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Key CorpKey Q4 2021 earnings per share from continuing operations of 64 cents easily beat Zacks’ consensus estimate of 57 cents. Net income improved by 14.3% compared to the prior year quarter.
The stock rebounded nearly 1% in premarket trading, reflecting investor optimism about better-than-expected results. The full day trading session will show a clearer picture.
Results benefited from higher non-interest income and lower provisions. However, lower net interest income due to lower rates and lower loan balances, as well as higher operating expenses were the downside factors.
Net income from continuing operations attributable to common shareholders was $601 million, up 9.5% year-over-year.
In 2021, earnings from continuing operations of $2.62 per share exceeded the consensus estimate of $2.55 and increased significantly from $1.26 the previous year. Net income from continuing operations attributable to common shareholders was $2.61 billion, up 96.5%.
Income improves and expenses increase
Quarterly total revenue increased 5.5% year over year to $1.95 billion. Revenue topped Zacks’ consensus estimate of $1.81 billion.
In 2021, total revenue increased 7% year over year to $7.29 billion. The top line beat Zacks’ consensus estimate of $7.14 billion.
Net interest income (on a tax equivalent basis) decreased slightly to $1.04 billion. The decline was primarily due to lower reinvestment yields and exit from the indirect auto loan portfolio, largely offset by higher earning asset balances.
The MNI in taxable equivalent from continuing operations contracted by 26 basis points (bps) to 2.44%.
Non-interest revenue was $909 million, up 13.3%. The increase was primarily due to higher investment banking and debt servicing fees, commercial mortgage service fees, deposit account servicing fees and corporate services revenue. .
Non-interest expense increased 3.7% to $1.17 billion. The increase is mainly explained by the increase in personnel costs, business services and professional fees as well as computer processing costs.
At the end of the fourth quarter, average total deposits stood at $151 billion, up 2.8% from the previous quarter. Average total loans were $99.4 billion, down nearly 1%.
Credit quality is improving
Net loan write-offs, as a percentage of average loans, decreased 45 basis points year-over-year to 0.08%. Provision for loan and lease losses was $1.06 billion, down 34.7%.
Provision for credit losses was $4 million, down 80% from the prior year quarter. Non-performing assets, as a percentage of loans in portfolio at the end of the period, other real estate assets held and other non-performing assets, amounted to 0.48%, down 44 basis points.
Capital ratios are deteriorating
KeyCorp’s tangible common equity to tangible assets ratio was 6.9% as of December 31, 2021, compared to 7.9% for the corresponding period of 2020. The Tier 1 risk-based capital ratio was of 10.7%, compared to 11.1% in the quarter of the previous year. level.
Strong loan and deposit balances, along with a focus on fee income, should continue to support KeyCorp’s earnings. However, falling rates and rising spending are near-term concerns.
KeyCorp currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other major banks
Financial truistTFC’s fourth-quarter 2021 adjusted earnings of $1.38 per share easily beat Zacks’ consensus estimate of $1.26. Net income increased by 16.9% over the prior year quarter.
Truist’s results were helped by higher fee income, lower operating expenses, modest loan growth and provision benefits. However, lower interest rates and a decline in net interest income (NII) were the slowing factors.
PNC Financial Services Group, Inc. PNC achieved a positive earnings surprise of 1.94% in the fourth quarter of 2021 thanks to a substantial recovery from credit losses. Adjusted earnings per share (excluding pretax integration costs related to the BBVA USA acquisition) of $3.68 beat Zacks’ consensus estimate of $3.61 and improved 12.5% year-on-year.
Growth in fee income on higher asset management and corporate services revenue supported PNC Financial’s results. However, higher spending, shrinking margins and lower lending were the headwinds.
State StreetSTT’s fourth-quarter 2021 adjusted earnings of $2.00 per share beat Zacks’ consensus estimate of $1.91. The net result was 18.3% higher than the level of the previous year.
State Street’s results reflected further gains in investment services, reserving benefits and improved fee income. However, higher spending, lower net interest income and lower interest rates were the slowing factors.
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