KeyCorp (KEY) — BATS 13/100 — 2026-07-21

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Summary based on KeyCorp earnings call on 2026-07-21

BotFlo AI Transformation Score for $KEY: 13 (13/100)

Sector AI Transformation Score for $KEY: 7 (7/50)

Presentation

(1/5) Strong Q2 earnings momentum and raised confidence
• 📈 KeyCorp reported Q2 EPS of $0.44, up 26% year-over-year, with revenue up 7% and pre-provision net revenue up 9%.
• 💰 Net interest margin expanded sequentially to 2.89%, with management on track to meet or exceed 3% by year-end.
• 🎯 Management expressed greater confidence in generating ROTCE above 15% by end of 2027 on the path to a 16% to 19% long-term target.

(2/5) Commercial growth, deposits, and capital deployment
• 🏦 Period-end C&I loans rose $2.1 billion or 3% sequentially as Key attracted new clients and deepened relationships.
• 💵 The deposit franchise performed well with total deposit costs down 2 basis points, while asset quality stayed strong with NCOs at 42 basis points.
• 🔄 Key repurchased more than $340 million of stock in the quarter and remains on pace for at least $1.3 billion of full-year buybacks while announcing the Clearwater U.K. advisory acquisition.

(3/5) Fee businesses, wealth, and client momentum
• 📊 Priority fee businesses include investment banking, commercial payments, and wealth, with commercial loan pipelines up 6% year-over-year.
• 💼 Wealth AUM reached a record $74 billion, and the mass affluent strategy since 2023 has added 59,000 households and over $4 billion of AUM.
• 🧭 Relationship households rose 3% and commercial clients 2% year-over-year, with wealth still less than 10% penetrated in existing mass affluent households.

(4/5) CFO detail on NII, fees, expenses, and credit
• 📉 Tax-equivalent NII rose 9% year-over-year and 2% sequentially, while NIM increased 2 basis points to 2.89% on loan growth, fixed-rate repricing, and an extra day.
• 📑 Investment banking fees were $169 million in the quarter and $366 million in the first half, with pipelines up 9% linked quarter and 3Q IB fees expected up 20% plus.
• ⚠️ NCOs were 42 basis points and NPAs rose on three idiosyncratic credits, but management does not expect meaningful incremental losses or a change to the 40–45 bp full-year NCO outlook.

(5/5) Raised 2026 guidance and second-half outlook
• 📈 Full-year revenue growth guidance was raised to 7% to 8% and NII growth to 9% to 11%, with NIM exit now expected at 3% to 3.05%.
• 🚀 Average loan growth guidance rose to 4% to 5% and average commercial loans to 8% to 10% for the year.
• ⚖️ Guidance implies substantial positive operating leverage, with revenues expected to grow twice as fast as expenses in 2026 while expense growth remains in a 3% to 4% full-year range.

Q&A

(1/12) Q&A: NIM drivers and path to 3% plus
• 📉 NIM rose in Q2 but less than expected due to stronger higher-quality loan growth at tighter spreads, lower overnight SOFR, and wholesale funding used through a seasonal deposit trough.
• 🔧 Second-half supports include about $9 billion of fixed-asset repricing with roughly 1.25% pickup and about 2% or $3 billion of core operating deposit growth.
• ✅ Key sees a path to 3% plus NIM with relatively low execution risk if loan growth moderates and deposit costs stay stable absent hikes.

(2/12) Q&A: Investment banking miss and back-half pipelines
• 📉 IB results came in short of internal expectations after a record 1Q and tough 2025 comps, but first-half fees of $366 million were still up about 4%.
• 📊 Pipelines are up 9% linked quarter and 31% year-over-year, supporting confidence in mid-single-digit full-year IB growth and a 20% plus 3Q step-up.
• ⏳ Middle-market deal timing and a bifurcation toward larger transactions delayed closes, but engaged pipelines and a higher-for-longer rate backdrop are viewed as constructive for getting deals done.

(3/12) Q&A: Trading NIM for client growth versus ROTCE targets
• 🎯 Management does not see the 15% plus ROTCE by year-end 2027 target as conflicting with growing NII and EPS through targeted new clients.
• 🏦 About 58% of C&I loans are investment grade, and returns require expanding beyond initial capital provision into broader relationship products over time.
• 💵 On deposits, Clark cited good visibility to largely commercial relationship-driven growth and no concern about hitting Q4’27 return or related NIM targets.

(4/12) Q&A: Operating leverage sustainability and buyback priorities
• ⚖️ Assuming a constructive macro, Key feels comfortable sustaining operating leverage through expense discipline plus strong pipelines and business momentum.
• 💻 Investments continue, including hiring and about $1 billion of tech and ops spend this year, while expense growth still fights toward long-term targets.
• 🔄 Capital priorities remain clients first, then business investment, dividend, and buybacks last, with at least $1.3 billion of repurchases and a marked CET1 target around 9.5% to 10%.

(5/12) Q&A: Path from ~3% NIM exit to 3.25% and middle-market IB cycle
• 📈 Clark said the difference between a 3% and 3.05% 2026 exit should not threaten 2027, with about $30 billion of fixed-asset repricing through year-end 2027 supporting the structural path.
• ✅ Operating deposit growth and readiness for flat rates or hikes keep management confident the 3.25% NIM view remains intact.
• ⏳ Middle-market M&A is lagging large-cap activity; about 40% of fees are PE-driven and Key sees early innings of a middle-market renaissance as exits eventually clear.

(6/12) Q&A: Higher-quality loan mix, AI power demand, and fee follow-through
• 🏭 Tighter spreads reflect targeted investment-grade clients and capital-markets-oriented relationships rather than a broad unexplained industry shift.
• ⚡ Chris said much credit demand supports U.S. electrical infrastructure build-out, as AI has made shortages of power generation and distribution abundantly clear.
• 🎯 On new clients, Key expects to hit return hurdles within 12 to 18 months via disciplined six-month reviews and industry-focused cross-sell of payments, hedging, and advisory.

(7/12) Q&A: Intentional loan mix, NDFI, and why Q2 NIM under-shot
• 🧭 Focus remains on seven industry verticals where Key understands winners and losers; similarly graded spreads are only modestly tighter year-over-year.
• 📋 NDFI rose about $600 million including investment-grade REIT growth; Key is not avoiding NDFI labels but will walk from specialty-finance deals that do not make sense.
• ⏱️ The main Q2 NIM surprise was timing mismatch between asset growth and deposit trough; smoother NIM is expected if funding is filled with quality deposits as loan growth moderates.

(8/12) Q&A: Clearwater U.K. deal and capital-markets diversification
• 🌍 Clearwater is an M&A boutique JV partner for six years, adding U.K. and continental distribution for U.S. sell-side work and access to U.S. PE buyers for European sellers.
• 🤝 The deal is both offensive and defensive and is expected to buttress Key’s leading middle-market M&A practice after many joint transactions.
• 🔍 Broader expansion will stay adjacent to current expertise, including new cities and industry verticals with large fee pools where Key can win.

(9/12) Q&A: Pushback on 2% deposit growth and PE-driven IB recovery
• 💵 Chris defended deposit visibility via commercial primacy in 82% of deposits and knowledge of additional client balances that can be won at known prices.
• 📊 IB pipelines are described as real though timing is uncertain; management calls full-year targets conservative after a record prior year and record 1Q.
• ⏳ Key does need the roughly 40% sponsor fee mix to return and believes PE holders are last movers who must eventually exit to raise new funds, while C&I activity is already improving.

(10/12) Q&A: Deposit mix outlook and NPA resolution confidence
• 💵 Noninterest-bearing mix is expected to stay roughly flattish in the back half as strong operating deposits arrive partly in interest-bearing and hybrid accounts.
• 🏠 Consumer household growth continues via core checking, with only a modest second-half pickup expected in CD and MMDA production in select markets.
• ✅ Reserve release occurred despite higher NPAs because portfolio health improved; specific reserves and idiosyncratic multifamily, consumer, and ag names support low loss content and unchanged 40–45 bp NCO guide.

(11/12) Q&A: AI second-derivative credit risks and idiosyncratic NPL drivers
• 🤖 Management has begun discussing AI second-derivative exposures and expects multi-year strength in power generation and distribution because data centers consume city-scale electricity.
• ⚠️ Nearer-term watch areas include software companies, where direct exposure is under about $300 million, and professional services such as lawyers, consultants, and accountants where LLMs apply easily.
• 🔍 Quarterly portfolio reviews hunt emerging hotspots; the other NPL names reflected tariff-driven consumer bankruptcy and Western Washington ag labor constraints, not private credit migration.

(12/12) Q&A: Payments and wealth fee outlook and deposit competition
• 💳 Payments, including embedded banking, has been a double-digit grower and is projected to remain one going forward after sustained investment.
• 💼 Wealth AUM is $74 billion with related fees growing about 14%, supported by the mass affluent focus launched in 2023.
• 🏛️ Deposit competition varies by region and has intensified somewhat with loan growth, but in a flat-rate world Key does not expect meaningful further price moves beyond beta responses to Fed hikes.