KeyCorp. (NYSE:KEY) Q2 2019 Earnings Conference Call - Final Transcript

Jul 23, 2019 • 10:00 am ET

Previous

KeyCorp. (NYSE:KEY) Q2 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you. [Operator Instructions] Your first question comes from the line of Scott Siefers from Sandler O'Neill. Please go ahead.

Analyst
Scott Siefers

Good morning, everyone.

Executive
Beth E. Mooney

Good morning.

Analyst
Scott Siefers

Thanks for taking my question. Hey. Don, I was hoping you could walk through, and with a little finer points the thoughts on the margin. I think you said in your prepared remarks that the margin overall should hold stable. I know you had a little liquidity build in the 2Q. And I think that tends to be a seasonal issue that comes out in the 3Q. So presumably that helps, but I guess I'm just curious regarding the puts and takes as you see them and then if -- when you made those comments, were you talking the core margin or the reported, and maybe if you can sort of dissect that as well, please.

Executive
Don Kimble

Sure. And Scott as you highlight, we did have some seasonal trends in the deposits, especially because some of the pressure on liquidity. And so, in the second quarter, our margin came down by 3 basis points from liquidity, not any impact on net interest income, but did have an impact on the overall margin. We also saw a reduction that wasn't expected as far as our purchase accounting accretion. The last quarter -- first quarter we are $22 million, second quarter we came in at $17 million. We would expect that to be relatively stable with maybe slight declines from here, but not having the kind of pressure that we saw this past quarter.

Going forward, we expect margin on a reported basis to be relatively stable. And so to your point, we should see some of that liquidity come back in over time and that could help offset some of the pressure associated with the most recent our expected 25 basis point rate decline. And so, we think that positions us to have more stability in that margin prospectively.

Analyst
Scott Siefers

Okay, that's perfect. I appreciate that. And then just one sort of ticky-tack question just on the accounting for the fraud. Just -- what is the reason if that becomes a 3Q event. Is that just because of the difficulty in estimating the potential loss now or were the books from an accounting standpoint closed at the time of disclosure? Just curious about that dynamic.

Executive
Don Kimble

On that point, the events that resulted in the fraud actually took place here in the third quarter and that's why the timing of the losses recognized in the third quarter as opposed to the second quarter.

Analyst
Scott Siefers

Yeah, okay. So you have got nothing more than that. All right. That's perfect. Thank you guys very much. I appreciate it.

Executive
Don Kimble

Thank you.

Operator
Operator

Your next question comes from the line of Ken Zerbe from Morgan Stanley. Please go ahead.

Analyst
Ken Zerbe

Great. Thanks good morning.

Executive
Don Kimble

Good morning.

Analyst
Ken Zerbe

I guess, first is, have us [Phonetic] facility your simple question, in turn you're building one rate cut into your guidance. How does your NII guidance change, if we actually get