Published on 20 Apr 2023 on Zacks via Yahoo Finance
KeyCorp (KEY) Q1 Earnings Beat Estimates on NII, Stock Tanks
KeyCorp’s KEY first-quarter 2023 adjusted earnings from continuing operations of 44 cents per share beat the Zacks Consensus Estimate of 41 cents. The bottom line declined 2.2% from the prior-year quarter. Our estimate for the metric was 43 cents per share.Shares of KEY lost more than 4.5% in early-market trading on concerns including deposit outflows, rising funding costs and deteriorating credit quality weighed on investor sentiments.A rise in net interest income (NII) driven by decent average loan growth and higher interest rates supported KEY’s results. However, a fall in non-interest income due to a tough operating backdrop, higher provisions and a rise in expenses were the undermining factors. Also, a decline in average deposits was a headwind.Net income from continuing operations attributable to common shareholders was $275 million, down 34.5% year over year. We had projected the same to be $398 million.
Revenues & Expenses Rise
Total revenues grew 1.1% year over year to $1.71 billion. The top line lagged the Zacks Consensus Estimate of $1.79 billion. Our estimate for the metric was $1.8 billion.NII (on a tax-equivalent basis) grew 8.4% to $1.11 billion. The increase was mainly driven by higher earning asset balances and a rise in rates, partly offset by higher funding costs. Our estimate for NII was $1.22 billion.Taxable-equivalent net interest margin from continuing operations increased 1 basis point (bp) to 2.47%. Our estimate for NIM was 2.76%.Non-interest income was $608 million, falling 10.1%. The decline was mainly due to lower consumer mortgage income, investment banking and debt placement fees and operating lease income and other leasing gains. Our estimate for non-interest income was $585.5 million.Non-interest expenses increased 9.9% to $1.18 billion. We had projected the metric to be $1.08 billion.At the first-quarter end, average total deposits were $143.4 billion, down 1.6% from the prior quarter. The decline reflected the normalization of pandemic-related balances, changing client behavior owing to higher interest rates and normal seasonal deposit outflows.Average total loans were $119.8 billion, up 1.8%. The growth was primarily driven by robust strength in commercial loan portfolios.