KeyCorp. (NYSE:KEY) Q1 2017 Earnings Conference Call - Final Transcript

Apr 20, 2017 • 09:00 am ET


KeyCorp. (NYSE:KEY) Q1 2017 Earnings Conference Call - Final Transcript


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Good morning, and welcome to KeyCorp's First Quarter 2017 Earnings Conference Call. As a reminder, this conference is being recorded.

I would now like to turn the conference over to the Chairman and CEO, Beth Mooney. Please go ahead, ma'am.

Beth Mooney

Thank you, Operator. Good morning and welcome to KeyCorp's first quarter 2017 earnings conference call. Joining me for today's presentation is Don Kimble, our Chief Financial Officer. And available for our Q&A portion of the call is Bill Hartmann, our Chief Risk Officer. Slide two 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 am now turning to Slide three. Key reported strong results for the first quarter which reflects continued business momentum throughout our company and our success in realizing value from our First Niagara acquisition. My comments this morning will exclude merger-related charges which were $81 million or $0.05 per share in the quarter. We generated positive operating leverage in both the year ago period and prior quarter and our pre-provision net revenue was up 58% from last year and 6% from the fourth quarter. Revenue trends reflect strong net interest income and another quarter of solid performance from our fee-based businesses including our capital market area.

Both revenue and expenses reflect our acquisition of First Niagara last August and the addition of over 1 million new consumer and commercial clients. Our result this quarter also reflects significant progress on our cost savings targets and efficiency goals. This has been accomplished by continuing to focus on legacy key expense levels, as well as executing our integration plans for First Niagara. At the end of the first quarter, we had achieved 85% of our targeted cost savings of $400 million from our acquisition. The remaining 15% will be realized by the end of next quarter and we expect to exceed our initial savings target and deliver $450 million of cost savings by early 2018.

Our cash efficiency ratio this quarter moved to 60.4% and we're on a past to move that below 60%. Credit quality remains strong this quarter but lower net charge-offs and a reduction in non-performing assets and loans relative to the prior quarter. We also maintained our strong capital position with the common equity Tier 1 ratio of 9.9%. During the quarter, we repurchased $160 million of common shares and subject to Board approval we expect to increase our common stock dividend in May.

Moving now to Slide four. During the quarter we made significant progress with our First Niagara acquisition and as I mentioned earlier, we expect to exceed our initial cost savings target but the conversion of branches, systems and clients completed in the fourth quarter our teams continue to execute our detailed merger plans as we moved into 2017. In addition to the completion of our branch consolidations plans, we have now exited approximately half of the corporate real estate space that was identified along with