KeyCorp. (NYSE:KEY) Q1 2019 Earnings Conference Call - Final Transcript

Apr 18, 2019 • 10:00 am ET


KeyCorp. (NYSE:KEY) Q1 2019 Earnings Conference Call - Final Transcript


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Good morning, and welcome to KeyCorp's First Quarter 2019 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 E. Mooney

Thank you, operator. Good morning and welcome to KeyCorp's first quarter 2019 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 am moving to Slide three. This morning, we reported earnings per common share of $0.38, which included $0.02 of efficiency related charges. Adjusting for notable items, related to the efficiency charges, our results were $0.40 per share, up 5% from the year ago period and down as expected relative to our seasonally strong fourth quarter results.

Our results this quarter benefited from continued growth in our balance sheet, driven by both loans and deposits. The primary driver of loan growth was commercial and industrial loans, with average balances up 8% versus the year-ago period. Average deposits from both commercial and consumer clients grew 5% over the same period.

Our growth reflects the success of our business model, competitive positioning in the market and investments we continue to make across the franchise. Non-interest income was below our expectations for the quarter, driven by our capital markets revenue. In addition to the expected seasonality in a number of fee income categories, including investment banking and debt placement fees, our investment banking business was also impacted by disruption from the government shutdown and the delayed closing of certain transactions.

It is important to note, that we remain positive, about the outlook for this business, based on new client growth, high client engagement and strong pipeline, including a record pipeline for M&A advisory fees.

We believe this positions us well for the remainder of the year. We also expect growth across our other fee-based businesses and as Don will walk through shortly, we are affirming our outlook for non-interest income for the year.

Expense management continues to be a positive story, with cost down 7% from the same period a year ago, adjusted for notable items. This reflects achieving nearly half of our $200 million in continuous improvement target, by the end of the quarter. And even more importantly, substantially, all of the targeted expense save, should be achieved by the end of the second-quarter. We remain committed to reaching our 54% to 56% cash efficiency ratio target in the second half of the year. The final two sections on this slide highlights our strong position in terms of both risk management and capital.

Credit quality remains a strength, with net charge-offs of 29 basis points, still well below our targeted range. And all of our credit metrics were stable this quarter. We remain committed to disciplined,