KeyCorp’s Operating Profit Rises by 9.5%; Net Profit Declines

65

KeyCorp, a prominent Midwest U.S. bank, reported a 9.5% increase in fourth-quarter operating profit, primarily driven by growth in fee-based businesses. However, net income declined due to the sale of a subprime mortgage unit.

Earnings from continuing operations at KeyCorp rose to $311 million, or 76 cents per share, compared to $284 million, or 69 cents per share, in the same period last year. Revenue increased by 3% to $1.3 billion.

Analysts had anticipated a profit excluding special items of 74 cents per share on revenue of $1.3 billion, according to Reuters Estimates.

Net income fell by 51% to $146 million, or 36 cents per share, from $296 million, or 72 cents per share, in the previous year. This decline was primarily due to a $165 million charge, or 40 cents per share, related to the sale of the Champion Mortgage lending unit to HSBC Holdings Plc and Fortress Investment Group LLC. KeyCorp divested the unit to focus on consumer and business banking.

KeyCorp projected a full-year profit in the range of $3 to $3.10 per share, slightly above analysts’ average expectation of $3.01 per share.

In terms of business segments, profit from community banking rose by 6% to $101 million, while profit from national banking, including construction loans, equipment finance, capital markets, and asset management, increased by 18% to $194 million.

Despite a decline in net interest margin to 3.66% from 3.68%, lending income rose by 4% to $744 million, and fee income increased by 1% to $558 million. Operating expenses remained relatively stable at $809 million.

Credit quality weakened compared to the third quarter, with KeyCorp setting aside $53 million for bad loans in the fourth quarter, up from $35 million previously. Net charge-offs also increased to $54 million from $43 million.

KeyCorp operates approximately 950 banking offices and holds $92 billion in assets. Its shares closed at $37.46 on the New York Stock Exchange, showing a 13% increase over the past year, in line with the rise in the Philadelphia KBW Bank Index.