KeyCorp (KEY) Q3 2022 Earnings Call Transcript

KeyCorp (NYSE:KEY.PK) Q3 2022 Earnings Conference Call October 20, 2022 8:00 AM ET

Company Participants

Chris Gorman - Chairman and CEO

Don Kimble - Chief Financial Officer

Clark Khayat - Chief Strategy Officer

Mark Midkiff - Chief Risk Officer

Conference Call Participants

Steven Alexopoulos - JPMorgan

Erika Najarian - UBS

John Pancari - Evercore

Gerard Cassidy - RBC

Ebrahim Poonawala - Bank of America

Scott Siefers - Piper Sandler

Matt O’Connor - Deutsche Bank

Mike Mayo - Wells Fargo Securities

Ken Usdin - Jefferies

Betsy Graseck - Morgan Stanley

Bill Carcache - Wolfe Research

Operator

Good morning. And welcome to KeyCorp’s Third Quarter 2022 Earnings Conference Call. As a reminder, this conference is being recorded.

I would now like to turn the conference over to the Chairman and CEO, Chris Gorman. Please go ahead.

Chris Gorman

Well, thank you for joining us for KeyCorp’s third quarter 2022 earnings conference call. Joining me on the call today are Don Kimble, our Chief Financial Officer; Clark Khayat, our Chief Strategy Officer; and Mark Midkiff, our Chief Risk Officer.

On slide two, you will find our statement on forward-looking disclosure and non-GAAP financial measures. It covers our presentation materials and comments, as well as the question-and-answer segment of our call.

I am now moving to slide three. This morning, we reported earnings of $513 million or $0.55 per common share. Our results included $0.06 per share of additional loan loss provision in excess of net charge-offs. Revenue was up 5% relative to the second quarter, driven by higher net interest income with a 13-basis-point increase in our debt interest margin.

One thing that sets Key apart is our approach to managing interest rate risk. We have been very deliberate and intentional in managing with a long-term perspective. While our net interest income is expected to be up double-digits this year, our balance sheet positioning presents a unique and significant upside for Key over the next two years.

Even in the event that rates remain at current levels, we will experience a meaningful benefit as our securities and swaps re-price. If we were to re-price our existing short-term treasuries and swaps at today’s interest rates, we would have an annualized net interest income benefit of over $1.2 billion.

Our balance sheet benefits from our strong stable deposit base. Approximately 60% of our deposits are in stable, low cost retail and escrow balances. In our commercial businesses, approximately 85% of our deposits are from core operating accounts.