KeyCorp’s 8-K presentation dated June 11, 2025, highlights the robust growth and strategic positioning of its Commercial Banking segment, especially within the middle market, underscoring its status as a high-value player in the U.S. financial sector.
The Commercial Bank, led by Ken Gavrity, showcased substantial middle market growth across 27 U.S. major metropolitan areas with approximately 4,600 customers. Key statistics reveal that 98% of deposits are tied to an operating account, and 94% of clients have at least one non-lending product, reflecting a deeply embedded client relationship model. Total commercial deposits surged to about $58 billion in 2024, supported by a 10% compound annual growth rate (CAGR) in commercial payments revenue over the past five years. This performance translates to an impressive 17-20% average return on equity across KeyCorp’s middle market business in recent years.
This growth trajectory resonates with historical performance affirmations found in recent earnings calls spanning 2023 and 2024. For instance, Q2 2024 earnings commentary revealed a 9% year-over-year growth in commercial deposits, a boost in cash management fees growing at approximately 10%, and strong momentum from embedded banking strategies that capitalize on fintech integration. Pipelines for middle market loans grew over 50% quarter-over-quarter, indicating robust future revenue streams despite a cautious approach to loan growth guidance due to evolving economic conditions.
However, KeyCorp’s net income in fiscal year 2024 showed a negative result of -\(161 million, against revenues of approximately \)9.06 billion and negative operating income of -$306 million. The challenges are partly attributed to macroeconomic pressures including elevated deposit beta related to interest rate rises and higher interest-bearing deposit costs, impacting their net interest margin which stood at 2.47% in Q1 2023. The bank is actively managing these through strategic capital allocation, enhanced risk management, and optimizing its lending and deposit portfolio balance.
KeyCorp’s capital position remains strong, with a common equity tier 1 (CET1) capital ratio of 10.5% as of mid-2024, well above the Federal Reserve’s stress test implied minimum of 7.6%. The bank’s proactive risk management is evident in its high-quality loan portfolio, with 82% commercial credit exposure linked to relationship clients and 56% of commercial and industrial loans rated investment-grade.
Looking ahead, KeyCorp expects a net interest income (NII) pivot starting late 2024 as short-dated swap maturities and treasury repricing yield an anticipated annual benefit of about $900 million by Q1 2025. Despite cautious loan growth forecasts for 2024, the bank foresees strong loan and client growth into 2025, supported by a solid middle market pipeline and strategic sector focuses, including healthcare, real estate, and technology.
KeyCorp’s integrated commercial banking platform, with deep fintech ecosystem partnerships, strategic geographic expansion, and holistic product offerings including embedded banking and capital markets solutions, positions it competitively for sustainable growth and client primacy in the evolving financial landscape.
For comprehensive details, refer to the original 8-K filing: KeyCorp Morgan Stanley U.S. Financials Conference 8-K.
Tags: KEY, KeyCorp, Q2_2025, CommercialBankingGrowth, NetInterestIncomeProjection, MiddleMarketLoanPipeline