KeyCorp 2026 Conference Summary Company Overview - **Company**: KeyCorp (NYSE: KEY) - **Industry**: Commercial Banking - **Conference Date**: February 9, 2026 Key Points Commercial Banking Performance - In 2025, KeyCorp's commercial bank generated **$2.1 billion** in revenue, accounting for nearly **one-third** of the company's total revenue and approximately **40%** of overall deposits [3][4] - The commercial banking platform is characterized as an efficient, high-return growth business, with a return on equity consistently in the **high teens to low twenties** [5] - The middle-market segment, defined as companies with annual revenues between **$10 million** and **$1 billion**, represents a significant growth opportunity with **200,000** companies in the U.S. and a current market share of less than **3%** [4] Growth and Market Strategy - The middle-market franchise has seen **9%** annual growth in commercial payments revenue over the past five years, indicating a strong demand for integrated banking services [5] - KeyCorp operates in **11 of the top 20** metropolitan statistical areas (MSAs) for middle-market companies and is actively expanding its presence [6] - The company has onboarded new teams in markets like Chicago and Southern California, which have driven customer growth and loan production at **twice the rate** of the rest of the portfolio [6][7] Client Sentiment and Economic Outlook - A survey indicated that **77%** of middle-market clients are optimistic about their own businesses, despite macroeconomic uncertainties [22] - Clients are focusing on capital expenditures (CapEx) for new production lines and geographic expansion, with increased interest in mergers and acquisitions (M&A) [25] - The company expects to outperform the market with a projected **5%-6%** growth in commercial loans, supported by a strong pipeline and anticipated M&A activity [34] Competitive Landscape - KeyCorp differentiates itself from larger global systemically important banks (GSIBs) by providing tailored services to middle-market clients, which are often overlooked by larger institutions [36] - The bank's expertise in capital markets and payments is a significant competitive advantage, allowing for a more coordinated approach to serving middle-market clients [36] Payment Solutions and Embedded Banking - KeyCorp's payments business has been a focus area, with gross payment fees growing at an **8% CAGR** over the last six years [9] - The bank is scaling its embedded banking strategy, which integrates banking services into clients' operations, and has doubled this business in 2025 [11] - The company aims for high single-digit to low double-digit growth in commercial payment fees moving forward [16] Technology and Innovation - KeyCorp is investing in technology, including artificial intelligence (AI), to enhance operational efficiency and client service [79] - The bank is focused on improving its digital platform and payment capabilities, with a full digital refresh expected later in the year [73] Credit Quality and Risk Management - The quality of the loan portfolio remains strong, with net charge-offs and non-performing loans (NPLs) at the low end of targeted ranges [8] - KeyCorp is monitoring sectors like agriculture, healthcare, and consumer goods for potential credit risks due to external pressures [86] Conclusion - KeyCorp's commercial banking model is positioned for sustainable growth, with a clear strategy focused on middle-market clients, innovative payment solutions, and a commitment to technology and talent development [16][87]

Financial Data and Key Metrics Changes - In Q4 2025, earnings per common share was $0.30, and on an adjusted basis, EPS was $0.37, reflecting a 9% year-over-year increase [17] - Revenue growth for 2025 was 11%, with adjusted EPS growth at 16% and 290 basis points of positive operating leverage [7][17] - Average loans grew 14.4% year-over-year, with organic loan growth of $10.1 billion, exceeding the $9.5 billion added through the Veritex partnership [17][19] - Average deposits increased 5.1% quarter-over-quarter and 8.6% year-over-year, with core deposits growing $5.5 billion year-over-year [19][20] Business Line Data and Key Metrics Changes - Consumer banking saw a 4% year-over-year increase in primary bank relationships, while business banking grew by 7% [8] - New initiatives contributed $1.8 billion to loan growth, with significant contributions from Texas and North and South Carolina expansions [17][18] - Fee income from payments grew 5%, with commercial payment revenues up 8% year-over-year, and wealth management grew 10% [22][24] Market Data and Key Metrics Changes - The company expanded its consumer and regional banking presence to 21 states, focusing on fast-growing markets [4][5] - The partnership with Veritex and Cadence is expected to enhance market growth and customer share in Texas and other new markets [15] Company Strategy and Development Direction - The company aims to become the leading people-first, customer-centered bank, leveraging a differentiated operating model [4][5] - Strategic investments in branch build-out, new commercial verticals, and fintech solutions are designed to enhance long-term growth [9][10] - The focus remains on organic growth, customer relationship deepening, and expanding wallet share while maintaining a moderate to low-risk profile [5][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth targets, emphasizing the effectiveness of their operating model and investments [34] - The outlook for 2026 includes expectations for net interest income growth between 10% and 13%, supported by loan and deposit growth [29][30] - Management anticipates continued strong performance in fee revenues, projecting growth between 13% and 16% [30] Other Important Information - The company achieved a 19% year-over-year increase in tangible book value while returning 40% of earnings through dividends [27] - Credit quality remains strong, with net charge-offs at 24 basis points and a criticized asset ratio of 4.2% [28] Q&A Session Summary Question: Clarification on expense trajectory and cost savings - Management indicated that underlying expense growth is expected in the mid-single digits, with a focus on positive operating leverage [41][42] Question: Partnership approach and revenue synergies - The partnership model has allowed for quicker decision-making and greater certainty for employees, enhancing the potential for cost and revenue synergies [46][47] Question: Expected first quarter expenses - Management refrained from providing specific quarterly guidance but emphasized the importance of positive operating leverage [52][53] Question: Revenue-producing initiatives in expense guidance - Very little of the revenue synergies are included in the current guidance, with more details expected in future updates [55][56] Question: Credit guidance and seasoning of loans - Management confirmed that while seasoning is a factor, the overall credit performance has been exceptional, with expectations for 2026 in the lower end of the guidance range [86]

Financial Data and Key Metrics Changes - In Q4 2025, earnings per common share was $0.30, with an adjusted EPS of $0.37, reflecting a 9% year-over-year increase [17] - Revenue growth for 2025 was 11%, with adjusted EPS growth of 16% and 290 basis points of positive operating leverage [6][24] - Average loans grew 14.4% year-over-year, with organic loan growth of $10.1 billion, exceeding the $9.5 billion added through the Veritex partnership [17][19] - Average deposits increased 5.1% quarter-over-quarter and 8.6% year-over-year, with core deposits growing $5.5 billion year-over-year [19][20] Business Line Data and Key Metrics Changes - Consumer banking saw a 4% year-over-year increase in primary bank relationships, while business banking grew by 7% [7] - New initiatives contributed $1.8 billion to loan growth, with significant contributions from Texas and North and South Carolina expansions [17] - Fee income businesses grew, with payments up 5%, commercial payment revenues up 8%, and wealth management growing 10% [21][22] Market Data and Key Metrics Changes - The company expanded its consumer and regional banking presence to 21 states, focusing on fast-growing markets [4] - The partnership with Veritex and Cadence is expected to enhance market growth and customer share in Texas and other new markets [15] Company Strategy and Development Direction - The company aims to become the leading people-first, customer-centered bank, leveraging a differentiated operating model [4] - Strategic investments in branch build-out, new commercial verticals, and fintech solutions are designed to enhance long-term growth [8] - The focus remains on organic growth, customer relationship deepening, and expanding wallet share while maintaining a moderate to low-risk profile [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth targets, emphasizing the effectiveness of the operating model and recent partnerships [32][34] - The outlook for 2026 includes expectations for net interest income growth of 10% to 13%, supported by loan and deposit growth [27] - Credit quality remains strong, with net charge-offs expected between 25 and 35 basis points, and a stable non-performing asset ratio [26][30] Other Important Information - The company plans to initiate programmatic share repurchases and maintain a strong dividend yield [25] - Investments in technology, including AI, are expected to continue driving growth and efficiency [79] Q&A Session Summary Question: Clarification on expense trajectory and cost savings - Management indicated that underlying expense growth is expected in the mid-single digits, with cost synergies from Veritex and Cadence expected to be realized in 2026 [40][41] Question: Revenue synergies from partnerships - Management highlighted that the partnership model has allowed for quicker decision-making and greater certainty, which is expected to enhance both cost and revenue synergies [44][46] Question: Guidance on first quarter expenses - Management refrained from providing specific quarterly guidance but emphasized the importance of positive operating leverage and continued investment back into the business [52] Question: Credit guidance and deposit beta - Management confirmed that the credit guidance reflects historical performance and that deposit beta is expected to remain in the high 30s to 40% range [86][87] Question: Technology investment details - Management stated that technology investments are focused on customer-facing capabilities and digital marketing, with significant growth expected in these areas [89]