KeyCorp. (NYSE:KEY) Q4 2016 Earnings Conference Call - Final Transcript

Jan 19, 2017 • 09:00 am ET

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KeyCorp. (NYSE:KEY) Q4 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning, ladies and gentlemen, and welcome to the KeyCorp's Fourth 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 Mooney

Thank you, operator. Good morning, and welcome to KeyCorp's Fourth 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 Chief Risk Officer.

(Forward-Looking Cautionary Statements)

I'm now turning to Slide 3. Key's strong results for the fourth quarter complete what has been a very successful and transformational year for our company. We reported our third consecutive year of positive operating leverage, and our pre-provision net revenue was up 23% from 2015, excluding merger-related charges. In the fourth quarter, we reduced our cash efficiency ratio to 63%, and our return on tangible common equity was 12.5%, excluding merger charges.

We completed our First Niagara acquisition in August, the largest in our company's history. And in October, we successfully integrated branches, systems and clients. This included moving data and account information for over 1 million new clients, converting over 300 branches and consolidating over 100 First Niagara and Key branches in the quarter. Overall, the conversion was very well executed, and we were open for business on Tuesday morning, following the Columbus Day weekend. Our 3 million total clients had access to our combined set of products and capabilities.

Our results this quarter reflects solid performance across our company, with meaningful contributions from both the community bank and the corporate bank. We continue to grow and expand client relationships, which generated solid loan growth and positive trends in our fee-based businesses. Investment banking and debt placement fees reached a record level for the quarter and the year despite the challenging environment we saw early in 2016.

Cards and payments, along with corporate services, also had record years. These have all been areas of targeted investments over the past several years. We also maintained our moderate risk profile and continue to operate below our targeted range for net charge-offs.

Capital management remains a clear priority for us. We increased our common stock dividend in May by 13% and, subject to board approval, we expect an additional increase of 12% in the second quarter of this year. We also resumed our share repurchases in the third quarter after completing our acquisition. And although we did not repurchase shares earlier in the year, we still paid out almost 60% of our net income in 2016.

Final item on this slide is our First Niagara acquisition, which I've already mentioned in my remarks. The acquisition continues to exceed our expectations as we are already realizing some of our targeted cost savings and begin to see traction on revenue opportunities across our organization. As we've seen early signs of momentum, we see First Niagara clients are choosing Key because of our broader capability.

Some examples include: we have