KeyCorp Earnings Rise With Loans (Update 1)
- KeyCorp reports first-quarter earnings per share of 21 cents.
- Analysts were expecting EPS of 19 cents.
- Average commercial loans grew 7% during the first quarter; 20% year-over-year.
Updated with comments from Jefferies analyst Ken Usdin.
The Cleveland lender reported first-quarter net income from continuing operations attributable to common shareholders of $199 million, or 21 cents a share, compared to $201 million, or 21 cents a share, during the fourth quarter, and $184 million, or 21 cents a share, during the first quarter of 2011.
|KeyCorp CEO Beth E. Mooney|
The first-quarter earnings came in ahead of the 19 cent EPS estimate among analysts polled by Thomson Reuters.
KeyCorp reported first-quarter noninterest income of $472 million, increasing from $414 million the previous quarter, and $457 million a year earlier. This increase reflected $27 million in gains on leased equipment during the first quarter, increasing from just $9 million in the fourth quarter, and $4 million in the first quarter of 2011. The company also booked $35 million in gains on principal investing, improving from an $8 million loss in the fourth quarter, and matching the results in the first quarter of 2011.
KeyCorp's first-quarter average loans grew 3% sequentially and 2% year-over-year, to $34.8 million, while coveted commercial and industrial loan balances grew to an average $19.7 billion, increasing 7% just in the fourth quarter, and 20% year-over-year.
The company's first-quarter provision for loan and lease losses was $42 million, compared to transfers away from reserves of $22 million the previous quarter, and $40 million a year earlier. While it was quite a significant change for the company to resume adding to loan loss reserves, the reserves still declined by $60 million during the first quarter, boosting operating earnings.
KeyCorp's first-quarter net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- was 3.08%, increasing from 3.04% in the fourth quarter but declining from 3.16% in the first quarter of 2011.
The company's first-quarter return on average assets was 1.02%, compared to 1.01% in the fourth quarter and 1.32% during the first quarter of 20112, when the company released $232 million in loan loss reserves.
The return on average common equity was 8.25% during the first quarter, compared to 8.26% the previous quarter, and 8.75% a year earlier.
KeyCorp has a deal in place to acquire 37 branches in Buffalo and Rochester, N.Y., as part of First Niagara Financial Group's (FNFG) planned divestiture of overlapping branches after it acquires about 200 branches from HSBC (HBC) . KeyCorp will pick up about $2.4 billion in deposits and $400 million in loans, when the branch deal closes, which is expected to happen in the third quarter.