KeyCorp's fourth-quarter profit beats estimates on dealmaking boom

KeyCorp

21/01/2025 14:24

Jan 21 (Reuters) - KeyCorp's  KEY.N  fourth-quarter
adjusted profit beat estimates on Tuesday, as an improved
macroeconomic and regulatory outlook boosted fees earned off
advising clients on deals.
    Investor optimism fueled by the U.S. Federal Reserve's
interest rate cuts, coupled with anticipated deregulation and
tax cuts under the Donald Trump administration, has accelerated
deal activity.
    KeyCorp's adjusted non-interest income was up 27% in the
quarter. Its investment banking fees rose 63% to $221 million.
    The bank's adjusted profit was 38 cents per share for the
three months ended Dec. 31, beating analysts' average estimate
of 33 cents, according to data compiled by LSEG.
    Still, shares of the Cleveland, Ohio-based bank dropped 4%
in premarket trading, as it took charges related to the loss on
the sale of securities and maintained its forecast for net
interest income growth in 2025.    
    INTEREST INCOME OUTLOOK
    While banks are expected to benefit this year from
normalization of deposit costs due to lower interest rates and a
projected recovery in loan demand, the Fed is likely to cut
rates by less than what analysts previously estimated,
potentially limiting interest income growth across the industry.
    KeyCorp expects its NII — the difference between what a bank
earns off loans and pays on deposits — to grow roughly 20% in
2025. Analysts were expecting a 22% jump.
    Truist analyst Brian Foran said the NII forecast came up a
little short of expectations, driven by loan balances, which are
yet to return to growth.
    KeyCorp's NII benefited as it received capital proceeds from
the first of three parts of Canada's Scotiabank's  BNS.TO  $2.8
billion investment for a 14.9% stake, announced in August.
    The bank's NII rose about 14% to $1 billion in the quarter.
Net interest margin, considered a key profitability measure for
banks, expanded 34 basis points to 2.41%.

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A look at KeyCorp's investment banking and debt placement fees
in recent quarters    https://reut.rs/3E3tWId
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 (Reporting by Ateev Bhandari and Arasu Kannagi Basil in
Bengaluru; Editing by Shilpi Majumdar)
 ((ArasuKannagi.Basil@thomsonreuters.com))