, total revenues were $7.51 billion, up 16.4% from the previous year, also exceeding the consensus estimate of $7.43 billion [4] Income and Expenses - NII on a taxable-equivalent basis rose 15.3% year over year to $1.22 billion, with the net interest margin expanding 41 basis points to 2.82% [5] - Adjusted non-interest income increased by 8.3% to $782 million, driven by higher investment banking and corporate services income [6] - Non-interest expenses rose nearly 1% to $1.24 billion, with adjusted expenses increasing 2.4% to $1.26 billion [6] Loan and Deposit Growth - Average total loans were $106.32 billion, showing a slight increase from the previous quarter, while average total deposits were $150.71 billion, also up marginally [7] Credit Quality - Provisions for credit losses surged to $108 million from $39 million in the prior-year quarter, impacting investor sentiment despite solid earnings [8][9] - Net loan charge-offs as a percentage of average total loans decreased by 4 basis points year over year to 0.39%, and non-performing assets as a percentage of the portfolio declined by 15 basis points to 0.59% [10] Capital Ratios - KeyCorp's tangible common equity to tangible assets ratio improved to 8.4% as of December 31, 2025, up from 7% in the same period of 2024 [11] - The Tier 1 risk-based capital ratio was 13.4%, down from 13.7%, while the Common Equity Tier 1 ratio decreased to 11.7% from 11.9% [11] Share Repurchases - During the reported quarter, KeyCorp repurchased shares worth $200 million [12] Strategic Outlook - The company is expected to benefit from decent loan balances, balance sheet repositioning efforts, and stabilizing funding costs, although weak asset quality remains a concern [13]