KeyCorp (KEY) Investor Update summary

Strategic investment overview

• Announced a $2.8 billion minority equity investment from Scotiabank at an 11% premium to recent share price, representing 14.9% pro forma ownership at $17.17 per share.

• Investment structured in two tranches: initial 4.9% stake closing by end of August 2024, with the remainder in Q1 2025 upon regulatory approval.

• Scotiabank will have two board seats, customary governance protections, and a five-year standstill agreement capping ownership at 19.9%.

• No strategic rights or first refusal granted to Scotiabank; Key retains full strategic agility.

• Scotiabank gains preemptive rights to participate in future equity issuances.

Capital and financial impact

• Capital raise increases CET1 ratio by 195–200bps, with pro forma CET1 of 11.3–12.4% and AOCI-adjusted CET1 at 9.1–9.4%.

• Tangible book value per share is expected to improve by over 10% according to some sources, while others project a 10% decrease.

• Tier 1 capital and leverage ratios will improve, positioning above peer medians.

• The transaction is projected to be low single-digit accretive to consensus EPS in 2025 and slightly accretive in 2026.

• About half the capital will be used to reposition low-yielding securities, expected to generate $400 million in additional net interest income in year one.

Securities portfolio repositioning

• Plan to sell low-yield, long-duration AFS securities and reinvest in higher-yield, more liquid assets.

• One-time after-tax loss expected, using about half of the capital raised.

• Reinvestment projected to generate $400 million in additional net interest income.

• Anticipated improvements in 2025 and 2026 net interest margin (NIM), return on average assets (ROAA), and EPS.

• Proceeds will also support growth initiatives and provide agility in an uncertain macro environment.