KeyCorp. (NYSE:KEY) Q2 2015 Earnings Conference Call - Final Transcript

Jul 16, 2015 • 09:00 am ET


KeyCorp. (NYSE:KEY) Q2 2015 Earnings Conference Call - Final Transcript


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Good morning and welcome to KeyCorp's Second Quarter 2015 Earnings conference call. This call is being recorded. At this time, I'd like to turn the conference over to Beth Mooney, Chairman and CEO. Please go ahead, ma'am.

Beth Mooney

Thank you, Operator, and good morning and welcome to KeyCorp's second quarter 2015 earnings conference call. Joining me for today's presentation is Don Kimble, our Chief Financial Officer, and available for the Q&A portion of the call is Chris Gorman, President of our Corporate Bank; E.J. Burke and Dennis Devine, Co-Presidents of our Community Bank; and Bill Hartmann, our Chief Risk Officer.

Slide 2 is our statement on forward-looking disclosure and non-GAAP financial measures. It covers our presentation materials and comments as well as the question and answer segment of our call.

I'm now turning to Slide 3. We had a good second quarter. Our results show positive operating leverage and momentum across our company. Revenue was up 4% from last year, benefiting from strength in our core fee-based businesses and solid loan growth. On the fee side, investment banking and debt placement had a record quarter of $141 million, which was up 42% from the prior year. Stronger financial advisory fees and loan syndications drove the improvement this quarter.

We also saw good trends in trust and investment services, as well as in cards and payments income. Both businesses benefited from the investments we have made over the past few years in our people, products and capabilities. Average loans increased in both the community bank and the corporate bank, and loan growth continued to be driven by commercial, financial and agricultural loans, which were up 10% higher than the year ago period.

In second quarter, our expense levels reflect higher performance-based compensation from stronger revenue trends in the quarter, as well as the cost from Pacific Crest Securities and seasonal factors. Don will provide more detail on expenses in his remarks. We remain focused on generating positive operating leverage by growing revenues while holding expenses relatively stable, which over time will continue to drive further improvement in our efficiency ratio. Credit quality remains strong this quarter with a net charge-off ratio of 25 basis points, well below our targeted range. We continue to be disciplined with structure and staying true to our relationship focus.

Capital remains a strength of our company with a common equity Tier 1 ratio of 10.7%. In the second quarter, our board approved a 15% increase in our common stock dividend and we repurchased $129 million in common shares. Overall, we are pleased with the quarter and believe that we are well positioned for the second half of the year. Our results continue to demonstrate the successful execution of our business model, which has allowed us to continue to add and expand client relationships and grow revenue.

Now I'll turn the call over to Don to discuss the details of our second quarter results.

Don Kimble

Thanks, and I'm on Slide 5. As Beth said, we had a good quarter with