KeyCorp Q2 2025 slides: EPS jumps 40% YoY as NIM expands

KeyCorp (NYSE:KEY) presented its second quarter 2025 financial results on July 22, 2025, revealing substantial year-over-year growth in earnings and revenue, driven by expanding net interest margin and strong fee income performance.

Quarterly Performance Highlights

KeyCorp reported earnings per share of $0.35 for Q2 2025, representing a 6% increase from the previous quarter and a robust 40% jump year-over-year. Total (EPA:TTEF) revenue reached $1.84 billion, up 3.8% quarter-over-quarter and 20.6% compared to the same period last year.

The bank’s performance exceeded its Q1 2025 results, when it reported EPS of $0.33 and revenue of $1.8 billion. KeyCorp’s stock closed at $18.28 on July 21, with slight premarket movement showing a 0.11% decline to $18.26 ahead of the earnings presentation.

As shown in the following comprehensive financial summary, the company demonstrated strength across multiple metrics:

"Our second quarter results reflect the continued execution of our relationship strategy, with strong growth in both net interest income and fee-based revenues," said Chris Gorman, Chairman and CEO of KeyCorp, according to the presentation materials.

Detailed Financial Analysis

Net Interest Income and Margin

KeyCorp’s net interest income (tax equivalent) increased to $1.15 billion, up 4.1% from the previous quarter and 27.9% year-over-year. The net interest margin expanded to 2.66%, an improvement of 8 basis points quarter-over-quarter and 62 basis points year-over-year.

The following chart illustrates the steady improvement in net interest income and margin:

The margin expansion was primarily driven by improved deposit pricing, swap maturities, and fixed-rate securities repricing. The company’s balance sheet management strategy appears to be yielding positive results as interest rates stabilize.

Loan and Deposit Trends

Average loans increased to $105.7 billion, with commercial loans growing 2.7% quarter-over-quarter while consumer loans declined by 1.8%. The loan portfolio remains predominantly variable rate (66%), with 91% of commercial loans made to established client relationships.

The following chart shows the evolution of the loan portfolio:

On the funding side, average deposits decreased slightly by 0.7% quarter-over-quarter, but client deposits grew 2% year-over-year. Importantly, deposit costs declined by 7 basis points, contributing to the improved net interest margin.

Noninterest Income

Noninterest income reached $690 million in Q2 2025, up 3.3% from the previous quarter and 10% year-over-year. Investment banking and debt placement fees were particularly strong at $178 million, up 41% from the same period last year.

The following breakdown shows the diverse sources of fee income:

Trust and investment services income also performed well at $146 million, up 5% both quarter-over-quarter and year-over-year. Corporate services revenue increased 17% quarter-over-quarter and 12% year-over-year, reflecting KeyCorp’s success in deepening client relationships.

Expense Management and Efficiency

Noninterest expenses totaled $1.15 billion, up 2% from the previous quarter and 7% year-over-year. With revenue growing at a faster pace than expenses, the company achieved positive operating leverage of 14% year-over-year.

The cash efficiency ratio improved to 62.4%, down 106 basis points quarter-over-quarter and 780 basis points year-over-year, indicating improved operational efficiency.

Credit Quality and Capital Position

Credit quality metrics remained stable or improved during the quarter. Net charge-offs to average loans decreased to 39 basis points, down 4 basis points from the previous quarter. Nonperforming assets to loans plus OREO declined slightly to 66 basis points.

The following chart illustrates the stable credit quality trends:

KeyCorp maintained a strong capital position with a Common Equity Tier 1 (CET1) ratio of 11.7%, up approximately 120 basis points year-over-year. Tangible book value per common share increased to $12.83, representing impressive growth of 26.7% year-over-year.

Forward-Looking Statements & Guidance

Looking ahead, KeyCorp provided a positive outlook for the remainder of 2025. The company expects average loans to decline 1-3% for the full year compared to 2024, but projects a 2% increase versus year-end 2024 levels.

Net interest income is forecast to grow approximately 5% for the full year, with a stronger 20-22% increase expected in Q4 2025 compared to Q4 2024. The company anticipates achieving a net interest margin of 2.75% by the fourth quarter of 2025.

The following slide details the company’s financial outlook:

"We continue to focus on targeted scale in our differentiated fee businesses, driving new relationships with a focus on primacy, maintaining risk management excellence, and strengthening our balance sheet," said Clark Khayat, Chief Financial Officer, according to presentation materials.

Conclusion

KeyCorp’s Q2 2025 financial results demonstrate continued momentum across key performance metrics, with substantial year-over-year growth in earnings, revenue, and net interest margin. The company’s strategic focus on fee-based businesses and relationship banking appears to be yielding positive results, as evidenced by the strong growth in investment banking, trust services, and corporate services revenues.

With a solid capital position, improving efficiency, and stable credit quality, KeyCorp appears well-positioned to achieve its full-year 2025 targets. The company’s outlook suggests continued net interest income growth and margin expansion in the coming quarters, which should support further earnings improvement.

Investors will likely focus on the company’s ability to maintain this positive trajectory amid evolving economic conditions and potential changes in the interest rate environment.

Full presentation:

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