KeyCorp (KEY) Up 1.2% Since Last Earnings Report: Can It Continue?

Core Viewpoint - KeyCorp's recent earnings report shows a positive trend with adjusted earnings per share exceeding estimates, driven by higher net interest income (NII) and non-interest income, despite rising expenses and provisions [2][4]. Financial Performance - KeyCorp's Q4 2025 adjusted earnings per share from continuing operations was 41 cents, beating the Zacks Consensus Estimate of 38 cents, reflecting a 7.9% increase year-over-year [2]. - Total revenues for Q4 2025 increased by 12.5% year-over-year to $2 billion, surpassing the consensus estimate of $1.94 billion [5]. - For the full year 2025, total revenues were $7.51 billion, up 16.4% from the previous year, exceeding the consensus estimate of $7.43 billion [5]. Income and Expenses - Net interest income (TE basis) rose 15.3% year-over-year to $1.22 billion, with net interest margin (NIM) expanding 41 basis points to 2.82% [6]. - Adjusted non-interest income was $782 million, an increase of 8.3%, primarily due to higher investment banking and corporate services income [7]. - Non-interest expenses increased nearly 1% to $1.24 billion, attributed to rising costs across most components [7]. Credit Quality - The provision for credit losses was $108 million, significantly up from $39 million in the prior-year quarter, while the allowance for loan and lease losses was $1.43 billion, up 1.3% [9]. - Net loan charge-offs as a percentage of average total loans declined 4 basis points year-over-year to 0.39% [9]. - Non-performing assets as a percentage of the portfolio decreased 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 prior year [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]. 2026 Outlook - Management anticipates total revenues to increase nearly 7% year-over-year, with average loan balances expected to grow by 1-2% [12]. - Net interest income is projected to rise by approximately 8-10% in 2026, with NIM expected to reach 3.00%-3.05% by the end of Q4 2026 [13]. - Adjusted non-interest income is expected to grow by 5-6% year-over-year, driven by fee growth in key business areas [14]. Long-term Outlook - Management expects NIM to exceed 3.25% by Q4 2027, with return on tangible common shareholders' equity projected to be in the range of 16-19% [16]. Industry Performance - KeyCorp operates within the Zacks Banks - Major Regional industry, where M&T Bank Corporation has seen a 5.7% increase in stock price over the past month, reporting revenues of $2.48 billion for the last quarter, a year-over-year change of +3.8% [21].