KeyCorp at RBC Conference: Strategic Financial Outlook

On Tuesday, 04 March 2025, KeyCorp (NYSE: KEY) presented at the RBC Capital Markets Financial Institutions Conference, outlining its strategic financial positioning amid economic uncertainties. The company, led by CFO Clark Kayotte, emphasized a robust outlook for net interest income growth and proactive expense management, while also acknowledging challenges such as interest rate fluctuations and regulatory changes.

Key Takeaways

• KeyCorp targets a 20% growth in net interest income for 2025, supported by structural components.
• The company is managing expenses through automation and strategic outsourcing.
• Investment banking, wealth management, and payments sectors are poised for mid-to-high single-digit growth.
• KeyCorp is considering reinstating its share repurchase authorization.
• The company remains vigilant about economic uncertainties and their potential impact.

Financial Results

• Net Interest Income (NII):

- Targeting a 20% growth for the full year 2025.

- First quarter NII expected to be around $1.1 billion.

- Growth supported by portfolio repositioning and swap expirations.

• Fees:

- Aiming for a 5%+ increase in 2025.

- Investment banking, wealth management, and payments sectors expected to grow mid-to-high single digits.

- Other income projected at approximately $15 million per quarter.

• Deposits:

- Non-interest-bearing deposits make up about 23% of total deposits.

- Deposit betas expected to be around 50% for the year.

- First quarter deposit balances anticipated to decrease by 1%, reflecting typical seasonality.

• Net Interest Margin (NIM):

- Fourth quarter 2024 NIM was 2.41%.

- Targeting a NIM of 2.7% or better.

• Expenses:

- Committed to a mid-single-digit growth rate.

- Employing process reengineering, automation, and strategic outsourcing/insourcing to manage expenses.

• Credit Quality:

- Fourth quarter net charge-off ratio was 43 basis points.

- Guidance for 2025 is between 40-45 basis points.

• Capital Levels:

- Capital marked in the mid to high 9% range.

- Considering share repurchase authorization reinstatement.

Operational Updates

• Investment Banking:

- Hiring investment bankers with a target of a 10% increase.

- Focus on seven industry verticals or sub-verticals.

• Technology Investments:

- Investing in tech platforms, particularly customer-facing.

- Redeploying staff into sales and client-facing roles.

• Commercial Real Estate (CRE):

- Commercial mortgage servicing expected to be stable after a record year.

- Special servicing anticipated to decline after strong performance.

• Private Credit:

- Joint venture with Blackstone under review for renewal suitability.

- Operating a direct lending fund in partnership with a third party.

Future Outlook

• Net Interest Income:

- Confident in achieving 20% growth due to structural factors.

• Fees:

- Expecting growth in investment banking, wealth management, and payments.

• Expenses:

- Managing growth to invest in technology and client-facing roles.

- Anticipates a 2-3% expense growth over time.

• Capital:

- Considering reinstating share repurchase authorization.

• Economic Conditions:

- Monitoring potential economic uncertainty and its impact on business.

Q&A Highlights

• Interest Rate Sensitivity:

- Positioned neutrally to interest rate movements, adaptable to various environments.

• Deposit Pricing:

- Deposit betas expected to remain around 50% throughout the year.

• Leveraged Lending:

- Leveraged book is conservatively managed, reflecting the company’s risk appetite.

For those interested in more detailed insights, the full transcript of the conference call is available below.

Full transcript - RBC Capital Markets Financial Institutions Conference:

Unidentified speaker: Thank you for joining us for our next fireside chat, with KeyCorp. They need little introduction with Clark here to my immediate left. But as you know, headquartered in Cleveland, Ohio with about 187,000,000,000 in assets, nine sixty one branches, put up an ROTCE in the most recent period at about 15.5%. And with me today is their Chief Financial Officer, Clark Kayotte. And Clark became the CFO in 2023, right after this conference actually.

And he’s been with the company since 2012, running different commercial lines of businesses such as payments and treasury functions. And thank you, Clark, for joining us today.

Clark Kayotte, Chief Financial Officer, KeyCorp: Happy to be here. I know it’s

Unidentified speaker: still earlier in the year, but with all the changes going on in the macro environment, especially with last night’s news with the tariffs, can you say how or talk to us how you guys are positioned for this kind of turbulent, I don’t want to call it turbulent, but changing times?

Clark Kayotte, Chief Financial Officer, KeyCorp: Sure. So you guys have a good ability to anchor this conference off something. This year it would be the tariff news. So, look, I think our view would be all signs still point to a pretty durable economy that feels constructive, this morning’s reaction notwithstanding. Our view and our hope is that this gets digested along with some of the other moves and we find some equilibrium and some stability and it ends up being a constructive year.

That’s obviously not a definite, but it would still be our kind of majority view that this is going to be a pretty solid constructed view.

Unidentified speaker: And have any of your corporate or commercial customers in the last four weeks or so, has there been any real definitive pullbacks or changes? Or can you tell? Or is it just too early to really tell?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. Maybe two things that we’ve seen or heard. One would be pull forward of inventory. So, and I think we’re seeing that kind of broadly. That will show up in some loan balances that you know, we would expect to stick, but, you know, people buying inventory ahead of some of these moves.

And then I think the other view would be, you know, lots of deep conversations, lots of positioning, but, like, let’s see what’s going to happen. So, you know, I feel like for the last couple of quarters, we’ve been talking about uncertainty via the election, then you get the election and then, you know, you feel like, okay, things are gonna improve. Now we’re back into, again, a little period of uncertainty. And so that’s just always going to drive a little bit of hesitation. And we’re seeing a little bit more of that right now.

Unidentified speaker: I think your inventory comment is interesting because in Friday’s H-eight data, you’ve been I don’t know if you’ve been noticing, but the C and I loans are clearly moving up and probably ties into your commentary there. The other as we look at the banks into 2025, aside from this now new uncertainty, one of the real positive trends is the changes coming from regulation with all the new heads coming in, especially on Basel III endgame and then of course, CCAR and the stress test. What’s your color? What are you guys hearing and seeing? And how do you feel about the direction it’s moving in?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. Look, I think the direction feels constructive and positive. We’re always going to be supportive of the balance of safety and soundness with allowing banks to support clients and communities. That’s, you know, I think an important place to be and find that intersection. I think the rhetoric always leads the reality.

So it’s going to take a little bit of time for this to distill down to field supervision and everyday activity. That’s still, you know, kind of a hangover from where we’ve been. But I do think, generally speaking, things look like they’re headed in a productive way. I think if you talk Basel three, you know, not sure exactly how that’s gonna look and when, but generally speaking, we feel like we’re well positioned for that. The RWA moves in the originally proposed rule, we were prepared for and actually got some benefit out of.

So I don’t know that we’re too concerned about that. And obviously with last year’s activity, the capital and mark capital pieces feel very strong. As it comes to liquidity, I think those rules are likely here to stay and we are well positioned for that again, given some of the steps we’ve taken over the last year or so. And then lastly, TLAC and long term debt, I don’t really know again where that’s gonna shake out. It does feel like there will be at least some tailoring, but even if it was fully baked, you know, it would be $2,000,000,000 to $3,000,000,000 of additional,

Unidentified speaker: you

Clark Kayotte, Chief Financial Officer, KeyCorp: know, borrowing for us. So not a huge lift. So I think across the board from those standpoints, we feel like we’re well positioned for whatever direction we go in and any sort of alteration from where we’ve been, I think, is just for the positive. Yep. Correct.

Unidentified speaker: Yep. There is even some talk we’re hearing that the LTD or the TLAC may actually go away, which would be a positive. No doubt about it. Maybe when we talk about the full year outlook, when you think back to what your guide was in January, ’20 percent growth in net interest income, which is very strong, some folks thought maybe it could have been higher. So maybe how are you feeling about that at this point?

Again, we’re two months into the year, of course, but any color there? Hard to make everyone happy.

Clark Kayotte, Chief Financial Officer, KeyCorp: But, look, we feel really good about the 20%, as we’ve said, very confident. I think that confidence comes from the structural nature of that. So we’ve talked about, you know, whether it’s the two repositionings of the portfolio we did, whether it’s the swaps finally gone, whether it’s another $15,000,000,000 of fixed rate securities and swaps repricing issues, a bunch of things that accrue to our benefit that are gonna drive that. The reason we haven’t moved too much off of that is again, you know, we’re trying not to mark to market every month. And if you go back to when we did our planning, you know, five year and ten year rates were at a level, they improved.

When we went to earnings, they’re back or below where we were when we did the planning. So we don’t want to be tied too much to all this volatility. Right. And again, we feel really good about where we’re going. I think, to the extent the economy is as constructive as people feel like it could be, I think we’ve got some upside.

But as we just talked about, right, there’s a fair amount of now uncertainty that I don’t think has been as prevalent. And to the extent it goes in a different direction, then I think that puts some pressure across the board. But, all in all, we feel really good about where we are and we’ll continue to update, but everything is tracking very comfortably with those.

Unidentified speaker: And if you had to paint an interest rate scenario that is ideal for Key the way you are today, is it the short end sticking around four and we get a positive slope or what if you had your ideal environment, what would it be?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. I think longer term, everybody wants something that is probably a little bit lower on the front end and upward sloping, right? In the near term, cuts to the front end tend to put pressure when your loans repriced right away and you’ve got a little bit of deposit lag. I think we’ve managed that pretty well. We’re relatively neutral to rate.

So I think we’re very well positioned for almost any rate environment that could happen. There’s probably some extremes that we can talk about. But, again, upward sloping curve is always ideal from a shape standpoint, but obviously the absolute level of rates matter. So I do think to the extent we see the five year and ten year where they are kind of right around here that could drive some activity as long as it’s not a function of people thinking the economy is going downhill. So there’s got to be kind of good constructive belief in the economy and then kind of rates at the right level.

Unidentified speaker: Okay. Speaking of deposits, your deposit costs in the fourth quarter dropped 21 basis points sequentially, which obviously very impressive. Non interest bearing now is about 23% of total deposits, including the hybrid accounts. How is the deposit pricing trending so far in the quarter? And what are your deposit beta expectations for this coming year?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. As we’ve said, as we go through the year, we’d expect to be around 50. We ended or in the fourth quarter, we were 40 plus. We probably in December around 45. We’re probably a tick higher than that in the first quarter.

The reason we’re not a lot higher is two things. Like one, seasonal deposits are always lower in the first quarter. We’ve seen that again. I think in My Time A Key that historically has been kind of down 1% to 3%. Right.

We’ll see it closer to the 1% end than the 3% end. So I think we’re doing well there. Yep. But that obviously puts a little bit of pressure. And then the rate expectation is fewer cuts, which means probably less ability to drive pricing down.

That said, we have continued to be proactive in managing the book and we’ll expect to see, you know, a few billion dollars per month in the first half come out of CDs and MMDA promos. So we clearly have some opportunity. So all in all, I’d say deposit balances and pricing have gone very well. We expect it to continue to be good. I mean, there’s again some edge cases where it could get challenging.

But right now, again, we expect betas throughout the year to kind of be close to 50 or around 50. And balances, I think, from a first quarter low will continue to build as they generally do and we don’t see anything there that would cause us to think differently. Yes.

Unidentified speaker: It’s interesting with the non interest bearing deposits that you folks have relative to total deposits. It’s been a number of years where we’ve had such a higher front end of the curve where those non interest bearing deposits are really quite golden. Yeah. Do you see any ability of I mean, they’re quite high already as a percentage of total going higher or is this where they kind of set it allow set it allow that? It’s

Clark Kayotte, Chief Financial Officer, KeyCorp: a good question. I think if rates were to come down, you could see a little bit of build there. The other place where I think we’ve had a lot of success and you noted the kind of additional non interest bearing component of the hybrids, That piece for us has been a really great tool. And one of the things our payments team does really well is engage and expand those relationships in those hybrid accounts, which translates to moving those dollars from interest bearing to non interest bearing. And we’ve continued, I think in the fourth quarter, we created another maybe $500,000,000 of non interest bearing through the expansion of treasury services.

So we’ll continue to do that. That’s a really proactive great way to increase retention, improve the relationship, get more non interest bearing deposits. The broad consumer book again is going to just be acquisition of checking accounts and then absolute level of rates. So a little bit less proactive on that other than than can you acquire new clients.

Unidentified speaker: When we were just chatting about interest rates, you talked about some extremes. But when you look at the full year on the net interest income guide, what’s the biggest risk of that number not materializing? Is it an extreme move in rates one way or the other? Or

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. I think that’s exactly it. So I think a hard move on the front end in either direction. Oh, either direction. Okay.

I mean, look, the down, you’re just going to have the loans repriced right away and just take some time. So that’ll put some pressure on it. The up then, I guess, is going to depend on loan volumes, which then drive deposit leads, which then drive deposit pricing and beta competition. But I think those moves would have to be hard and quick for us to feel, you know, enough pain to get really outside of that guide. And I don’t see anything causing that other than, you know, kind of an event we’re not thinking about right now, which is always possible.

I mean, there can be a geopolitical thing that that happens, or an economic, you know, real recessionary activity. So that brings with it a whole host of other issues. But other than a really hard short term move up or down, I think we’re relatively well positioned. Got it. Yes.

Yes.

Unidentified speaker: It is similar when you think about hard moves like during the pandemic when they dropped so dramatically there at the very beginning. The net interest margin coming out in the fourth quarter of twenty twenty four was 2.41%. You’ve been talking about achieving a 2.7% net interest margin or better as we go out. If we do have higher for longer on rates, how does that margin play out as we get into the end of the year?

Clark Kayotte, Chief Financial Officer, KeyCorp: So again, if it’s on the margin, not going to have a huge impact. It’s be slightly beneficial. So we’re pretty neutral with maybe a little lean to asset sensitivity right now. But I would call it neutral for the sake of this discussion. So it’s not going to have a big impact.

I mean, slight moves on the front end of the curve again, I think are marginally good or bad, but manageable. And then the reinvestment rates or the borrowing capacity that happens based on where the five and ten year are, again, unless they’re moving dramatically, you know, there some advantage or some not. If it’s all structurally higher, in the near term, I think reinvestment rates get better, but you’re probably gonna see loan demand come down. So there’s some, you know, trade off there. And I think for our business and maybe for the economy generally, we’d like rates to be a little bit lower and we’d like a little bit more economic activity to happen.

I think that just benefits the business more broadly. Yes. Got it.

Unidentified speaker: And moving now, obviously, net interest income is very important for your organization. But turning to fees, when you guys are talking about the upside this year in the fourth quarter earnings call, you were talking about a 5% upside to fees in 2025. Can you walk us through the puts and takes of what you’re seeing in achieving that number?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. So we said again kind of five plus because we think there’s something on top of that. But I’d say in the areas we talk a lot about, so investment banking, wealth payments, we feel really good about where we’re positioned. We’re adding people in those areas. We’re building capability and we’d expect those to be mid to high single digit growers.

So really solid, you know, very consistent. We’d also, if you look at the other income line, that was noisy last year with the repositionings. In addition to repositionings, we traded some treasuries at some times earlier in the quarters. If you take all of that out, I think you really will see that come back and I’d guide to like a 15,000,000 a quarter kind of number, which I think is obviously beneficial year over year. The counter to that will be from a pure growth percentage.

Our commercial mortgage servicing business, which is, you know, really important to us, a great business, had a record year last year, is going to be kind of flattish. So you won’t see the percentage growth there and it’s a meaningful business. Still really strong, but we would expect special servicing to come down after, you know, a really record year. And then, operating lease expense because of a change we made two years ago that wouldn’t have mattered in March of twenty twenty three, where we changed, you know, accounting treatment and we now kind of we don’t take all the credit upfront, we take it as they as it occurs, that that number will come down pretty significantly in the year. It’ll be offset almost dollar for dollar on expense.

So net net, it doesn’t really impact PPNR. Right. But from a fee standpoint, it that’s actually declining. So I think there’s a lot of movement underneath, but the places that we really are focused are I think set to perform well.

Unidentified speaker: And you’re unique in this question because of your commercial mortgage servicing and you just touched on special servicing. Can you share with us because as you pointed out, it grew very rapidly last year as the commercial real estate market suffered particularly office. What are your guys seeing now? The guys in special servicing, what are they telling you about what they’re seeing in the commercial real estate markets?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. So, you know, the thing that’s really declined in the last two years has been retail. So decline in special servicing. So that used to be the leader post pandemic as you would think. Yes.

Still relatively high, but it’s, you know, it’s stabilized to come down. Office obviously spiked and that’s gonna just that’s gonna work its way over time. And I think it’ll continue to be a challenge.

Unidentified speaker: One

Unidentified speaker: Is it more in the so called gateway cities of Nashville or Austin or Fort Lauderdale versus Buffalo, New York?

Clark Kayotte, Chief Financial Officer, KeyCorp: Buffalo Buffalo and Cleveland are always the example. Maybe there’s a benefit of being there. I’m going to say Cleveland, but

Unidentified speaker: I’m with M and T tomorrow.

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. Yeah. The clearly the Southeast is just a supply and demand issue. So, tends to be great demographics, but a little bit of oversupply and I think some a little bit more stress there than you’re seeing in other markets. And as we’ve talked about, we got out of some gateway cities probably too early, But in a view to be conservative on where we’re lending, we did move out of those.

And I think, again, lower rates will help work that through. But if we do see some inflation and any uptick in unemployment given some of the swirl that we’re hearing, right, I think that will create some more pressure.

Unidentified speaker: Key has obviously differentiated itself with its investment banking business. And over the years, you and Chris have hired investment bankers and you talked about that on the fourth quarter call about hiring more investment bankers for 2025 and into 2026. Can you talk to us how is that progressing? Where are you guys seeing that move?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. So we tend to go in and out of that market based on how hot it is and where we think we have opportunity. We stepped back in, in ’twenty four. I think we had a fair bit of success. We’ve got a really strong pipeline in terms of potential additions.

We’re focused largely in our seven industry verticals or sub verticals, building out some of the sub verticals there. And I think we’ve had some real success in the last few quarters adding high quality bankers. And it’s always a function of, are they going to be in a place where, you know, we have interest supporting and are they going to be able to do more with the platform? So often it’s, you know, somebody coming from a boutique or a single kind of double product thing and now they have a a full menu and we just wanna make sure they can take advantage of that and I think we’ve done that well. I think we put a number out, a target of kind of 10%

Unidentified speaker: Okay.

Clark Kayotte, Chief Financial Officer, KeyCorp: More hires. I view that as, you know, more of a guideline than a rule. You know, we’re not gonna get to 10% just for the sake of getting there. Right. But, you know, cultural fit, right person at the right time in the right space.

You know, we’re gonna to go add that person to the platform and continue to invest there.

Unidentified speaker: Talking about investing, you mentioned hiring these investment bankers, you’re also investing in wealth management and payments, of course, and you’re opening your tech spend this year. So and you’re committed to the mid single digit rate of growth in expenses. So can you talk to us about where the tech spending is going? And are you getting cost savings in other areas to help offset some of the increased spending in these areas?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. So it’s a great question. One, I would just start by saying, I think over the last four or five years, we’ve done a really good job just managing expenses and maintaining discipline. So when I first got the key, it was always like we’re going to have to run a program and maybe cut some expenses. I think we’ve been much more proactive about getting in front of it and managing it intelligently and strategically.

I think this is no different. We’re going to invest more to build out some tech platforms mostly on customer facing and sort of what we would call change the bank type platforms, and then hire or redeploy people into sales and client facing positions. And we do that by virtue of, I mean, you’ll see an uptick. We said low to single digits this year. But part of it, of that discipline is just finding saves every year.

So doing things, is it process reengineering? Is it automation? Is it outsourcing certain services? Is it insourcing certain services in, in some cases? So it’s just an ongoing version of good tight discipline and managing that over time so that we can invest where we have to when we have to.

Right. And again, I think what you’ll see going forward, assuming no big event in the market is we’ll be kind of a 2%, three %, expense grower as we continue to invest over time.

Unidentified speaker: Got it. Shifting over to credit, your charge off net charge off ratio in the fourth quarter was about 43 basis points. You’ve guided to 40 to 45 this year, which is quite low relative to history, of course. Where could we see some I mean, in that number, where do you see the charge offs materializing within your range?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. I mean, we always start with the leverage book, although you know, we feel really good about that. We’ve since I joined Key, the dollar amount of that leverage book is the same, and we’re about twice as big. So, you know, we can do the math on percentages. But, you know, we’ve made again, managed that pretty good, and it’s got a lot of turnover.

So, always something you have to pay attention to and there’s going to be loss in that book at some point. And you just prepare for that. Anything consumer oriented, I think, has been tough the last few years. I think that’s likely to continue. And again, some of these policies that we’re seeing from the administration could make that even harder.

Again, anything that sort of hits inflation or unemployment will will create a little bit more stress there. And then multifamily again or commercial real estate to the extent rates really spike, but I’m not so worried about that from a from a loss content standpoint. Our models will tell us to provide Yes. And we will, you know, to be conservative. But I don’t think that generally pulls through to loss in the same way, that it does provision.

Unidentified speaker: Right. When you think about leverage lending, obviously, as you mentioned, since you’ve been there, it’s been flat relative to the size of the organization. Is it a better organized market? Or is it I mean, are people not doing crazy things in leverage lending yet? Are are those animal spirits about to kick in and you’re gonna see higher debt levels and stuff like you normally see it as an economy takes off?

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. I think the bank books are just pretty conservative on a, you know, we call it leveraged when it gets to a certain level. I’m not sure that’s what maybe the market thinks of broadly as leveraged. I do think as we started this off today, maybe the animal spirits mentality is a little bit tamped from where it was a few months ago. But I do think our leverage book is reflective of our risk appetite.

We think, you know, we we talk a lot about private credit and the and the threat or, you know, partnership opportunities with private credit. I think we’re actually really well positioned to deal with that, across a different you know, a bunch of different fronts. One of which is just we’ll we’ll distribute the paper to those funds, and we’re happy to do that on behalf of clients and get them the, you know, the best, most competitive terms. But again, our leverage book probably hasn’t grown quite as much because the market’s moved in a different direction and our risk appetite hasn’t expanded to take on more credit risk there.

Unidentified speaker: Speaking of the private credit side, you guys announced the joint venture with Blackstone, I think it was about last year or prior to that. How is it going? Or is it some and how does it differ from what you’ve always done? Just lay off some of the risk.

Clark Kayotte, Chief Financial Officer, KeyCorp: Yeah. I mean, so if I just step back and say, how do we think about private credit, right? One is we distribute a lot of loans to that group. We always have.

Unidentified speaker: Always have.

Clark Kayotte, Chief Financial Officer, KeyCorp: There’s more appetite and more capital to do it. So we would expect that to continue. The second version of that is, you know, something like a Blackstone where we’re we’ve got kind of a direct and bespoke partnership. The difference really than any distribution is, you know what the terms are and you have committed capital and you work through that. You know, I’d say returns on that are fine.

You know, we’re coming up on, you know, do you re up that or not? And we’ll determine whether it makes sense to keep doing that. We love the underlying business that that supports. And if you recall, you know, we ultimately did it as a risk concentration

Unidentified speaker: Absolutely.

Clark Kayotte, Chief Financial Officer, KeyCorp: Vehicle. So we’ll revisit all of those terms. The third version is we have a direct lending fund on balance sheet. So we partnered with a third party. They put in equity.

We put in a little bit of equity. We provide the senior debt. Yep. And that allows us to provide a product to clients if they want a direct platform. And then obviously, we we lend directly.

So we think across the board, you know, we’re pretty competitive in interacting with private credit. Right. But there’s clearly a lot of dollars and a lot of appetite. And it you know, I don’t think it’s going anywhere. So, we’re just trying to understand where we best play there and and not necessarily change our risk appetite and our underwriting standards to reflect there.

Unidentified speaker: Sure. No doubt. Maybe we could talk about the first quarter and how it’s progressing for you guys. You want to give us an update? I know we’re about two months obviously into the first quarter and how loan growth is tracking and other metrics that you guys monitor the investment banking activity, etcetera.

Clark Kayotte, Chief Financial Officer, KeyCorp: Yes. So balance sheet wise, as we said, we kind of saw a little bit of stability and a slight growth in commercial in the fourth quarter. C and I, that’s continued to date, so call it maybe plus a billion dollars so far. Some of that could be the inventory, kind of buy ahead. That’s offset a little bit by CRE, which is, you know, pay down or refi out.

Right. And then the expected runoff in consumer. And just, you know, as a reminder, the consumer book or the mortgage book running down is accretive because those are coming off at, you know, low three percentage, 3% and you can replace them either manage liquidity or replace them with higher yielding loans or with securities. So that’s all good, sort of as we expected. And from a deposit standpoint, as I said, down maybe a percent plus, which we view as typical seasonality, but we feel really good about that.

So first quarter overall, NII, kind of at where we expected, maybe a little stronger. We think it’ll come in about $1,100,000,000 or so. So we feel good about that. And again, completely in line with where we think the year goes. Fees, we think in aggregate kind of mid $600 range.

And again, good strength across the board. Investment banking in the first quarter, you know, call it plus or minus 150,000,000, 2 tough comps, right, coming off a fourth quarter that was maybe our third best quarter ever Right. At $2.20 and coming off a year ago quarter, which was our first best first quarter ever at 171 or so. Right. So it’s not gonna compare to those, but it’s gonna be a very solid first quarter.

And if you recall, our you know, we’re a back half of the year capital markets business. So last year, just under $300,000,000 in the first half, close to $400,000,000 in the second half. So I don’t know if it’ll be exactly shake out that way, but the number feels right online. We don’t have any concern today about the full year guide. Again, subject to where the market uncertainty goes.

And then expenses year over year pretty flat. We’re going to be down significantly from the fourth quarter as we talked about. And when you put it all together, you know, PPNR is going to be up $50,000,000 60 million dollars from the fourth quarter. So we felt like fourth quarter was strong. We had PPR PPNR coming in quite a bit stronger, and we feel very good about where that starts.

Charge offs and provision, you know, charge offs again, I think will be pretty close to fourth quarter dollar wise, you know, flat to maybe a slight release and again depending on where the last month of the quarter shakes out, but I wouldn’t expect big moves there on provision. So all in all, it’s shaping up very well so far.

Unidentified speaker: Good. And we only have a few seconds here, but coming back to provisions and reserves, do you think because of CECL now that you and your peers are just better reserved going into whatever, I mean, more uncertainty in the future, just pre January of twenty twenty?

Clark Kayotte, Chief Financial Officer, KeyCorp: I mean, in theory, we should be because it’s lifetime versus

Unidentified speaker: Just on capital and how do you with the potential softening of the rules with the regulators, how are you guys viewing your capital levels? Obviously, they’re very strong since the investment from Scotiabank. How are you guys looking at that going forward? Yes. So look, I think we’re going to be a marked capital world going forward.

Right now, we’re kind of mid to high nine’s. Feel really good about that. I think that’s probably in the zip code of where we go long term. So we’re kind of there. We’re going to build capital more organically based on earning trajectory.

So again, we’re going to do what we’ve always done. We’re going to support clients organically and I would include in that organic build sort of niche tuck in acquisitions that build capability or open client paths. Because I think we’ve demonstrated we can do that well and it does feel like just an extension of the business. Dividend I think is where it is until further notice. So I wouldn’t be looking to raise that.

And then the last bucket is do we do share repurchase? We’re talking to our board right now about reinstating an authorization. So I’d expect to see that this year. If loan demand doesn’t materialize at all, we can look at more repositionings if we had to do that, we could. There’s places we could go.

We don’t necessarily want to do that. We’d rather support clients and then there’s obviously inorganic activity that may or may not materialize. I don’t see that materializing this year. So I’m not spending a ton of time thinking about that. And then the reality is I’m okay right now given uncertainty to have a little bit more capital.

So I feel great about that and it’s a nice problem to have and we will actively take advantage of it, but I think we have a lot of paths and a lot of opportunities. Great. Clark, thank you for your insights and transparency. Please join me in a round of applause thanking Clark.

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