Snapshot
Keycorp /New/ reported $1.95B of revenue in Q1 2026, up 10.3% year over year, with diluted EPS of $0.44.
- Revenue
- $1.95B
- YoY growth
- +10.3%
- Diluted EPS
- $0.44
- Operating margin
- —
What management said
- •I'd like to thank you for joining KeyCorp's Q1 2026 earnings conference call.
- •As usual, we will reference our earnings presentation slides, which can be found in the investor relations section of the key.com website.
- •This covers our earnings materials as well as remarks made on this morning's call.
- •Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15%+ return on tangible common equity by year-end 2027.
- •Revenue grew 10% year-over-year, with revenue growing more than 2 times the rate of expenses.
- •Adjusted pre-provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth.
- •Net interest margin expanded 5 basis points sequentially to 2.87% as we remain on track to exceed 3% net interest margin by year-end.
- •Commercial loan growth was strong and broad-based across industries and geographies, increasing $3.3 billion or 4% sequentially on a period-end basis.
- •Total funding costs declined by 15 basis points during the quarter, with interest-bearing deposit costs decreasing 22 basis points, resulting in a cumulative through the cycle down beta of 56%.
- •Asset quality metrics remained strong with a net charge-off ratio of just 38 basis points.
- •In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders.
- •Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients, to support our own organic growth, and to repurchase our shares.
What went well
- •Q1 2026 earnings were $0.44 per share, up 33% year-over-year, with return on tangible common equity exceeding 13% on the path to a 15%+ target by year-end 2027.
- •Revenue grew 10% year-over-year, more than twice the rate of expense growth, and adjusted pre-provision net revenue rose another $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth.
- •Net interest margin expanded 5 basis points sequentially to 2.87%, keeping the company on track to exceed 3% NIM by year-end.
- •Commercial loans grew $3.3 billion, or 4% sequentially on a period-end basis, with broad-based growth across industries and geographies.
- •Priority fee-based businesses (wealth, investment banking, commercial payments) collectively grew 12% year-over-year, and investment banking and debt placement fees of $197 million set a new Q1 record, up 13%.
- •The company repurchased nearly $400 million of common stock during the quarter, well above its $300 million+ commitment, and raised its 2026 buyback plan to at least $1.3 billion.
What went wrong
- •Management expects investment banking fees to decline in Q2 versus the record Q1, guiding to a $175 million-$180 million range given uncertain market conditions.
- •The loan loss provision of $106 million included a reserve build, with additional qualitative reserves added to account for a wider range of potential macroeconomic outcomes.
- •Reported average non-interest-bearing deposits decreased 5.5% sequentially, and average deposits declined 2% sequentially on seasonal patterns and intentional brokered CD runoff.
- •Middle-market M&A activity remained subdued, with management noting it is not seeing as much come out of the pipeline as hoped despite record backlogs.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Full-year net interest income guidance | FY2026 | prior guidance | increased | raised |
| Full-year loan growth guidance | FY2026 | prior guidance | increased | raised |
| Share repurchases | FY2026 | $1.2 billion | at least $1.3 billion | raised |
| Q2 investment banking fees | Q2 2026 | record $197 million in Q1 | $175 million-$180 million | expected to decline |
| Investment banking fee growth | FY2026 | None | mid-single digits (5%-6%) | reiterated |
| Net interest margin | year-end 2026 | None | exceed 3% | on track |
| Return on tangible common equity | year-end 2027 | None | 15%+ | reiterated |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Earnings per share | up 33% to $0.44 | Disciplined execution, revenue growing more than 2x expenses |
| Revenue | up 10% | NII growth and 12% growth in priority fee-based businesses |
| Taxable-equivalent net interest income | up 11% | Loan remixing, swap repricing, and proactive deposit beta management |
| Non-interest income | up 8% | Priority fee-based businesses collectively grew 12% |
| Investment banking and debt placement fees | up 13% to $197 million | M&A, equity issuance, and commercial mortgage debt placement activity; a new Q1 record |
| Tangible book value per share | up 10% | Earnings generation |
| Net charge-off ratio | 38 basis points | Asset quality metrics remained strong |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Net interest margin expansion | 2.82% (Q4 2025) | 2.87% | improving |
| Deposit cost management | cumulative IB deposit beta 51% | cumulative IB deposit beta 56%, total deposit costs 1.65% | improving |
| Commercial loan growth | C&I grew ~$900 million spot (Q4 2025) | C&I grew $3 billion or 5% period-end | accelerating |
| Capital position and return of capital | 10.3% marked CET1, $300 million+ Q1 buyback committed | arrived at ~10% marked CET1, repurchased nearly $400 million, raised buyback to $1.3 billion+ | strengthening |
| Private credit / MDFI disclosure | limited disclosure | added detailed disclosures; ~$10.9 billion private credit outstandings, books 90% investment grade | expanding transparency |
| Middle-market M&A recovery | muted for three years, pickup expected | record pipelines but transactions slow-playing amid volatility | still subdued |
Q&A summary
Given strength in lending and fees, what is client sentiment and are you seeing widening private credit spreads like a peer mentioned?
Gorman said the consumer is in great shape with strong credit metrics and a wealth effect from a now 1.15 million mass affluent universe (up 15%); on commercial, utilization rose as clients invest in CapEx but macro uncertainty causes some to slow-play M&A. On MDFI, he sees a firming of spreads as some private credit players pull back amid redemptions, creating an opportunity for banks to re-intermediate.
How will deposits trend from here, and are you near the bottom of the NIB mix?
Khayat said brokered deposits came out about $1.6 billion as a seasonal decline, NIB is stable when hybrids are included, and balances should trough around mid-May then build through the year; Q1-to-Q2 average balances stable to slightly up with higher ending balances on June 30, and the company feels good about liquidity to fund loan growth.
How much room is there to keep bringing down deposit costs with rate cuts on hold?
Khayat said with no cuts as the base case, deposit pricing should stabilize and the company can hold serve in the mid-50s beta; if loan growth intensified, competition could pick up, but they have many funding avenues including continued brokered CD runoff.
What are your capital allocation priorities and could anything change the buyback pace, including inorganic opportunities?
Gorman said priorities are unchanged: support client growth, invest in people and technology, pay the $0.205 dividend, and repurchase shares; a severe macro downturn with credit losses is the main risk, and acquisitions would be small boutique-type operations akin to hiring groups of people. The plan is to repurchase $1.3 billion in 2026.
Why does the high-end loan growth guide imply a slowdown from Q1 levels, and could there be upside?
Gorman acknowledged appropriate conservatism given macro uncertainty; drivers include broad-based growth, a 20% backlog increase from year-end, utilities/power buildout for GenAI, healthcare consolidation, and reviving CRE transaction activity, partly offset by $0.5-$0.6 billion of quarterly residential mortgage runoff.
Would the 100+ basis point Basel endgame benefit all be upside to the 15% 2027 ROTCE target?
Gorman said finalized rules will give greater flexibility, with roughly 100 basis points of benefit under the standardized approach, but the company will say more after final rules and its decision between the standardized approach or ERBA.