KeyCorp’s third quarter results were met with a significant negative market reaction, despite the company achieving revenue in line with Wall Street expectations and reporting higher-than-expected non-GAAP earnings per share. Management attributed recent performance to improved net interest margin, ongoing growth in fee-based businesses, and a favorable shift in deposit mix. CEO Chris Gorman noted that both net interest income and pre-provision net revenue saw sequential improvements, driven by strong commercial loan activity and disciplined cost control. However, Chief Financial Officer Clark Khayat highlighted that higher personnel costs and technology investments contributed to a rise in expenses, signaling increased investment in growth initiatives.
Is now the time to buy KEY? Find out in our full research report (it’s free for active Edge members).
KeyCorp (KEY) Q3 CY2025 Highlights:
- Revenue: $1.89 billion vs analyst estimates of $1.88 billion (176% year-on-year growth, in line)
- Adjusted EPS: $0.41 vs analyst estimates of $0.38 (7.6% beat)
- Adjusted Operating Income: $606 million vs analyst estimates of $695.6 million (32.1% margin, 12.9% miss)
- Market Capitalization: $19.44 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From KeyCorp’s Q3 Earnings Call
- Manan Gosalia (Morgan Stanley) asked for details on the drivers behind the 15% return on tangible common equity target and how it could be exceeded. CFO Clark Khayat explained that margin expansion, organic loan growth, strategic fee income, and disciplined capital deployment were central, and noted the 15% figure is a milestone, not a ceiling.
- Ebrahim Poonawala (Bank of America) inquired about the bank’s appetite for mergers and acquisitions, and the risk of tangible book value dilution. CEO Chris Gorman clarified that large-scale M&A is a low priority and that capital deployment will remain focused on organic growth and smaller, fee-oriented acquisitions.
- Brian Foran (Truist Securities) questioned the timing and extent of loan book rebalancing and the end goal for shrinking low-yielding consumer assets. Gorman described plans to accelerate C&I loan growth and outlined that further runoff in consumer loans would be replaced by higher-yielding assets over time.
- Ryan Nash (Goldman Sachs) pressed for more details on the pace of share buybacks and capital deployment beyond the fourth quarter. Khayat responded that the $100 million buyback was a starting point and that capital return could increase as macro conditions stabilize.
- John Pancari (Evercore) asked about expectations for operating leverage and efficiency ratios in 2026 and beyond. Khayat stated that positive operating leverage would be sustained, driven by margin gains and fee income growth, while acknowledging ongoing investments may keep efficiency ratios above some peers.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch closely for (1) evidence that net interest margin and loan portfolio remixing continue to drive higher profitability, (2) sustained growth in fee-based businesses like investment banking, payments, and wealth management, and (3) disciplined expense management as technology and staffing investments ramp up. The pace and scale of share repurchases and the successful execution of new client initiatives will also serve as key indicators of momentum.
KeyCorp currently trades at $17.47, down from $17.76 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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