KeyCorp

Key reported second-quarter EPS of $0.44, up 26% year over year. Revenue increased 7% year over year, pre-provision net revenue grew 9%, tax-equivalent net interest income rose 9% year over year and 2% sequentially, and net interest margin improved 2 basis points sequentially to 2.89%. Expenses increased 5% year over year, noninterest income rose 2%, and tangible book value per share grew 6% year over year. Loan loss provision was $92 million, including $115 million of net charge-offs, or 42 basis points, and a $23 million reserve release; CET1 was 11.2% and marked CET1 was 9.8%. For 2026, management raised revenue guidance to 7% to 8% growth from about 7%, NII guidance to 9% to 11% from 9% to 10%, average loan growth to 4% to 5% from 2% to 4%, and average commercial loan growth to 8% to 10%. The company now expects to exit the year with NIM of 3.0% to 3.05% and still expects at least $1.3 billion of share repurchases.

Christopher Gorman said the quarter showed strong business momentum and progress against strategic commitments, emphasizing loan growth, fee-business strength, and capital discipline. He highlighted the Clearwater UK acquisition as a strategic extension of the middle-market advisory franchise and said the company is well positioned across a range of macro scenarios. His tone was confident and constructive, repeatedly pointing to long-term return targets and saying the bank is on track to exceed 15% ROTCE by the end of 2027.

Clark Khayat focused on the mechanics behind the quarter and the revised outlook. He said revenue was up 7%, expenses were up 5%, NII rose 9% year over year, and NIM reached 2.89%; the main margin drags were stronger loan growth, tighter spreads on new loans, and seasonal deposit dynamics, partly offset by $9 billion of fixed-rate asset repricing expected in the back half. He also said deposits closed at $153 billion, total deposit costs fell 2 bps to 1.63%, net charge-offs were 42 bps, and the company remains on track for share repurchases of at least $1.3 billion, with a roughly $300 million quarterly run rate in the back half implied.

Analysts focused on why NIM came in lighter than expected, whether the higher-growth/lower-yielding lending mix can still support the 2027 return target, and how much confidence management has in the new deposit-growth and investment-banking assumptions. Management said the NIM gap was mostly timing and mix: stronger loan growth, temporarily higher wholesale funding, and a seasonal deposit trough, while citing about $9 billion of fixed-rate repricing and expected deposit growth as support for a 3%+ exit NIM. On investment banking, management acknowledged second-quarter fees were below expectations but said the business has strong pipelines, with Q3 fees expected to be up 20%+ quarter over quarter and mid-single-digit growth still the full-year goal. Analysts also pressed on private-equity-driven middle-market M&A and credit trends, and management said sponsor activity is likely to return, while current credit issues are idiosyncratic rather than signs of broader deterioration.