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| 8-K - FORM 8-K - KEYCORP /NEW/ | d625225d8k.htm |
 KeyCorp
Bank of America Merrill Lynch 2013 Banking and
Financial Services Conference
Chris Gorman
President, Key Corporate Bank
Don Kimble
Chief Financial Officer
EXHIBIT 99.1 |
 FORWARD-LOOKING STATEMENTS AND ADDITIONAL
INFORMATION DISCLOSURE
This presentation contains forward-looking statements, including statements
about our financial condition, results of operations, asset quality trends,
capital
levels
and
profitability.
Forward-looking
statements
can
often
be
identified
by
words
such
as
“outlook,”
“goal,”
“objective,”
“plan,”
“expect,”
“anticipate,”
“intend,”
“project,”
“believe,”
or “estimate.”
Forward-looking statements represent management’s current expectations
and forecasts regarding future events. If underlying assumptions prove to be
inaccurate or unknown risks or uncertainties arise, actual results could vary
materially from these projections or expectations. Risks and uncertainties
include but are not limited to: (1) continued strain on the global financial markets; (2) the slow progress of the U.S. economic
recovery; changes in trade, monetary and fiscal policies; (3) our ability to
anticipate interest rate changes correctly and manage interest rate risk; (4)
changes
in
local,
regional
and
international
business,
economic
or
political
conditions;
(5)
regulatory
initiatives
in
the
U.S.,
including
the
Dodd-Frank
Act, subjecting us to new and more stringent regulatory requirements; (6) the
increase in unemployment or deterioration in real estate asset values or
their failure to recover for an extended period of time; (7) adverse changes in
credit quality trends; (8) our ability to determine accurate values of
certain assets and liabilities; (9) adverse behaviors in securities, public debt,
and capital markets ; (10) unanticipated changes in our liquidity position,
including but not limited to, changes in the cost of liquidity, our ability to
enter the financial markets and to secure alternative funding sources; (11) the
soundness
of
other
financial
institutions;
(12)
our
ability
to
satisfy
new
capital
and
liquidity
standards
such
as
those
imposed
by
the
Dodd-Frank
Act
and
those
adopted
by
the
Basel
Committee;
(13)
our
ability
to
receive
dividends
from
our
subsidiary,
KeyBank;
(14)
downgrades
in
our
credit
ratings
and the credit ratings of KeyBank; (15) our ability to timely and effectively
implement our strategic initiatives; (16) operational or risk management
failures; breaches of security or failures of our technology systems due to
technological or other factors and cybersecurity threats; (17) the occurrence
of natural or man-made disasters or conflicts or terrorist attacks; (18) the
adequacy of our risk management programs; (19) adverse judicial
proceedings;
(20)
increased
competitive
pressure
due
to
industry
consolidation;
(21)
our
ability
to
attract
and
retain
talented
executives
and
employees, to effectively sell additional products or services to new or existing
customers, and to manage our reputational risks; and (22) unanticipated
adverse effects of acquisitions and dispositions of assets or businesses. We
provide greater detail regarding these factors in our 2012 Form 10-K and subsequent filings, which are available online at www.key.com/ir and
www.sec.gov. Forward looking statements speak only as of the date they are made and
Key does not undertake any obligation to update the forward- looking
statements to reflect new information or future events. This
presentation
also
includes
certain
Non-GAAP
financial
measures
related
to
“tangible
common
equity,”
“Tier
1
common
equity,”
“pre-provision
net
revenue,”
“cash
efficiency
ratio,”
and
“adjusted
cash
efficiency
ratio.”
Management
believes
these
ratios
may
assist
investors,
analysts
and
regulators
in analyzing Key’s financials. Although Key has procedures in place to ensure
that these measures are calculated using the appropriate GAAP or
regulatory
components,
they
have
limitations
as
analytical
tools
and
should
not
be
considered
in
isolation,
or
as
a
substitute
for
analysis
of
results
under GAAP. For more information on these calculations and to view the
reconciliations to the most comparable GAAP measures, please refer to the
Appendix to this presentation or our most recent earnings press release, which is
accessible at www.key.com/ir. 2 |
 Key
is a strong company that is well-positioned to leverage its distinctive
capabilities Key –
Who We Are
Revenue
Ranking based on asset size
Loans and deposit balances: 3Q13 YTD average; revenue and noninterest income: YTD
as of 9/30/13 Loans
•
15
th
largest U.S. bank-based financial
services company
•
Two primary lines of business:
Key Community Bank
Key Corporate Bank
•
Business diversity across the franchise
•
Relationship-based strategy and value
proposition
•
Local presence with industry expertise
Key Corporate Bank
Key Community Bank
Other
Noninterest Income
3 |
 Execution of strategic priorities position Key to best deliver for its clients
Positioned to Win
Executing on distinct capabilities
and business alignment
Investing in franchise
Improving productivity
Maintaining moderate risk profile
Remaining disciplined with
capital management
Solutions that meet clients’
needs
Broad capabilities, including on-balance sheet and capital markets
alternatives
Competitive businesses, positioned to grow
Winning market share and investing for growth
More efficient and productive with improved client focus
Cash efficiency ratio
(a)
down to 64% in 3Q13 from 69% at the
launch of the efficiency initiative (2Q12)
Strong credit culture and risk management process
Net charge-offs down 66% from 3Q12
Delivering shareholder value and returning capital
Total payout of 79% YTD
(b)
Benefit to Key and Clients
Strategic Priorities
(a)
Excludes efficiency initiative charges
(b)
Includes dividends and share repurchases through 9/30/13
4 |
 Business Model: Aligned and Targeted
Traditional Bank Products
Capital Markets Capabilities
Deposits & payments
Loans
Wealth management &
private banking
Equipment
finance
Commercial mortgage
banking
Derivatives & foreign
exchange
Equity capital markets
Equity research
M&A /
financial sponsors /
leveraged finance
Investment grade & high-
yield debt
Loan syndications
Public finance
Key’s Competitive Advantage
Commercial Client Revenue Size ($MM)
Local delivery of broad product set and industry expertise
Community Bank
Corporate Bank
Targeted Industries
5 |
 6
Key Corporate Bank
Our middle market focus, industry-driven operating model and broad corporate
& investment banking capability set are unique…and drive results
Regional Banks
Universal Banks
Capability / Model
Middle Market Focus
Industry-driven Model
Investment Banking
Focused Franchise
Deep Industry Knowledge
Results (FY13)
Case Study: Industrial (Specialty Chemicals Practice)
•
Four dedicated chemicals coverage
bankers with aligned M&A, syndications
and capital markets professionals
•
Leading M&A advisory practice
•
Strong presence across industry events
•
Top-rated equity research franchise (two
analysts covering 36 companies)
•
$1B in capital committed to sector
•
> 50 clients and 200 prospects
Commercial Banking
Boutiques
Note:
Operating
model
and
capabilities
comparison
data
are
illustrative
and
represent
a
typical
firm
within
each
category;
some
exceptions
will
apply. |
 7
Delivering the Distinctive Platform
Key can lead transactions across markets --
this breadth and access allow
us to match client needs and market conditions to deliver the best execution
for our clients
•
In the twelve months ended 3Q13, Key Corporate Bank raised $57B in capital in >
800 transactions, less than 15% of which went to our balance sheet
Healthcare
Energy
Consumer
Industrial
Public Sector
Real Estate
Key’s Balance
Sheet
Equity Capital
Markets
Syndicated Loans
Real Estate Capital
Markets
Debt Capital Markets
(IG/HY/Public Fin.)
Private Capital
Industry Verticals
Capital Placement ($B)
Key’s Capital Solutions
Credit facility (bank or institutional)
Bridge loan
Direct placement (debt or equity)
Equity offerings (IPOs / FOs / converts)
Commercial mortgage
Investment grade & high-yield debt
Mezzanine capital placement
Tax-exempt securities
Note:
Capital
placement
$
are
LTM
3Q13
and
include:
in
transactions
where
Key
served
as
bookrunner
(or
equivalent)
--
100%
of
capital
raised;
in
transactions
where
Key
served
as
co-manager
--
the
proportion
of
capital
corresponding
to
Key’s
transaction
economics
(e.g.,
$20MM
if
Key
were
a
10%
co-manager
on
a
$200MM
equity
offering).
Balance
sheet
figures
represent
loan
commitments.
Data
exclude
equipment
finance
and
syndicated
loan
participations.
$8
$36
$5
$5
$1
$2
Additional value is created as Key delivers non-capital solutions (e.g.,
payments, derivatives, foreign exchange, financial advisory) to
clients |
 Growing
Our Franchise We have taken purposeful steps to enhance our ability to
acquire and expand
targeted client relationships within our industry verticals
the result is
greater transaction activity and enhanced roles for Key
•
Key Corporate Bank has raised $46B of capital for our clients during the first nine
months of FY13 --
more than any previous full-year period
Capital Placement ($B)
Note:
Capital
placement
$
include:
in
transactions
where
Key
served
as
bookrunner
(or
equivalent)
--
100%
of
capital
raised;
in
transactions
where
Key
served
as
co-
manager
--
the
proportion
of
capital
corresponding
to
Key’s
transaction
economics
(e.g.,
$20MM
if
Key
were
a
10%
co-manager
on
a
$200MM
equity
offering).
Data
include
loan
commitments
and
exclude
equipment
finance
and
syndicated
loan
participations.
8
$23
$31
$37
$46
$0
$15
$30
$45
$60
$75
FY10
FY11
FY12
YTD 3Q13 |
 $29.4
$28.4
$25.5
$22.9
$21.5
$19.9
$18.7
$18.0
$17.2
$16.6
$17.3
$18.5
$18.5
$18.4
$19.2
$19.9
$20.1
$20.2
$20.9
$177
$149
$149
$153
$154
$155
$193
$208
$243
$258
$227
$224
$222
$235
$272
$320
$339
$352
$355
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
Achieving Results
Note:
Chart depicts period-end loan balances for Key Corporate Bank only. LTM
denotes the twelve month period ended 3Q13. We continue to make solid progress
in growing both loans and investment banking & debt placement fees
-- demonstrating the power of our model
•
Since 1Q09, investment banking and debt placement fees have doubled while we
focused our balance sheet strategically on a more targeted client base
•
Loan balances up $4.3B (+26%) vs. 2Q11 trough
Loan Balances ($B) & LTM Investment Banking & Debt Placement Fees
($MM) Corporate Bank Loan Balances ($B)
LTM Investment Banking & Debt Placement Fees ($MM)
9 |
 External Benchmarking
Our results compare favorably to external benchmarks
we are gaining C&I
loan share and getting paid for the risks we take
Loan Growth
Source:
Federal
Reserve
H8
report
dated
October
25,
2013;
peer
SEC
filings
and
earnings
releases.
Peer
data
are
for
Corporate
Bank
equivalent
segments
of
peer
financial
institutions
(e.g.,
PNC
Corporate
&
Institutional
Banking
segment).
Peer
banks
include
BAC,
CMA,
FITB,
JPM,
PNC,
STI,
USB,
WFC.
Revenue
/
assets
calculation
is
calculated
based
on
LTM
3Q13
revenue
divided
by
3Q13
average
assets
for
Key
and
peers.
Asset Productivity
Since our portfolio troughed in 2Q11, Key Corporate Bank has taken
C&I loan share…
…while our broad product capabilities generate peer leading asset
productivity
10 |
 Note:
Middle
Market
denotes:
Public
companies
with
market
capitalization
between
$50MM
and
$1.5B
+
private
companies
and
public
sector
entities
with
revenue between $50MM and $1.5B. Key clients include Key Corporate Bank +
Commercial Banking business units. Source:
Capital IQ; Dun & Bradstreet; U.S. Census.
We have a substantial opportunity to expand our client base --
targeting
middle market companies $50MM to $1.5B within our focus industry
verticals
•
~5,000 prospects headquartered within Key’s Community Bank franchise that
align with the Corporate Bank’s focus industry verticals
•
On a YTD basis, Key’s new corporate & investment banking clients generate
average revenue ~$300k
Sizing the Opportunity
U.S. Middle Market Universe
(all industries and geographies)
Focus Verticals
(all geographies)
Focus Verticals + In-Footprint
~40,000 companies & institutions
~25,000 companies & institutions
~6,000 companies & institutions
Key clients
Non-clients
11 |
 A
clear, focused strategy executed with rigor and discipline over the cycle is
the core of our risk management strategy
•
Net charge-offs of $21MM (10bps) over the last twelve months
•
Portfolio credit quality is strongest since pre-crisis across all
metrics Effective Risk Management
•
Industry expertise
& specialization
–
Lend to sectors we
know well
–
Better discern risk/return
trade-offs
–
Ability to distribute risk via
syndications and capital
markets solutions
•
Client selection
–
Long-term approach to client
relationships and franchise building
–
Target clients within Key’s risk
appetite
•
Risk culture & awareness
–
Strong partnership
between sales and risk
teams
•
Core principles
•
Willing to exit relationships
–
Exited > 2,000 client relationships
post-crisis for risk-related reasons
–
Reduced construction lending by
more than 75% ($2B) since crisis
•
Clearly defined “good
business”
parameters
–
Strong hurdles & tracking
for new opportunities
–
Disciplined hold limits
–
Structural rigor
–
Client-level ROE thresholds
–
Lead with ideas and
solutions, vs. balance sheet
12 |
 Financial Review
13
*
*
*
*
*
*
*
*
* |
 Progress on Targets for Success
Focus areas
Metrics
(a)
KEY
FY11
KEY
FY12
KEY
3Q13 YTD
Targets
Improving balance
sheet efficiency
Loan to deposit ratio
(b)
87%
86%
84%
90-100%
Maintaining
moderate risk profile
NCOs to average loans
1.11%
.69%
.33%
40-60 bps
Provision to average loans
(.12)%
.45%
.28%
Growing high
quality, diverse
revenue streams
Net interest margin
3.16%
3.21%
3.16%
>3.50%
Noninterest income
to total revenue
44%
46%
43%
>40%
Generating positive
operating leverage
Adj. cash efficiency ratio
(ex. efficiency initiative
charges)
(c)
68%
67%
65%
60-65%
Strengthening
returns with
disciplined capital
management
Return on average assets
1.17%
1.05%
1.02%
1.00-1.25%
(a)
Continuing operations, unless otherwise noted
(b)
Represents period-end consolidated total loans and loans held for sale
(excluding education loans in the securitization trusts) divided by
period-end consolidated total deposits (excluding deposits in foreign office)
(c)
Excludes intangible asset amortization; non-GAAP measure: see Appendix for
reconciliation 14 |
 Operating Leverage: Driving Productivity and Efficiency
(a)
Efficiency initiative charges include pension settlement in 3Q13
(b)
Non-GAAP measures: see Appendix for reconciliation
(c)
Excludes one-time gains of $54 million related to the redemption of trust
preferred securities Achieved cost savings target; focused on further
efficiency improvement Driving productivity enhancements: improving annualized
revenue per FTE 15 |
 Strong Capital Position is a Competitive Strength Over Time
Disciplined Capital Management
Executing on Capital Priorities
(a)
Peer group data source: SNL; 9/30/13 ratios are estimated
1. Organic Growth
4. Opportunistic Growth
2. Dividends
3. Share Repurchases
16 |
 Focused Forward
Key is well-positioned to grow and improve returns
17 |
 Appendix
18
*
*
*
*
*
*
*
*
*
* |
 Outlook
and Expectations Loans
•
Mid-single digit average balance growth
NIM
•
Relatively stable to the 3Q13 level over the next few quarters
•
Potential downward pressure, dependent upon level of liquidity
Revenue
•
Net interest income relatively stable in 2H13
•
Continued strength in fee income businesses
Expense
•
$680 -
$700 million for 4Q13, including one-time charges
Efficiency
•
60% -
65% cash efficiency
NCOs / Provision
•
Within
or
below
targeted
range
of
40
–
60
bps
of
average
loans
•
Provision near the level of net charge-offs
Capital
•
Remaining share repurchase authority of $187 million over the next
two quarters
Guidance provided during 3Q13 earnings call
19 |
 Efficient Balance Sheet: Improving Balance Sheet Mix
Average Loans Continue to Increase, Driven by Commercial, Financial &
Agricultural (CF&A) Growth in Non-time Deposits with Improved Funding
Cost 20
Note: Loan and deposit figures represent average balances; deposits exclude
deposits in foreign office (a) Source: Federal Reserve H8;
industry data are not seasonally adjusted (b) Transaction
deposits include noninterest-bearing, NOW, and MMDA |
 Average Total Investment Securities
Highlights
High Quality Investment Portfolio
Portfolio composed of Agency or GSE backed
CMOs: Fannie, Freddie & GNMA
–
No private label MBS or financial paper
Average portfolio life at 9/30/13 of 3.8 years
compared to 3.2 years at 6/30/13
Unrealized net gain of $3 million on available-for-
sale securities portfolio at 9/30/13
Securities cash flows of $1.3 billion in 3Q13
and $1.5 billion in 2Q13
Yields on purchases were 67 bps lower than
3Q13 maturities
Securities to Total Assets
(b)
(a) Yield is calculated on the basis of amortized cost
(b) Includes end of period held-to-maturity and
available-for-sale securities 21 |
 High
Quality Revenue: Diverse Streams TE = Taxable equivalent
(a) Excludes gains from the redemption of trust preferred securities
and leveraged lease terminations Noninterest income diversity provides
strength; growth in core businesses (a)
Net Interest Income & Net Interest Margin (TE) Trend
Noninterest Income
22
Continuing Operations |
 Significant Improvement in Credit Quality Trends
Moderate Risk Profile: Strong Credit Quality
Maintaining Moderate Risk Profile
(a)
Peer group data source: SNL
23 |
 Asset
Quality Trends Quarterly Change in Criticized Outstandings
(a)
Delinquencies to Period-end Total Loans
(a)
Loan and lease outstandings
(b)
From continuing operations
Metric
(b)
3Q13
2Q13
1Q13
4Q12
3Q12
Delinquencies to EOP total loans: 30-89 days
.54
%
.47
%
.70
%
.80
%
.69
%
Delinquencies to EOP total loans: 90+ days
.17
.15
.16
.15
.17
NPLs to EOP portfolio loans
1.01
1.23
1.24
1.28
1.27
NPAs to EOP portfolio loans + OREO + Other NPAs
1.08
1.30
1.34
1.39
1.39
Allowance for loan losses to period-end loans
1.62
1.65
1.70
1.68
1.73
Allowance for loan losses to NPLs
160.4
134.4
137.4
131.8
136.0
24 |
 Period-
end
loans
Average
loans
Net loan
charge-offs
Net loan
charge-offs
(b)
/
average loans
(%)
Nonperforming
loans
(c)
Ending
allowance
Allowance /
period-end
loans
(d)
(%)
Allowance /
NPLs
(%)
9/30/13
3Q13
3Q13
2Q13
3Q13
2Q13
9/30/13
6/30/13
9/30/13
9/30/13
9/30/13
Commercial, financial and agricultural
(a)
$24,317
$23,864
$ 4
$ 8
.07
.14
$ 102
$ 146
$
370 1.52
362.75
Commercial real estate:
Commercial Mortgage
7,544
7,575
(8)
(2)
(.42)
(.11)
58
106
172
2.28
296.55
Construction
1,058
1,073
(6)
1
(2.22)
.38
17
26
36
3.40
211.76
Commercial lease financing
4,550
4,633
15
(2)
1.28
(.17)
22
14
64
1.41
290.91
Real estate –
residential mortgage
2,198
2,193
2
4
.36
.74
98
94
35
1.59
35.71
Home equity:
Key Community Bank
10,285
10,247
12
14
.46
.56
198
205
82
.80
41.41
Other
353
364
2
5
2.18
5.16
13
16
14
3.97
107.69
Consumer other –
Key Community Bank
1,440
1,435
7
5
1.94
1.44
2
3
27
1.88
N/M
Credit cards
698
700
8
6
4.53
3.45
4
11
34
4.87
850.00
Consumer other:
Marine
1,083
1,120
1
5
.35
1.66
25
30
31
2.86
124.00
Other
71
67
-
1
-
5.42
2
1
3
4.23
150.00
Continuing total
(e)
$53,597
$53,271
$ 37
$ 45
.28
.34
$ 541
$ 652
$
868 1.62
160.44
Discontinued operations
4,738
4,905
9
7
1.36
1.04
23
19
38
.80
165.22
Consolidated total
$58,335
$58,176
$46
$ 52
.33
.38
$ 564
$ 671
$
906 1.55
160.64
Credit Quality by Portfolio
Credit Quality
(a) 9-30-13 ending loan balances include $96 million of
commercial credit card balances; 9-30-13 average loan balances
include $96 million of assets from commercial credit cards
(b)
Net loan charge-off amounts are annualized in calculation. NCO ratios for
discontinued operations and consolidated Key exclude education loans in the
securitization trusts since valued at fair-market value (c)
9-30-13 and 6-30-13 NPL amounts exclude $18 million and $19
million respectively of purchased credit impaired loans acquired in July 2012.
(d) Allowance/period loans ratios for discontinued operations and
consolidated Key exclude education loans in the securitization trusts since valued at
fair-market value
(e) 9-30-13 ending loan balances include purchased loans of $176
million of which $18 million were purchased credit impaired $ in millions
N/M = Not Meaningful
25 |
 Vintage (% of Loans)
Loan
Balances
Average Loan
Size ($)
Average
FICO
Average
LTV
(a)
% of Loans
LTV>90%
2012 and
later
2011
2010
2009
2008 and
prior
Home equity loans and lines
First lien
$
16 $ 23,209
744
35
%
.4
%
-
-
1%
1%
98
%
Second lien
337
23,003
729
82
32.5
-
-
-
-
100
Total home equity loans and lines
$ 353
23,013
729
80
31.0
-
-
-
-
100
Nonaccrual loans
First lien
$
1 $
24,247 729
33
%
-
-
-
-
-
100
%
Second lien
12
24,712
702
82
35.1
%
-
-
-
-
100
Total home equity nonaccrual loans
$
13 24,685
703
80
33.0
-
-
-
-
100
Exit Portfolio -
Home Equity
Third quarter net charge-offs
$
2 -
-
-
-
100
%
Net loan charge-offs to average loans
2.18
%
Vintage (% of Loans)
Loan
Balances
Average Loan
Size ($)
Average
FICO
Average
LTV
(a)
% of Loans
LTV>90%
2012 and
later
2011
2010
2009
2008 and
prior
Home equity loans and lines
First lien
$
5,932 $
67,691 765
67
%
.6
%
40
%
6%
4
%
4
%
46%
Second lien
4,353
47,569
760
76
3.2
25
6
4
4
61
Total home equity loans and lines
$ 10,285
57,525
763
71
1.8
33
6
4
4
53
Nonaccrual loans
First lien
$
108 $
58,708 713
73
%
.4%
2
%
3%
3
%
5
%
87%
Second lien
90
48,922
711
78
2.0
-
2
2
4
92
Total home equity nonaccrual loans
$
198 53,794
712
75
1.1
1
2
3
5
89
Community Bank -
Home Equity
Third quarter net charge-offs
$
12 -
3%
-
4
%
93%
Net loan charge-offs to average loans
.46
%
(a)
Average LTVs are at origination. Current average LTVs for Community Bank total
home equity loans and lines is approximately 74%, which compares to 75% at
the end of the second quarter 2013. Community Bank –
Home Equity
Exit Portfolio –
Home Equity
$ in millions, except average loan size
Home Equity Loans –
9/30/13
$ in millions, except average loan size
26 |
 Balance Outstanding
Change
Net Loan Charge-offs
Balance on
Nonperforming Status
9-30-13
6-30-13
9-30-13
vs.
6-30-13
3Q13
(c)
2Q13
(c)
9-30-13
6-30-13
Residential properties –
homebuilder
$ 26
$ 26
-
-
$ 1
$ 8
$ 8
Marine and RV floor plan
25
28
$ (3)
-
-
6
7
Commercial lease financing
(a)
796
931
(135)
$ (2)
(2)
1
1
Total commercial loans
847
985
(138)
(2)
(1)
15
16
Home equity –
Other
353
375
(22)
2
5
14
16
Marine
1,083
1,160
(77)
1
5
25
31
RV and other consumer
71
69
2
-
1
2
-
Total consumer loans
1,507
1,604
(97)
3
11
41
47
Total exit loans in loan portfolio
$ 2,354
$ 2,589
$ (235)
$ 1
$ 10
$ 56
$ 63
Discontinued operations –
education lending
business (not included in exit loans above)
(b)
$ 4,738
$ 4,992
$ (254)
$ 9
$ 7
$ 23
$ 19
(a)
Includes (1) the business aviation, commercial vehicle, office products,
construction and industrial leases; (2) Canadian lease financing portfolios;
and (3) all remaining balances related to lease in, lease out; sale in, lease out;
service contract leases; and qualified technological equipment leases (b)
Includes loans in Key’s consolidated education loan securitization
trusts (c)
Credit amounts indicate recoveries exceeded charge-offs
$ in millions
Exit Loan Portfolio
Exit Loan Portfolio
27 |
 Three months ended
9-30-13
6-30-13
9-30-12
Tangible common equity to tangible assets at period end
Key shareholders’
equity (GAAP)
$
10,206
$
10,229
$
10,251
Less:
Intangible assets
(a)
1,017
1,021
1,031
Preferred Stock, Series A
(b)
282
282
291
Tangible common equity (non-GAAP)
$
8,907
$
8,926
$
8,929
Total assets (GAAP)
$
90,708
$
90,639
$
86,950
Less:
Intangible assets
(a)
1,017
1,021
1,031
Tangible assets (non-GAAP)
$
89,691
$
89,618
$
85,919
Tangible common equity to tangible assets ratio (non-GAAP)
9.93
%
9.96
%
10.39
%
Tier 1 common equity at period end
Key shareholders' equity (GAAP)
$
10,206
$
10,229
$
10,251
Qualifying capital securities
340
339
339
Less:
Goodwill
979
979
979
Accumulated
other
comprehensive
income
(loss)
(c)
(409)
(359)
(109)
Other assets
(d)
96
101
121
Total Tier 1 capital (regulatory)
9,880
9,847
9,599
Less:
Qualifying capital securities
340
339
339
Preferred Stock, Series A
(b)
282
282
291
Total Tier 1 common equity (non-GAAP)
$
9,258
$
9,226
$
8,969
Net
risk-weighted
assets
(regulatory)
(d)
$
82,913
$
82,528
$
79,363
Tier 1 common equity ratio (non-GAAP)
11.17
%
11.18
%
11.30
%
Pre-provision net revenue
Net interest income (GAAP)
$
578
$
581
$
572
Plus:
Taxable-equivalent adjustment
6
5
6
Noninterest income (GAAP)
459
429
518
Less:
Noninterest expense (GAAP)
716
711
712
Pre-provision net revenue from continuing operations (non-GAAP)
$
327
$
304
$
384
GAAP to Non-GAAP Reconciliation
$ in millions
(a)
Three months ended September 30, 2013, June 30, 2013, and September 30, 2012
exclude $99 million, $107 million, and $130 million, respectively, of
period end purchased credit card receivable intangible assets (b)
Net of capital surplus for the three months ended September 30, 2013 and June 30,
2013 (c)
Includes net unrealized gains or losses on securities available for sale (except
for net unrealized losses on marketable equity securities), net gains or
losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other
postretirement plans
(d)
Other assets deducted from Tier 1 capital and net risk-weighted assets consist
of disallowed intangible assets (excluding goodwill) and deductible
portions of nonfinancial equity investments. There were no disallowed
deferred tax assets at 9-30-13, 6-30-13, and 9-30-12
28 |
 GAAP
to Non-GAAP Reconciliation (continued) $ in millions
(a)
Three months ended September 30, 2013, June 30, 2013, and September 30, 2012
exclude $103 million, $110 million and $86 million, respectively, of
average ending purchased credit card receivable intangible assets
Three months ended
9-30-13
6-30-13
9-30-12
Average tangible common equity
Average Key shareholders' equity (GAAP)
$
10,237
$
10,314
$
10,222
Less:
Intangible assets (average)
(a)
1,019
1,023
1,026
Preferred Stock, Series A (average)
291
291
291
Average tangible common equity (non-GAAP)
$
8,927
$
9,000
$
8,905
Return on average tangible common equity from continuing operations
Net
income
(loss)
from
continuing
operations
attributable
to
Key
common
shareholders
(GAAP)
$
229
$
193
$
211
Average tangible common equity (non-GAAP)
8,927
9,000
8,905
Return on average tangible common equity from continuing operations
(non-GAAP) 10.18
%
8.60
%
9.43
%
Return on average tangible common equity consolidated
Net income (loss) attributable to Key common shareholders (GAAP)
$
266
$
198
$
214
Average tangible common equity (non-GAAP)
8,927
9,000
8,905
Return on average tangible common equity consolidated (non-GAAP)
11.82
%
8.82
%
9.56
%
Cash efficiency ratio
Noninterest expense (GAAP)
$
716
$
711
$
712
Less:
Intangible asset amortization on credit cards (GAAP)
8
7
6
Other intangible asset amortization (GAAP)
4
3
3
Adjusted noninterest expense (non-GAAP)
$
704
$
701
$
703
Net interest income (GAAP)
$
578
$
581
$
572
Plus:
Taxable-equivalent adjustment
6
5
6
Noninterest income (GAAP)
459
429
518
Total taxable-equivalent revenue (non-GAAP)
$
1,043
$
1,015
$
1,096
Cash efficiency ratio (non-GAAP)
67.5
%
69.1
%
64.1
%
Adjusted cash efficiency ratio
Adjusted noninterest expense (non-GAAP)
$
704
$
701
$
703
Less:
Efficiency initiative and pension settlement charges (non-GAAP)
41
37
9
Net adjusted noninterest expense (non-GAAP)
$
663
$
664
$
694
Total taxable-equivalent revenue (non-GAAP)
$
1,043
$
1,015
$
1,096
Adjusted cash efficiency ratio (non-GAAP)
63.6
%
65.4
%
63.3
%
29 |
 Tier 1
Common Equity Under the Regulatory Capital Rules, Incorporating Basel III
Guidance (estimated) (a)
KeyCorp & Subsidiaries
$ in billions
Quarter ended
Sept. 30, 2013
Tier 1 common equity under current regulatory rules
$
9.3 Adjustments from current regulatory rules
to the Regulatory Capital Rules: Deferred tax assets and other
(b)
(.1)
Tier 1 common equity anticipated under the Regulatory Capital Rules
(c)
$
9.1 Total risk-weighted
assets under current regulatory rules
$
82.9 Adjustments from current regulatory rules to the
Regulatory Capital Rules: Loan commitments <1 year
.5
Past Due Loans
.2
Mortgage servicing assets
(d)
.6
Deferred tax assets
(d)
.2
Other
1.5
Total risk-weighted assets anticipated under the Regulatory Capital
Rules
$
85.9 Tier 1 common equity ratio under the Regulatory Capital
Rules 10.6
%
(a)
Tier
1
common
equity
is
a
non-generally
accepted
accounting
principle
(GAAP)
financial
measure
that
is
used
by
investors,
analysis
and
bank
regulatory agencies to assess the capital position of financial services
companies; management reviews Tier 1 common equity along with other
measures of capital as part of its financial analyses
(b)
Includes the deferred tax asset subject to future taxable income
for realization, primarily tax credit carryforwards
(c)
The
anticipated
amount
of
regulatory
capital
and
risk-weighted
assets
is
based
upon
the
federal
banking
agencies’
Regulatory
Capital
Rules
(as
fully phased-in on January 1, 2019); Key is subject to the Regulatory
Capital Rules under the “standardized approach”
(d)
Item is included in the 10%/15% exceptions bucket calculation and is
risk-weighted at 250% Table may not foot due to rounding
30 |