KeyCorp. (NYSE:KEY) Q4 2015 Earnings Conference Call - Final Transcript

Jan 21, 2016 • 10:00 am ET

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KeyCorp. (NYSE:KEY) Q4 2015 Earnings Conference Call - Final Transcript

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Presentation
Executive
Don Kimble

up 2% from the prior year and up 3% from the prior quarter. For the full year, Key had revenue growth of over 3% reflecting the success we've had in growing our businesses. This revenue growth has allowed us to grow our pre-provision net revenues 5% year-over-year. I will cover the other items in the rest of my presentation so I'm now turning over to slide 7. Average loan balances were up $3 billion or 5% compared to the year-ago quarter and up $295 million from the third quarter. Our year-over-year growth was once again driven primarily by commercial, financial, and agricultural loans and was broad based across Key's business lending segments.

Average CF&A loans were up $3.7 billion or 14% compared to the prior year and were up $510 million or 2% unannualized from the third quarter. During the current quarter, we continue to generate strong customer growth that was muted by paydowns of lines to existing customers. Continuing on to slide 8 on the liability side of the balance sheet. Average deposits, excluding deposits in foreign office, totaled $71.5 billion for the fourth quarter of 2015, an increase of $2.3 billion compared to the year-ago quarter. The year-over-year increase is reflective of growth in our commercial mortgage servicing business and inflows from commercial and consumer clients.

Compared to the third quarter of 2015, average deposits excluding deposits in foreign office increased by $1.5 billion. The growth was driven by both seasonal and short-term deposit inflows from commercial clients along with growth in NOW and money market deposit accounts and certificates of deposit. Turning to slide 9. Taxable equivalent net interest income was $610 million for the fourth quarter of 2015 and the net interest margin was 2.87%. These results compare to taxable equivalent net interest income of $588 million and a net interest margin of 2.94% for the fourth quarter of 2014. The increase in net interest income reflects higher earning asset balances partially offset by lower earning asset yields, which also drove the decline in the net interest margin.

Compared to the third quarter of 2015, taxable equivalent net interest income increased by $12 million and the net interest margin was unchanged. The increase in net interest income and the stable net interest margin were attributable to higher earning asset yields and loan fees. And while net interest margin was stable, it was negatively impacted by higher levels of excess liquidity driven by short-term commercial deposit growth. Slide 10 shows the summary of noninterest income, which accounted for 44% of our total revenues. Noninterest income in the fourth quarter was $485 million, down $5 million or 1% from the prior year and up $15 million or 3% from the prior quarter.

The slight decrease from the prior year was attributed to lower net gains from principal investing of $18 million and $7 million of lower trust and investment services income reflecting market variability. These decreases were partially offset by a $12 million increase in other income gains