KEYCORP /NEW/ Q2 2026 earnings call

KeyCorp delivered a strong second quarter of 2026, reporting GAAP diluted EPS of $0.44, up 26% year-over-year, on 7% revenue growth (to about $1.96 billion of taxable-equivalent revenue) and 9% pre-provision net revenue growth. Commercial loan momentum was the highlight, with period-end C&I loans up $2.1 billion (3% sequentially) led by new relationships in utilities, power/renewables, real estate, and technology, much of it tied to the electrical-infrastructure build-out. Net interest margin expanded 2 basis points to 2.89%, and management raised full-year guidance for revenue (7%-8%), net interest income (9%-11%), and average loan growth (4%-5%), reaffirming a path to an exit NIM of 3%-3.05%, positive operating leverage, and a return on tangible common equity above 15% by the end of 2027. Fee businesses were mixed: commercial payments (+12%), wealth (record $74 billion AUM), and the collective priority franchises grew 8% in the first half, but investment banking fees of $169 million fell short of expectations and slipped year-over-year as middle-market M&A continued to lag large-cap and private-equity exits stayed muted, though pipelines hit record levels with a Q3 step-up of 20%+ expected. The two watch items driving a lower stock reaction were the smaller-than-hoped NIM step-up (a timing mismatch between loan growth and a seasonal deposit trough bridged with wholesale funds) and a $126 million rise in non-performing assets to 74 basis points on three idiosyncratic credits in multifamily, consumer goods, and agriculture, against which specific reserves are held and resolutions are expected. Capital remained a strength, with an 11.2% CET1 ratio, over $340 million of buybacks (on pace for at least $1.3 billion), ~$1 billion of technology/operations investment, and the announced Clearwater U.K. acquisition extending KeyCorp's middle-market advisory internationally; operating margin is not a standard metric for a bank.

• KeyCorp reported second-quarter GAAP diluted EPS of $0.44, up 26% year-over-year, on 7% revenue growth and 9% pre-provision net revenue growth.
• Commercial loan growth was strong, with period-end C&I loans up $2.1 billion (3% sequentially) driven by new relationships and deepening across utilities, power/renewables, real estate, and technology.
• Net interest margin expanded 2 basis points sequentially to 2.89%, with management on track to reach or exceed 3% by year-end, supported by over $9 billion of low-yielding fixed-asset repricing.
• Priority fee businesses (investment banking, commercial payments, wealth) collectively grew 8% in the first half; commercial payment fees rose 12%, wealth AUM hit a record $74 billion, and IB pipelines reached record M&A levels.
• Management raised full-year guidance for revenue (to 7%-8%), net interest income (to 9%-11%), and average loan growth (to 4%-5%), implying revenue growing twice as fast as expenses.
• The company repurchased over $340 million of stock (on pace for at least $1.3 billion for the year), maintained an 11.2% CET1 ratio, and announced the strategic Clearwater U.K. acquisition to extend its middle-market M&A advisory internationally.

• Investment banking and debt placement fees of $169 million came up short of expectations and were down year-over-year, as record middle-market deals were pushed out in diligence and middle-market activity continues to lag large-cap.
• Net interest margin rose only 2 basis points versus a larger expected step-up, and the stock opened lower; management attributed the shortfall to stronger-but-tighter-spread loan growth, a bigger balance sheet, and a seasonal deposit trough bridged with wholesale funding.
• Non-performing assets increased $126 million sequentially to an annualized 74 basis points of loans, driven by three idiosyncratic credits in real estate/multifamily, consumer goods, and agriculture.
• New loans came on at higher credit quality but lower (tighter) spreads, modestly diluting the margin, and management is willing to trade some NIM to add quality relationship clients.
• Commercial mortgage servicing fees fell $21 million year-over-year to $49 million on lower deposit-placement and special-servicing fees, and net charge-offs of 42 basis points sat at the low end (but within) the full-year outlook.