KeyCorp faces credit risk from loan defaults, especially in commercial and industrial loans and commercial real estate. Market risk from interest rate fluctuations, impacting net interest income and economic value of equity, is a concern. Geopolitical instability, economic downturns, and cybersecurity threats also pose risks. The strategic minority investment by Scotiabank, while not currently material, could create conflicts of interest and influence over KeyCorp's operations. The document also highlights potential losses from litigation and regulatory changes.
Financial Upside
KeyCorp's client deposits and new relationship household growth are increasing. Assets under management for Key Private Client are growing. Expenses are down, implying operating leverage. The Common Equity Tier 1 ratio has improved, likely due to balance sheet optimization and Scotiabank's investment. Higher-yielding investments from securities repositioning are expected to boost net interest income.
