KeyCorp. (NYSE:KEY) Q4 2018 Earnings Conference Call - Final Transcript

Jan 17, 2019 • 09:00 am ET


KeyCorp. (NYSE:KEY) Q4 2018 Earnings Conference Call - Final Transcript


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Good morning, and welcome to KeyCorp's Fourth Quarter 2018 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.

Beth Mooney

Thank you, operator. Good morning and welcome to KeyCorp's fourth quarter 2018 earnings conference call. In the room with me is Don Kimble, our Chief Financial Officer; Chris Gorman, President of Banking; and Mark Midkiff, 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.

Now I'm moving to slide three. As you have seen with our headlines this morning, Key reported strong results for the fourth quarter and this finishes what has been a very successful year for our company, as we continue to grow, invest for the future and deliver on our financial commitment. For the fourth quarter, we reported GAAP earnings per share of $0.45. Our EPS results included $0.03 from a pension settlement charge and costs associated with our efficiency initiative which we refer to as notable items in our materials. Adjusting for this $0.03 of notable items, it brings our core earnings per share to $0.48 for the quarter. To provide a consistent view of our financial trends and prior periods comparisons, my remarks this morning will focus on the adjusted core numbers which exclude notable items in all periods.

Ore strong fourth quarter builds on the momentum we continue to see across our company. Highlights for the quarter included solid revenue growth, well managed expenses, strong credit quality with a meaningful decline in non-performing loans and further improvement in criticized and classified loans, improved efficiency and return measures with both up almost 400 basis points from the year ago quarter and disciplined capital management, which includes returning a significant amount to our shareholders through dividends and share repurchases.

Don will spend more time on the fourth quarter details. So I will focus most of my comments on our full year performance. 2018 was our sixth consecutive year of positive operating leverage. Our return on average tangible common equity increased each quarter during the year, reaching 17.5% in the fourth quarter. For the year, we reached a record level of revenue of $6.4 billion, reflecting continued growth in loans and deposits, as well as achieving all-time highs in several of our fee-based businesses, including investment banking and debt placement fees. The growth in both spread and fee income reflects the breadth and depth of our business model and our ability to acquire and expand relationships with our targeted clients.

Expenses remained well controlled, as we drove efficiencies across our company, while continuing to make investments in areas where we have targeted scale and reach. Yesterday, we announced an exciting new opportunity to build out our digital consumer lending platform with the acquisition of Laurel Road, which I will discuss later in my remarks. Over the