KeyCorp (KEY) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Strategic focus and business mix

• Emphasis on expanding fee-based, capital-light revenues, with 40% of revenues from fees across capital markets, payments, and wealth management.

• Client selection and primacy are key, targeting high-quality borrowers and deepening relationships through multiple services.

• Recent initiatives include Virtual Account Management and a Blackstone asset forward flow arrangement.

• Commercial servicing and third-party loan servicing are significant growth and fee income areas.

• Rigorous tracking of client penetration and revenue-to-asset metrics to ensure balance sheet efficiency.

Efficiency, expenses, and deposit strategy

• Focus on improving ROTCE and operating leverage, with scaling of asset management to lower efficiency ratio over time.

• Consumer deposits are stable and well-priced, with digital adoption improving efficiency across a 15-state branch footprint.

• Small business segment seen as a major growth opportunity.

• Deposit betas expected to drift higher but remain within guided range, with ongoing competition for deposits.

• New liquidity rules and loan growth trends will influence deposit and funding strategies.

Loan demand, guidance, and capital markets

• Loan demand remains muted due to macro uncertainty and rate volatility, though pipelines and client interest are building.

• Clients are waiting for rate stability rather than lower rates to transact, especially in real estate.

• Full-year guidance remains intact, though loan balances may come in light; NII growth expected but at a lower rate.

• Capital markets activity is building, but some deals were pulled forward, making the second quarter lighter.

• Expenses and credit trends are as planned, with any uptick in criticized assets driven by denominator effects, not net charge-offs.