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KeyCorp’s KEY first-quarter 2021 earnings of 61 cents per share easily surpassed the Zacks Consensus Estimate of 49 cents. Also, the bottom line improved substantially from 12 cents earned in the prior-year quarter.
Results benefited from a rise in revenues, robust loan and deposit balances, and provision benefit. However, lower rates and a rise in operating expenses were the headwinds.
Net income from continuing operations attributable to common shareholders was $591 million, up significantly from $118 million recorded in the year-ago quarter.
Revenues Improve & Expenses Increase
Total revenues grew 19.4% year over year to $1.75 billion. Also, the top line beat the Zacks Consensus Estimate of $1.70 billion.
Net interest income (on tax-equivalent basis) increased 2.3% year over year to $1.01 billion. The rise was attributed to higher earning asset balances and loan fees, partially offset by lower net interest margin (NIM).
Taxable-equivalent NIM from continuing operations decreased 40 basis points (bps) year over year to 2.61%.
Non-interest income was $738 million, surging 54.7%. The upswing was driven by increase in almost all fee income components except for service charges on deposit accounts, other income and corporate-owned life insurance income.
Non-interest expenses rose 15% from the prior year to $1.07 billion. The increase was mainly due to higher personnel costs.
At the first-quarter end, average total deposits were $137.4 billion, up 1.5% from the prior quarter. Average total loans were $100.7 billion, down 1%.
Credit Quality: Mixed Bag
Net loan charge-offs, as a percentage of average loans, increased 11 bps year over year to 0.46%. Allowance for loan and lease losses was $1.44 billion, up 5.8%.
However, provision for credit losses was a net benefit of $93 million against a provision of $359 million in the prior-year quarter. Provision benefit was mainly due to $207 million reserve release, which was largely driven by expected improvement in the economic outlook.
Further, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.78%, down 4 bps.
Capital Ratios Mixed
KeyCorp's tangible common equity to tangible assets ratio was 7.5% as of Mar 31, 2021, down from 8.3% in the corresponding period of 2020. Also, Tier 1 risk-based capital ratio was 11.2%, up from 10.2% in the prior-year quarter.
Share Repurchase Update
During the quarter, KeyCorp repurchased shares worth $135 million.
Solid loans and deposit balances, along with a focus on fee income, are likely to continue supporting KeyCorp’s revenues. However, lower rates and soft loan demand remain major concerns.
KeyCorp Price, Consensus and EPS Surprise
KeyCorp price-consensus-eps-surprise-chart | KeyCorp Quote
KeyCorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
First Republic Bank FRC delivered an earnings surprise of 16.2% in first-quarter 2021 on solid top-line strength. Earnings per share of $1.79 surpassed the Zacks Consensus Estimate of $1.54. Additionally, the bottom line climbed 53.1% from the year-ago quarter.
Citizens Financial Group CFG has reported first-quarter 2021 adjusted earnings per share of $1.41, surpassing the Zacks Consensus Estimate of 97 cents. Also, the bottom line compares favorably with the year-ago quarter’s 9 cents.
Zions Bancorporation’s ZION first quarter 2021 net earnings per share of $1.90 surpassed the Zacks Consensus Estimate of $1.15. Also, the bottom line marks a significant improvement from 4 cents earned in the year-ago quarter.
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