KeyCorp (KEY) Q2 2025 Earnings Call July 22, 2025 09:00 AM ET Speaker0Morning, and welcome to KeyCorp's Second Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Monney, KeyCorp Director of Investor Relations. Please go ahead.Speaker1Thank you, operator, and good morning, everyone. I'd like to thank you for joining KeyCorp's second quarter twenty twenty five earnings conference call. I'm here with Chris ...

Financial Data and Key Metrics Changes - The company reported record earnings of $119.4 million for Q2 2025, translating to $0.60 earnings per share, with a return on assets of 2.08%, compared to $115.2 million and a return on assets of 2.07% in the previous quarter [7][8] - Non-GAAP return on tangible common equity was 18.26%, while GAAP return was 17.68% [7] - Loan loss reserves remained strong at 1.86%, with Tier 1 capital at 15.6% and a leverage ratio of 13.4% [8] Business Line Data and Key Metrics Changes - The Trust, Wealth Management, and Mortgage divisions showed meaningful improvements, contributing positively to the bottom line [16] - CCFG closed approximately $500 million in new commitments for Q2, bringing the year-to-date total to over $800 million, with portfolio growth of CAD 122 million [24] Market Data and Key Metrics Changes - Deposits decreased by $53 million in Q2 due to seasonal tax payments, but balances grew in May and June, indicating a recovery in deposit activity [16] - The company operates in dynamic and growing states such as Arkansas, Texas, Alabama, and Florida, which are contributing to its performance [16] Company Strategy and Development Direction - The company aims to acquire additional assets to enhance income, targeting approximately $450 million in income for the current year and $500 million for the next year [12][11] - Management is actively looking at several acquisition opportunities and intends to make an announcement before the next quarterly report [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of margins and expects the third quarter to perform similarly to the first two quarters of 2025 [30] - The company is cautious about potential rapid interest rate cuts, emphasizing the need for a gradual approach to avoid inflation [36] Other Important Information - The company has been aggressive in stock buybacks, purchasing over 3 million shares worth approximately $86 million and paying out about $150 million in dividends [8][10] - A lawsuit settlement resulted in elevated expenses for the quarter, amounting to approximately $3.5 million, but management expects expenses to normalize in the following quarters [81][82] Q&A Session Summary Question: Loan growth and customer base aggressiveness - Management noted that while they are not being more aggressive, they are benefiting from strong markets where their teams are performing well [32][34] Question: M&A opportunities and deal sizes - The company is looking at potential acquisitions in the range of $2 billion to $6 billion, focusing on opportunities that align with their growth strategy [131][132] Question: Deposit pricing and competition - Management indicated that deposit pricing remains competitive but they are able to negotiate slightly lower rates than competitors [56] Question: Impact of sub debt on margin - The removal of sub debt is expected to benefit the net interest margin by about 5 to 6 basis points, with full benefits realized in Q4 [137] Question: Hiring plans - The company does not plan to aggressively hire lenders, preferring to develop talent internally rather than poaching from competitors [120][126] Question: Mortgage banking outlook - The mortgage banking segment has shown variability, with no strong multi-month trends expected until interest rates decrease significantly [90][91]