Investor Meetings. August 2010

Transcription

1 Investor Meetings August 2010

2 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE 1 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Key s financial condition, results of operations, earnings outlook, asset quality trends and profitability. Forward-looking statements are not historical facts but instead represent only management s current expectations and forecasts regarding future events, many of which, by their nature, are inherently uncertain and outside of Key s control. Key s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause Key s actual results to differ materially from those described in the forward-looking statements can be found in Key s Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the period ended March 31, 2010, which have been filed with the Securities and Exchange Commission and are available on Key s website ( and on the Securities and Exchange Commission s website ( Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. Key does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

3 Key Facts 2 14th largest U.S. bank-based financial services company by asset size NYSE Symbol: KEY Assets: $94 billion Market Cap: $7 billion Headquarters: Cleveland, Ohio Employees: 15,665 Banking Offices: 14 States Web Site: Data as of June 30, 2010

4 Strong Franchise Geographically Diverse 3 Branches Rocky Mountain and Northwest 373 Great Lakes 344 Northeast 302 ATMs Loans (a) $10.6 $6.6 $5.6 Deposits (a) $15.8 $16.4 $15.1 Branches Corporate offices KNB offices Wealth Management (a) Community Banking average total loans and deposits for the second quarter of 2010

5 2010 Strategic Priorities 4 Return to sustainable profitability Sustain strong reserves, capital and liquidity Continue building a robust risk management culture Expand and acquire client relationships Attract and retain a capable, diverse and engaged workforce

6 Diversified Business Mix 5 Second Quarter 2010 Revenue (TE) Regional Banking Retail Banking Business Banking Private Banking Wealth Management 45% 16% 5% Real Estate Capital and Corporate Banking Services Equipment Finance 10% 8% 16% Commercial Banking Community Banking National Banking Other Segments Other Segments Corporate Treasury Principal Investing Exit Portfolios Institutional and Capital Markets Victory Capital Management KeyBanc Capital Markets TE = Taxable Equivalent

7 Community Banking Strategic Focus 6 Continuing to invest and leverage integrated delivery model Differentiating through service Actively managing risk Optimizing cost structure given new industry economics Aligning with National Banking

8 Community Banking Investing for Growth 7 Opened 18 new branches YTD; plan to open 22 additional branches during the remainder of 2010 Targeting higher growth markets where Key has the opportunity to build branch density (8 priority districts) Completed renovations on approximately 160 branches over the past two years Expect to renovate another 85 branches in 2010 Improvement in technology drives lower costs and improves overall client experience

9 Community Banking Differentiating Through Service 8 Scored significantly higher than its largest competitor banks in the 2009 customer satisfaction survey conducted by the American Customer Satisfaction Index American Customer Satisfaction Index Recognition Recognized in 2010 Bank Monitor Report for its online banking site Ranked 11 th in BusinessWeek s 2009 annual ranking of Customer Service Champs Top bank on the list

10 National Banking Strategic Focus 9 Identify targeted clients and prospects Align sales force around specific industry or client verticals Coordinated approach through National Banking Collaborative, seamless approach to meeting client needs Capitalize on alignment with Community Banking Maximize client opportunities Rationalize delivery system Emphasize client-facing activities and drive efficiencies

11 National Banking Differentiated Operating Model 10 KNB is differentiated from competitors through focus on our sweet spot More comprehensive products and industry expertise than regional peers More consistent focus and better product coordination than bulge bracket firms More capital and better local relationships than boutiques and non-banks Competitive Landscape Breadth of Industry & Product Capabilities Low High Regional Banks Key National Banking Boutiques Bulge Bracket <$10MM $200MM $1B >$10B Client Size (revenue)

12 Financial Review 11

13 Financial Summary Second Quarter Q10 1Q10 2Q09 Income (loss) from cont. ops. attributable to Key common shareholders $.06 $(.11) $(.68) Performance from continuing operations Net interest margin (TE) 3.17% 3.19% 2.70% Return on average total assets.44 (.26) (.96) Capital Tier 1 common equity 8.07% 7.51% 7.36% Tier 1 risk-based capital Total risk-based capital Tangible common equity to tangible assets Asset quality from continuing operations Allowance for loan losses to period-end loans 4.16% 4.34% 3.48% Allowance for credit losses to period-end loans Net loan charge-offs to average loans NPLs to EOP portfolio loans NPAs to EOP portfolio loans + OREO + Other NPAs TE = Taxable Equivalent, EOP = End of Period

14 Improving Net Interest Margin (TE) 13 Second Quarter 2010 $ in millions Continuing Operations Net interest margin is up 40 bps compared to 2Q09 Continued benefit from improved funding mix as maturing CDs re-price or move into lower-cost transaction deposits During the 3 rd quarter, approximately $2.8 billion in CDs are maturing at an average cost of 4.51% $800 $700 $600 $500 $400 $300 $200 $100 $0 3.50% $591 $613 $637 $632 $ % 3.17% 3.04% 3.00% 2.87% 2.77% 2.71% 2.70% 2.53% 2.50% 2.37% 2.30% (a) (a) 2.00% Net Interest Income Net Interest Margin Net Interest Spread TE = Taxable equivalent (a) The information shown in this table has been adjusted to exclude the impact of certain leveraged lease terminations, which reduced taxable equivalent net interest income by $16 million and $14 million in 2Q09 and 3Q09, respectively.

15 Average Loans 14 $ in billions Continuing Operations $80 $60 $40 $20 $0 CF&A CRE Comml Mtg CRE Construction Leasing Home Equity Other Consumer Exit Portfolios Total Loans $68.7 $64.8 $60.5 $57.6 $55.0 $ $ $ $ $ Exit Portfolios Average Balances $12 $9 $6 $3 $0 Leasing CRE Homebuilder Marine/RV Floor Plan Home Equity - Other Marine/RV & Other Consumer Total Exit Portfolios Discontinued Operations Education Lending Business (a) $9.8 $8.9 $ $3.8 $8.0 $7.2 $6.7 $ $4.1 $ $3.9 $ $6.7 $ $6.3 Loans Held for Sale Total Loans and Loans Held for Sale $69.3 $65.5 $61.1 $58.0 $55.5 (a) Includes loans in Key s education loan securitization trusts consolidated upon the adoption of new consolidation accounting guidance on January 1, 2010.

16 Average Deposits (a) 15 $ in billions $70 $60 $50 $40 $30 $20 $10 $0 $66.8 $67.4 $66.8 $64.6 $ DDA 24% CDs > $100K 15% CDs < $100K 18% NOW/MMDA 40% Savings 3% DDA NOW/MMDA Savings CDs < $100K CDs > $100K (a) Excludes foreign office deposits.

17 Strong Liquidity Position 16 5% 3% 2Q09 Average Earning Assets 4% 3% 4% 3% 2Q10 Average Deposit & Funding Sources 2Q09 2Q10 3% 6% 9% 1% 76% 20% 65% 13% 4% 1% 82% 9% 3% 1% 84% 1% Total loans Investment securities Other investments Education loan securitization trusts Loans held for sale Short-term investments Education lending business Core deposits Short-term borrowings Education lending business Deposits in foreign offices Long-term debt Education loan securitization trusts 125% 100% 75% 107% Loan to Deposit Ratio (a) 101% 98% 93% 93% 50% 101% 95% 91% 88% 88% 25% 0% Continuing operations Discontinued operations (a) Ending balances; loans & loans held for sale (excluding securitized loans) to deposits (excluding foreign branch).

18 Asset Quality Net Loan Charge-offs 17 $ in millions Continuing Operations 2Q10 Net Loan Charge-offs = $435 million Commercial, financial and agricultural 31% Consumer other 8% Home equity 10% Residential mortgage 2% CRE mortgage 29% Commercial lease financing 3% CRE construction 17% Net Loan Charge-Offs to Average Loans 5.00% 4.64% 4.00% 3.59% 3.67% 2.93% 3.18% 3.00% 2.00% 1.00% Allowance to Period-End Loans 4.50% 4.31% 4.34% 4.16% 4.00% 4.00% 3.48% 3.50% 3.00% 2.50% 0.00% Net Charge-Offs $ in millions CF&A & Leasing CRE - Comml Mtg CRE - Construction Consumer Exit Portfolios Total $ $502 $ $587 $ $708 $ $522 $ $ % Peer Median

19 Asset Quality Nonperforming Assets 18 $ in millions Continuing Operations 2Q10 Nonperforming Loans = $1,703 million Commercial, financial and agricultural 29% Consumer other 3% Home equity 7% Residential mortgage 4% CRE mortgage 24% Commercial lease financing 5% CRE construction 28% Nonperforming Asset Trends $3,150 $2,700 $2,250 $1,800 $1,350 $900 $450 $0 CF&A & Leasing CRE - Comml Mtg CRE - Construction Consumer Held for Sale OREO + Other Total $2,548 $2,799 $2,510 $2,428 $2,086 $ $2,548 $ $2,799 $ $2,510 $ $2,428 $ $2, % 5.00% 4.00% 3.00% 2.00% 1.00% Allowance to NPLs 150% 130.3% 125% 115.9% 117.4% 107.1% 108.5% 100% 75% 50% 25% 0% Peer Median NPA to Loans + OREO

20 Capital Ratios 19 Tangible Common Equity to Tangible Assets 10.00% Tier 1 Common Equity 10.00% 8.00% 7.35% 7.58% 7.56% 7.37% 7.65% 8.00% 7.36% 7.64% 7.50% 7.51% 8.07% 6.00% 6.00% 4.00% 4.00% 2.00% 2.00% 0.00% 0.00% Tier 1 Risk-Based Capital 15.00% 12.00% 9.00% 6.00% 3.00% 12.57% 12.61% 12.75% 12.92% 13.62% 2.39% 1.97% 2.09% 2.15% 2.20% 2.99% 2.52% 2.68% 2.82% 2.91%.36%.30%.32%.34%.35% 7.36% 7.64% 7.50% 7.51% 8.07% 6.00% Total Risk-Based Capital 18.00% 15.00% 12.00% 9.00% 6.00% 3.00% 16.67% 16.65% 16.95% 17.07% 17.80% 2.81% 2.90% 2.86% 2.90% 2.75% 1.28% 1.29% 1.29% 1.30% 1.29% 2.20% 2.39% 1.97% 2.09% 2.15% 2.99% 2.52% 2.68% 2.82% 2.91%.36%.30%.32%.34%.35% 7.36% 7.64% 7.50% 7.51% 8.07% 10.00% 0.00% 0.00% Qualifying Common Convertible Preferred Capital Purchase Program Capital Securities Qualifying ALLL/Unfunded Comm. Qualifying LTD Peer Median Fed-defined minimum for a well capitalized bank

21 Key s Targets for Success (a) 20 KEY Business Model KEY Metrics KEY 2Q10 Targets Action Plans Core funded Loan to deposit ratio (b) (c) 93% % Improve risk profile of loan portfolio Improve deposit mix and grow deposit base Returning to a moderate risk profile NCOs to average loans 3.18% bps Focus on relationship clients Exit noncore portfolios Limit concentrations Focus on risk-adjusted returns Growing high quality, diverse revenue streams Net interest margin Noninterest income to total revenue 3.17% 44.1% >3.50% >40% Improve funding mix Focus on risk-adjusted returns Leverage Key s total client solutions and crossselling capabilities Creating positive operating leverage Keyvolution cost savings $197 million implemented $300-$375 million Improve efficiency and effectiveness Leverage technology Change cost base to more variable from fixed Executing our strategies Return on average assets.44% % Execute our client insight-driven relationship model Improved funding mix with lower cost core deposits Keyvolution savings (a) Continuing operations, unless otherwise noted. (b) Loans & loans HFS (excluding securitized loans) to deposits (excluding foreign branch). (c) Consolidated operations.

22 Appendix 21

23 Income Statement 22 $ in millions, except per share info Favorable (Unfav) 2Q10 vs. 2Q10 1Q10 2Q09 1Q10 2Q09 Net interest income (TE) $ 623 $ 632 $ 575 $ (9) $ 48 Noninterest income (214) Total revenue (TE) 1,115 1,082 1, (166) Provision for loan losses Personnel expense (23) (10) Nonpersonnel expense Total noninterest expense Income (loss) from continuing operations before income taxes 118 (116) (397) Income taxes 17 (75) (170) (92) (187) Income (loss) from continuing operations 101 (41) (227) Income (loss) from discontinued operations, net of taxes (27) 2 4 (29) (31) Net income (loss) 74 (39) (223) Less: Net income (loss) attributable to noncontrolling interests (1) Net income (loss) attributable to Key $ 70 $ (55) $ (226) $ 125 $ 296 Income (loss) from cont. ops. attributable to Key common shareholders $ 56 $ (98) $ (394) $ 154 $ 450 Net income (loss) attributable to Key common shareholders 29 (96) (390) Per common share Income (loss) from cont. ops. attributable to Key common shareholders $.06 $ (.11) $ (.68) $.17 $.74 Income (loss) from discontinued operations, net of taxes (.03).01 (.03) (.04) Net income (loss) attributable to Key common shareholders.03 (.11) (.68) Weighted-average common shares outstanding (000) 874, , ,883 N/A N/A N/A = Not Applicable

24 Credit Quality by Portfolio 23 $ in millions Period-end loans Average loans Net loan charge-offs Net loan charge-offs (a) / average loans Nonperforming loans Ending allowance Allowance / period-end loans Allowance / NPLs 6/30/10 2Q10 2Q10 1Q10 2Q10 1Q10 6/30/10 3/31/10 6/30/10 6/30/10 6/30/10 Commercial, financial and agricultural $17,113 $17,725 $136 $ % 2.72 % $489 $558 $ % % Commercial real estate: Commercial mortgage 9,971 10, Construction 3,430 3, Commercial lease financing 6,620 6, Real estate - residential mortgage 1,846 1, Home equity: Community Banking 9,775 9, Other Consumer Community Banking 1,147 1, Consumer other: Marine 2,491 2, Other Continuing total $53,334 $54,953 $435 $ % 3.67 % $1,703 $2,065 $2, % % Discontinued operations - education lending business 6,594 6, Consolidated total (b) $59,928 $61,008 $466 $ % 3.55 % $1,743 $2,108 $2, % % (a) Net charge-off amounts are annualized in calculation. (b) Average loans exclude securitized trust balances. N/M = Not Meaningful

25 Commercial Portfolio Line of Business 24 Quarterly Average Loan Balances $ in billions $60 $51.1 $50 $47.5 $40 $43.5 $41.0 $38.6 $30 $20 $10 $0 Net Charge-Offs $ in millions $700 $600 $492 $500 $410 $400 $603 $410 $351 Nonperforming Loans $ in millions $2,500 $2,000 $1,500 $1,992 $2,078 $1,954 $1,843 $1,449 $300 $200 $100 $1,000 $500 $0 $0 Other Segments Institutional & Capital Markets Equipment Finance Real Estate Capital & Corporate Banking Services Regional Banking Regional Banking

26 Commercial Portfolio Continuing Ops. Average Loans, NCOs and NPLs 25 $ in millions Real Estate Institutional Regional Banking Commercial Banking Capital & Corp. Bank Srvs. Equipment Finance & Capital Markets Other Segments Total Average Loans Commercial, financial and agricultural $2,979 $5,651 $2,471 $883 $4,651 $1,090 $17,725 Commercial real estate 2,574 2,478 8, ,127 Commercial lease financing , ,721 6,759 Total commercial loans $5,739 $8,779 $11,463 $4,478 $5,004 $3,148 $38,611 Net Charge-Offs Commercial, financial and agricultural $23 $29 $16 $6 $13 $49 $136 Commercial real estate Commercial lease financing Total commercial loan NCOs $34 $65 $142 $17 $13 $80 $351 Second Quarter 2010 Nonperforming Loans Commercial, financial and agricultural $54 $108 $12 $46 $109 $160 $489 Commercial real estate Commercial lease financing Total commercial NPLs $147 $193 $594 $103 $110 $302 $1,449 First Quarter 2010 Average Loans Commercial, financial and agricultural $3,080 $5,697 $2,742 $741 $5,200 $1,336 $18,796 Commercial real estate 2,712 2,585 9, ,967 Commercial lease financing , ,815 7,195 Total commercial loans $5,986 $8,971 $12,336 $4,573 $5,526 $3,566 $40,958 Net Charge-Offs Commercial, financial and agricultural $23 $13 $5 $7 $26 $52 $126 Commercial real estate Commercial lease financing Total commercial loan NCOs $45 $19 $207 $18 $26 $95 $410 Nonperforming Loans Commercial, financial and agricultural $58 $135 $15 $18 $106 $226 $558 Commercial real estate ,186 Commercial lease financing Total commercial NPLs $144 $265 $796 $108 $106 $424 $1,843

27 Commercial Real Estate 26 $ in millions Period-end loans Nonperforming loans Net loan charge-offs Q10 1Q10 Retail properties $2,377 $2,504 $168 $227 $23 $32 Multifamily properties 2,202 2, Health facilities 1,182 1, Office builldings 1,155 1, Residential properties Land and development (a) Other CRE 1,304 1, Total nonowner-occupied 9,333 10, , Owner-occupied 4,068 4, Total $13,401 $14,457 $877 $1,186 $201 $263 (a) Nonresidential land and development loans.

28 Commercial Real Estate Loans June 30, $ in millions Geographic Region % of Commercial West Southwest Central Midwest Southeast Northeast Total Total CRE Mortgage Construction Nonowner-occupied: Retail properties $390 $237 $267 $682 $575 $226 $2, % $1,574 $803 Multifamily properties , , Health facilities , , Office buildings , Residential properties Warehouses Land and development Hotels/Motels Manufacturing facilities Other Total nonowner-occupied 1, ,516 1,581 2,038 1,661 9, ,252 3,081 Owner-occupied 1, , , , Total $3,364 $823 $1,893 $2,581 $2,176 $2,564 $13, % $9,971 $3,430 Nonowner-occupied: June 30, 2010 Nonperforming loans $90 $194 $72 $79 $210 $110 $755 N/M $301 $ days past due N/M days past due N/M Nonowner-occupied: March 31, 2010 Nonperforming loans $147 $185 $169 $68 $286 $155 $1,010 N/M $419 $ days past due N/M days past due N/M (a) Nonresidential land and development loans. N/M = Not Meaningful

29 Commercial Real Estate 28 Period-end Loan Balances $ in billions $20 $17.9 $16.6 $15.2 $16 $12 $14.5 $13.4 $8 $4 $0 Nonperforming Loans Net Charge-Offs $ in millions $ in millions $1,400 $350 $1,268 $1,255 $1,170 $1,186 $1,200 $300 $297 $1,000 $877 $250 $220 $800 $200 $346 $263 $201 $600 $400 $200 $0 $150 $100 $50 $0 Retail properties Multifamily properties Office buildings Health facilities Residential properties Land and development Other CRE Owner occupied

30 Reducing Risk CRE Residential Properties (a) 29 $ in millions Reduced the Residential Properties (Homebuilder) portfolio by 79% since 1Q08 Initiated process in 2Q08 to aggressively sell at-risk homebuilder loans Reduced exposure to the California market by 95% and the Florida market by 86% since 1Q08 Total Period-end Loans $4,000 $3,000 $2,000 $1,000 $0 $3,638 1Q08 $2,715 $2,356 $2,154 $1,839 $1,641 $1,492 $1,131 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 $938 $752 2Q10 California $800 $705 $600 $400 $428 $367 $200 $280 $236 $177 $134 $107 $46 $36 $0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Performing loans Florida $800 $614 $600 $524 $400 $381 $335 $271 $224 $200 $183 $145 $116 $88 $0 1Q08 2Q08 3Q08 Nonperforming loans 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 (a) Non-owner occupied

31 Home Equity Loans June 30, $ in millions, except average loan size Loan Balances Average Loan Size ($) Average FICO Average LTV % of Loans LTV>90% Vintage (% of Loans) 2010 and Community Banking Home Equity loans and lines First Lien $ 5,129 $ 57, %.5 % 18 % 13 % 9 % 9 % 51 % Second Lien 4,646 43, Total Home Equity loans and lines $ 9,775 $ 49, Nonaccrual Loans First Lien $ 60 $ 86, % - 2 % 2 % 16 % 10 % 70 % Second Lien 52 58, % Total Home Equity nonaccrual loans $ 112 $ 70, Second quarter net charge-offs $ % 45 % 14 % 24 % Net loan charge-offs to average loans 1.02 % Other - Exit Home Equity Loans First Lien $ 32 $ 23, %.5 % - 1 % 25 % 15 % 59 % Second Lien , Total Home Equity loans $ 753 $ 26, Nonaccrual Loans First Lien $ 1 $ 20, % % 4 % 7 % 86 % Second Lien 16 28, % Total Home Equity nonaccrual loans $ 17 $ 28, Second quarter net charge-offs $ 16-1 % 42 % 37 % 20 % Net loan charge-offs to average loans 8.30 % 2005 and prior (a) Average LTVs are at origination. Current average LTVs for Community Banking total home equity loans and lines is approximately 76%, which compares to 77% at the end of the first quarter of 2010.

32 Exit Loan Portfolio 31 $ in millions Balance on Balance Outstanding Change vs. Net Loan Charge-offs Nonperforming Status Q10 1Q Residential properties homebuilder $195 $269 $(74) $20 $44 $109 $167 Residential properties held for sale (15) Total residential properties (89) Marine and RV floor plan (71) Commercial lease financing (a) 2,437 2,685 (248) Total commercial loans 2,925 3,333 (408) Home equity Other (42) Marine 2,491 2,636 (145) RV and other consumer (13) Total consumer loans 3,432 3,632 (200) Total loans in exit portfolio $6,357 $6,965 $(608) $114 $153 $385 $499 Discontinued operations - education lending business (not included in exit loans above) (b) $6,686 $6,268 $418 $31 $36 $40 $42 $ in billions $15 $10 $11.7 $11.2 $10.3 $9.5 $8.4 $7.6 $7.0 $6.4 $5 $0 3Q08 4Q08 1Q09 Residential properties Home equity - Other Marine and RV floor plan Marine Commercial lease financing RV and other consumer (a) Includes the business aviation, commercial vehicle, office products, construction and industrial leases, Canadian lease financing portfolios, and all remaining balances related to lease in, lease out; sale in, sale out; service contract leases and qualified technological equipment leases. (b) Includes loans in Key s education loan securitization trusts consolidated upon the adoption of new consolidation accounting guidance on January 1, 2010.

33 Net Charge-offs to Average Loans 32 Continuing Operations 2Q10 1Q10 4Q09 3Q09 2Q09 Commercial, financial and agricultural 3.08 % 2.72 % 4.36 % 3.02 % 2.75 % Real estate commercial mortgage Real estate construction Commercial lease financing Total commercial loans Real estate residential mortgage Home equity: Community Banking Other Total home equity Consumer other Community Banking Consumer other: Marine Other Total consumer other Total consumer Net loan charge-offs to average loans 3.18 % 3.67 % 4.64 % 3.59 % 2.93 %

34 Nonperforming Loans to Period-end Loans 33 Continuing Operations 2Q10 1Q10 4Q09 3Q09 2Q09 Commercial, financial and agricultural 2.86 % 3.10 % 3.04 % 3.30 % 2.97 % Real estate commercial mortgage Real estate construction Commercial lease financing Total commercial loans Real estate residential mortgage Home equity: Community Banking Other Total home equity Consumer other Community Banking Consumer other: Marine Other Total consumer other Total consumer Nonperforming loans to period-end loans 3.19 % 3.69 % 3.72 % 3.68 % 3.25 %