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KeyCorp Presentation to theCFA Society of Cleveland
April 29, 2010
Beth E. MooneyVice Chair – KeyCorpKey Community Banking
2
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key’s financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management’s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key’s control. Key’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key’s actual results to differ materially from those described in the forward-looking statements can be found in Key’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009, and September 30, 2009, and in its Annual Report on Form 10-K for the year ended December 31, 2008, each of which has been filed with the Securities and Exchange Commission and is available on Key’s website (www.key.com) and on the Securities and Exchange Commission’s website (www.sec.gov). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE
3
Key Facts
– 14th largest U.S. bank-based financial services company by asset size
– NYSE Symbol: KEY
– Assets: $95 billion
– Market Cap: $8 billion
– Headquarters: Cleveland, Ohio
– Employees: 15,700
– Banking Offices: 14 States
– Web Site: www.key.com
4
Strong Franchise – Geographically Diverse
$15.5$16.7$16.2Deposits (a)
Citizens BankM&T Bank
TD BanknorthJ.P. Morgan Chase
Fifth ThirdPNC
HuntingtonJ.P. Morgan Chase
Bank of AmericaJ.P. Morgan Chase
U.S. BankWells Fargo
Competitors
$5.8$6.8$10.7Loans (a)
430541530ATMs
304343367Branches
NortheastGreat LakesRocky Mountain and Northwest
WA
OR ID
UT CO
AK
OH
NY
KY
MI
IN
ME
CT
VT
(a) Community Banking average total loans and deposits for the first quarter of 2010
5
Strategic Update
First quarter 2010 loss narrows
Continued improvement in credit quality
Capital and liquidity positions remain strong
Management transition completed
Continued investment in relationship businesses
6
Financial Summary ― First Quarter 2010
TE = Taxable Equivalent, EOP = End of Period(a) Ratios are estimated.(b) From consolidated operations, calculated as loans and loans held for sale (excluding securitized loans) to deposits (excluding deposits in foreign office)
1Q10 1Q09Loss from continuing operations attributable to Key common shareholders $ (.11) $(1.03)
Performance – from continuing operationsNet interest margin (TE) 3.19% 2.79%Return on average total assets (.26) (1.87)
CapitalTier 1 common equity (a) 7.53% 5.62%Tier 1 risk-based capital (a) 12.96 11.22Total risk-based capital (a) 17.11 15.18
Asset quality – from continuing operationsAllowance for credit losses to period-end loans 4.55% 2.96%Net loan charge-offs to average loans 3.67 2.60Allowance for loan losses to nonperforming loans 117 116
LiquidityLoan to deposit ratio (b) 93% 115%
7
2010 Strategic Priorities
Return to sustainable profitability
Sustain strong reserves, capital and liquidity
Continue building a robust risk management culture
Expand and acquire client relationships
Attract and retain a capable, diverse and engaged workforce
8
Key’s Targets for Success
(a) Continuing operations, unless otherwise noted(b) Consolidated operations(c) Loans & loans HFS (excluding securitized loans) to deposits (excluding foreign branch)
• Leverage Key’s total client solutions and cross-selling capabilities
• Improve funding mix• Focus on risk-adjusted returns
>3.50%3.19%Net Interest MarginGrowing high quality, diverse
revenue streams >40%41.6%Noninterest income/ total revenue
Improve efficiency and effectivenessLeverage technologyChange cost base to more variable from fixed
$300-$375 million
$191 million implementedKeyvolution cost savings
Creating positive
operating leverage
Execute our client insight-driven relationship modelImproved funding mix with lower cost core depositsKeyvolution savings
1.00-1.25%(.26)%Return on average assetsExecuting our strategies
Focus on relationship clientsExit noncore portfoliosLimit concentrationsFocus on risk-adjusted returns
40-50 bps3.67%NCOs to average loansReturning to a moderate risk
profile
Improve risk profile of loan portfolioImprove mix and grow deposit base
90-100%93%Loan to deposit ratio (b) (c)Core funded
Action PlansTargetsKEY1Q10
KEY Metrics (a)KEY Business Model
9
9%
13%
16%
10%
6%46%
National BankingCommunity Banking
Institutional and Capital MarketsVictory Capital Management
KeyBanc Capital MarketsOther SegmentsCorporate TreasuryPrincipal Investing
Exit Portfolios
Equipment Finance
Real Estate Capital and Corporate Banking Services
Commercial Banking
Regional BankingRetail Banking
Business BankingPrivate Banking
Wealth Management
TE = Taxable Equivalent
Diversified Business Mix
First Quarter 2010 Revenue (TE)
Other Segments
10
Community Banking – Financial Summary
11.3 10.6 9.8 9.2 9.0
18.819.119.319.720.0
$0
$10
$20
$30
$40
1Q09 2Q09 3Q09 4Q09 1Q10
$31.3 $30.3 $29.1 $28.3 $27.8
Average Loans and Leases $ in billions
14.7 14.9 14.7 13.7 12.6
8.5 9.0 8.9 8.2 7.4
$50.9 $52.1 $52.5 $52.1 $51.0
10.610.59.79.18.6
17.4 17.3 17.4 17.9 18.61.7 1.8 1.8 1.8 1.8
$0
$10
$20
$30
$40
$50
$60
1Q09 2Q09 3Q09 4Q09 1Q10
Average Deposits (a)
$ in billions
DDA
NOW/MMDA
Savings
CDs < $100K
CDs > $100K
(a) Excludes foreign office deposits.
509 529 528 512 490
103 103 104 117 109
$0
$100
$200
$300
$400
$500
$600
$700
1Q09 2Q09 3Q09 4Q09 1Q10
Regional Banking Commercial Banking
$629$612 $632 $632 $599
Total Revenue (TE) $ in millions
57 61 63 46$468
$496 $491 $492 $468
422429430
439411
57
$0
$100
$200
$300
$400
$500
$600
1Q09 2Q09 3Q09 4Q09 1Q108,000
8,250
8,500
8,750
9,000
9,250
9,500
Noninterest Expense $ in millions
Regional Banking Commercial BankingFTE Regional Banking Commercial Banking
11
Community Banking Model
Leveraging Client Insight
Integrated Delivery Channels
Enhanced Sales/Service Culture
Optimizing to Maintain Efficiency and Effectiveness
Growing and Investing…
12
Leveraging Client Insight
Client InsightClient Needs/ Preferences/ Attitudes Client Behavior Local Market Conditions and Competitive IntelligenceClient Economics/ Profitability
Acquire & Expand Client Relationships
Sustainable, Profitable RevenueGrowth
Segment Value Propositions
Brand Positioning
Product Development/
Innovation
Delivery Channels
Human Capital
Sales & Service Process
Cul
ture
Exec
utio
n
Client Experience
13Integrated Delivery ChannelsBranch Strategy
November 2007
+ =
• Create a look distinctly Key
• Condition of outlet lifts performance
Branch Branch Modernization:Modernization:
Repair, Repair, Revitalize & Revitalize &
ReRe--brandbrand
Integrated Integrated Branch Branch StrategyStrategy
Branch Branch Expansion:Expansion:
Market Market Portfolio Portfolio ApproachApproach
• Concentrate investment in select markets
• Align capital investment with return
• Build branch density in growth markets
• Relative outlet share drives client acquisition
• Reintroduce Key into the market in a concentrated “burst”
• Achieve management focus & in-market efficiencies
• Optimize marketing spend
• Create market awareness
• Increase branch density, deposit market share and maximize revenue lift
Introduce Introduce Capabilities:Capabilities:
Differentiate Differentiate the Client the Client
ExperienceExperience
+
• Match service levels, functionality & design with client transaction potential
• Leverage client insight to customize and localize the experience
• Use technology as an accelerator of momentum (e.g., Teller21, Remote ATM, Desktop, etc.)
• Integrate with other channels
14
128th & Thornton, Colorado North French & Transit, Western NY
Shoppes of Solon, Cleveland
Integrated Delivery ChannelsBranch Expansion
15Integrated Delivery ChannelsBranch Modernization
16
Online Banking clients with iPhone or Blackberry phones can:• View accounts balances and transactions• Make payments to existing payees• Transfer money between Key accounts• Locate ATMs and Branches
Introduced in Q1 2010:• Text messaging capabilities for all clients and
phones, including: – Mobile Alerts– Real-time inquiries
Integrated Delivery ChannelsMobile Banking
Convenience is more than a nearby branch or ATM — it’s being able to bank wherever you are when you want, and being convenient is still one of the top reasons why people choose their bank. Key’s Mobile Banking is ideal for clients on the go — it allows them to locate a branch, view account information, pay bills and transfer funds from anywhere at any time.
17
• In Corporate Insight’s 2010 Bank Monitor Report, Key was cited for enhancements made to its online banking site Key.com for 2009:
• 1 GOLD MEDAL (Online Application capabilities)
• 2 SILVER MEDALS (Online Banking Account Information and Account Transfer Capabilities)
• 2 BRONZE MEDALS (Online Banking Alerts and Help Area)
Integrated Delivery ChannelsOnline Banking
18
2009 BusinessWeekCustomer Service Champ
2010 American Customer Satisfaction Index Recognition
Enhanced Sales/Service Culture
19
Optimizing to Maintain Efficiency and Effectiveness
Capital optimization– Exiting unprofitable relationships– Differentiating return thresholds based on risk model
Focus on operating efficiency and effectiveness– Consolidation of regions, branches, management, and headcount
Strong risk management– Net charge-offs at 1st Qtr 2010:
Home Equity 122 bpsCommercial Banking 90 bps
– Balance risk and reward
Enhancing profitability of deposit portfolio
20
(a) Peer data pulled from 1Q10 earnings releases and the peer calculation represents the median of Key and its 13 peer banks.
Improving Net Interest Margin
Net Interest Margin
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
WFC
PNCZIO
NUSBBBTMTBFITBHBAN
STIKEY
FHNCMA MI
RF
Key = 3.19%Peers (a) = 3.55%Net interest margin increased by 40 bps
compared to the 1Q09
Core funded; loan to deposit ratio improved from 115% in 1st quarter 2009 to 93% in 1st quarter 2010
Continued benefit from improved funding mix as maturing CDs re-price or move into lower cost deposits
First Quarter 2010
109% 101% 95% 91% 88%
0%
25%
50%
75%
100%
125%
1Q09 2Q09 3Q09 4Q09 1Q10
Loan to Deposit Ratio (b)
Continuing operationsDiscontinued operations
115%107%
101% 98% 93%
(b) Ending balances; loans & loans held for sale (excluding securitized loans) to deposits (excluding foreign branch)
21
KEY - Net Interest Margin KEY - Interest-bearing Deposits
Deposit Repricing Opportunity
Opportunity for continued repricing and improved rates
$23.6$19.2 $19.4 $20.0 $22.6 $23.2 $23.9 $21.9 $20.0
(a) Net interest margin is adjusted to exclude the impact of certain items related to leveraged leases.
3.19%3.04%
2.87%2.77%2.79%2.84%3.13%
3.32%3.29%
1.71%1.84%2.03%
2.15%2.24%2.56%2.57%2.56%
3.10%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10
Community Bank$ in billions
CDs
(a) (a) (a) (a) (a)
22
Community Banking – Advertising22
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Community Banking – Advertising23
24
Community Banking – Advertising24
25
Community Banking – Advertising