KeyCorp. (NYSE:KEY.PRG) Q3 2016 Earnings Conference Call Transcript

Oct 25, 2016 • 09:00 am ET

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KeyCorp. (NYSE:KEY.PRG) Q3 2016 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good morning, and welcome to KeyCorp's Third Quarter 2016 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.

Executive
Beth Elaine Mooney

Welcome to KeyCorp's third quarter 2016 earnings conference call. Joining me for today's presentation is Don Kimble, our CFO; and available for our Q&A portion of the call is Bill Hartmann, our CRO.

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. Third quarter was pivotal for our company in terms of both financial results and executing our strategy. We successfully closed our acquisition of First Niagara, adding over $35 billion in assets, 300 new branches, and 1 million new customers to Key. And while a lot of time and resources have been devoted to making sure our acquisition and conversion went smoothly, we've also stayed focused on maintaining the momentum in our core businesses. Importantly, both our Community Bank and Corporate Bank delivered strong results this quarter, and Don will cover our outlook in his remarks. But let me just say we remain confident in meeting our commitments, including the achieving of financial targets for our acquisition.

I'm now moving to slide 4. Before I provide highlights of our quarter, I do want to share that throughout our presentation, we've provided important details and transparency for Key's standalone operations and the impact of our acquisition. As we move forward, we will be reporting consolidated results with Key and First Niagara combined. But this quarter, we thought it would be useful to provide additional detail.

Slide 4 provides some highlights for standalone Key and the strong performance we saw this quarter. Our Community Bank and Corporate Bank are performing well, and we are realizing benefits from the investments we have made in recent years. As shown in our recent earnings release, we reported EPS of $0.16, and it is $0.30 excluding the impact of merger-related charges.

First Niagara operations were relatively neutral to our EPS this quarter. Compared to the year-ago period, standalone Key delivered positive operating leverage, and we are well positioned as we move forward as a combined company, having generated positive operating leverage for 9 of the past 11 quarters on a standalone basis.

Revenue grew 6% from the prior year, as we benefited from another quarter of solid loan and deposit growth and an 8% increase in non-interest income. Standouts for the quarter include a record level of investment banking and debt placement fees, along with double-digit growth in cards and payments income. Expenses continue to be well managed and reflected higher performance-based compensation this quarter, along with an increased FDIC assessment.

Not on the slide, but worth noting, we had another solid quarter in terms of credit quality, with our net charge-off ratio remaining below our targeted range. And although this slide focuses on