KeyCorp’s SWOT analysis: stock outlook amid strategic growth and market challenges

KeyCorp (NYSE:KEY), a prominent player in the U.S. Large-Cap Banks sector with a market capitalization of $18.86 billion, has been navigating a complex financial landscape characterized by strategic investments, robust fee income, and ambitious growth targets. According to InvestingPro analysis, the stock currently trades near its Fair Value, with analysts anticipating sales growth in the current year. As the company pursues its 2025 outlook, investors and analysts are closely monitoring its performance and potential in an evolving banking environment.

Company Overview and Financial Performance

KeyCorp has maintained a stable position in the banking industry, demonstrating resilience in its financial performance. The company’s net interest income (NII) is trending better than expected for the third quarter of 2025, potentially growing by 3-4%. This growth is attributed to stable loans, higher deposits, and a net interest margin (NIM) hovering around 2.70%. Notably, InvestingPro data shows the company maintains an impressive 54-year streak of consecutive dividend payments, currently offering a 4.77% yield.

The company’s earnings per share (EPS) estimates for fiscal year 2025 and 2026 stand at $1.47 and $1.80, respectively, reflecting analysts’ expectations of continued profitability. KeyCorp’s fee income has been a bright spot, particularly due to an increase in investment banking fees, which reached record levels in the first quarter of 2025.

Strategic Initiatives and Growth Outlook

KeyCorp’s strategic direction has been bolstered by significant developments. The company completed a $2.8 billion investment from Bank of Nova Scotia (BNS), with the final tranche of $2.0 billion closing in early 2025, giving BNS a 14.9% stake in KeyCorp. This investment is viewed as a crucial step in supporting KeyCorp’s 2025 outlook.

The company has outlined ambitious targets for 2025, including:

• NII growth of 20%
• Fee income growth exceeding 5%
• Expense growth maintained between 2-3%

Additionally, KeyCorp has announced a $1 billion share repurchase program set to commence in the second half of 2025, signaling confidence in its financial health and future prospects.

Industry Position and Competitive Landscape

KeyCorp operates in a competitive U.S. Large-Cap Banks sector, where differentiation and strategic positioning are crucial. The company’s record investment banking fees and stable NII performance have contributed to its competitive stance. However, the banking industry faces challenges, including interest rate fluctuations and economic uncertainties, which could impact KeyCorp’s performance relative to its peers.

Risks and Challenges

Despite positive trends, KeyCorp faces several challenges. The company has experienced higher-than-expected provisions for credit losses, which could potentially offset some of the revenue gains from NII and fees. With a current P/E ratio of 581.67 and revenue of $4.74 billion in the last twelve months, the stock’s valuation metrics suggest careful consideration is needed. For deeper insights into KeyCorp’s financial health and growth prospects, InvestingPro subscribers can access additional tips and comprehensive analysis, including detailed valuation metrics and growth forecasts.

KeyCorp’s ability to meet its ambitious NII growth targets while managing expenses and credit quality will be critical in the coming quarters. The company must also navigate the potential impacts of interest rate changes, with recent reductions of 200 basis points leading to a slight decrease in NII.

Bear Case

How might higher credit loss provisions impact KeyCorp’s profitability?

KeyCorp’s recent financial reports have shown higher-than-expected provisions for credit losses. This trend could significantly impact the company’s profitability if it continues or worsens. Increased provisions directly affect the bottom line, potentially offsetting gains from strong fee income and NII growth. If economic conditions deteriorate, leading to higher default rates, KeyCorp may need to further increase its loss reserves, which would put additional pressure on earnings.

What risks does KeyCorp face in meeting its ambitious NII growth targets?

KeyCorp has set an aggressive NII growth target of 20% for 2025. Achieving this goal may prove challenging in the face of economic uncertainties and interest rate fluctuations. The company’s NII has already shown sensitivity to interest rate changes, with a 200 basis point reduction leading to a 0.39% decrease in NII. If interest rates remain low or decline further, KeyCorp may struggle to generate the projected NII growth, potentially disappointing investors and affecting its stock performance.

Bull Case

How could KeyCorp’s strong investment banking performance drive future growth?

KeyCorp’s investment banking division has been a standout performer, with record fees reported in the first quarter of 2025. This strength in capital markets activities could be a significant driver of future growth for the company. As businesses seek advisory services for mergers, acquisitions, and capital raising in a potentially recovering economy, KeyCorp is well-positioned to capitalize on these opportunities. Continued strong performance in investment banking could not only boost fee income but also enhance KeyCorp’s reputation and market share in this lucrative segment of banking services.

What potential benefits could the BNS investment bring to KeyCorp’s operations?

The $2.8 billion investment from Bank of Nova Scotia (BNS) represents a strategic partnership that could yield substantial benefits for KeyCorp. This infusion of capital strengthens KeyCorp’s financial position, potentially enabling it to pursue growth opportunities, invest in technology, or expand its product offerings. The partnership with BNS, a major international bank, could also provide KeyCorp with access to new markets, cross-selling opportunities, and shared expertise in various banking segments. This strategic alliance may enhance KeyCorp’s competitive position and contribute to long-term value creation for shareholders.

SWOT Analysis

Strengths:

• Strong investment banking performance with record fees
• Effective expense management
• Strategic partnership with Bank of Nova Scotia
• Stable loan portfolio and growing deposits

Weaknesses:

• Higher-than-expected provisions for credit losses
• Sensitivity to interest rate fluctuations
• Flat fee income in some areas of the business

Opportunities:

• Potential for NIM expansion
• $1 billion share repurchase program
• Growing demand for capital markets and advisory services
• Possible synergies from BNS partnership

Threats:

• Economic uncertainties and potential recession risks
• Intense competition in the banking sector
• Regulatory changes affecting capital requirements or business practices
• Cybersecurity risks and technological disruptions

Analysts Targets

• Barclays Capital Inc.: USD 20.00 (October 9, 2025)
• Barclays Capital Inc.: USD 20.00 (August 7, 2025)
• Barclays Capital Inc.: USD 20.00 (July 24, 2025)
• Barclays Capital Inc.: USD 20.00 (July 23, 2025)
• Barclays Capital Inc.: USD 20.00 (June 26, 2025)
• Barclays Capital Inc.: USD 20.00 (May 8, 2025)
• Piper Sandler: USD 16.00 (April 21, 2025)
• Barclays Capital Inc.: USD 20.00 (April 21, 2025)
• Barclays Capital Inc.: USD 21.00 (April 3, 2025)

KeyCorp’s stock outlook reflects a mix of optimism and caution. While the company has demonstrated strengths in investment banking and strategic partnerships, it faces challenges in credit loss provisions and achieving ambitious growth targets. The consistent price target of USD 20.00 from Barclays Capital Inc. throughout most of 2025 suggests a stable outlook, with potential upside from the current stock price. However, the lower target from Piper Sandler indicates some divergence in analyst opinions.

As KeyCorp moves forward, its ability to leverage its strengths, mitigate risks, and capitalize on market opportunities will be crucial in determining its stock performance and long-term value creation for investors. With the RSI indicating oversold territory and seven analysts revising earnings upward for the upcoming period, investors seeking comprehensive analysis can explore KeyCorp’s full potential through InvestingPro’s detailed research reports and advanced metrics.

This analysis is based on information available up to October 13, 2025, and market conditions may have changed since then.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on KEY. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore KEY’s full potential at InvestingPro.

Should you invest in KEY right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if KEY is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate KEY further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if KEY appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.