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On Thursday, Keefe, Bruyette & Woods analyst David Konrad maintained an Outperform rating on KeyCorp (NYSE:KEY) stock, with a steady price target of $18.00. The endorsement follows recent insights shared by KeyCorp’s CEO and Chairman, Chris Gorman, at a competitor’s conference. Gorman’s presentation touched on the current quarter’s progression, particularly in the areas of investment banking and loan growth.
Gorman indicated that investment banking performance is tracking in line with expectations, with a forecast that first-half 2025 investment banking revenue could rise by 10% year-over-year. This projection is slightly below Keefe, Bruyette & Woods’ estimate of an 11% increase, suggesting a 14% quarter-over-quarter dip in investment banking fees for the second quarter of 2025. Despite this, backlogs are reported to be robust overall.
KeyCorp is witnessing early signs of loan growth, with management noting an uptick in utilization rates to 33%, up from 31% at the end of the first quarter. The company is experiencing inventory builds in its commercial and industrial (C&I) sector, with an anticipated quarter-over-quarter increase of approximately $1.5 billion, mirroring growth levels seen in the first quarter. However, KeyCorp’s typical utilization rate target remains between 35-36%.
Regarding the impact of tariffs, Gorman stated that only a small fraction of KeyCorp’s $74 billion C&I portfolio, approximately $1.5 billion, would be significantly affected. Additionally, KeyCorp’s management reiterated previous guidance for net interest income (NII), projecting an increase of over 20% year-over-year. This positive outlook reinforces the firm’s confidence in KeyCorp’s financial trajectory as the second quarter of 2025 unfolds.
In other recent news, KeyCorp reported its financial results for the first quarter of 2025, surpassing analysts’ expectations with earnings per share of $0.33, slightly above the forecasted $0.32. Revenue reached $1.8 billion, exceeding the anticipated $1.75 billion, marking a 16% year-over-year increase. Additionally, KeyCorp announced dividends for the second quarter of 2025, with a cash dividend of $0.205 per common share and various dividends for its preferred stock series. Shareholders recently elected all fifteen director nominees at KeyCorp’s Annual Meeting and ratified Ernst & Young LLP as independent auditors for the fiscal year 2025.
Jefferies has initiated coverage on KeyCorp with a "Hold" rating and a price target of $18, reflecting cautious optimism about the company’s financial prospects amid economic uncertainties. The firm acknowledged KeyCorp’s diversified revenue streams and strong capital position, with an expected 20% growth in net interest income by fiscal year 2025. KeyCorp also highlighted its strategic investments, particularly in Scotiabank (TSX:BNS), as a driver for future performance. The company maintains a robust capital position, with a CET1 ratio of 11.8%, and plans a $1 billion share repurchase later in the year.
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