KeyCorp Surpasses Earnings Expectations with 24% Year-Over-Year Growth
Good morning and welcome to KeyCorp's third quarter 2026 earnings conference call. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. As a reminder, this conference is being recorded.
KeyCorp's Chairman and Chief Executive Officer, Chris Gorman, highlighted the company's impressive third quarter performance during the earnings conference call. KeyCorp reported a 24% year-over-year growth in earnings per share, reaching $0.51 per share. This achievement reflects the strength of the company's relationship-driven franchise, as well as its disciplined execution of strategy and momentum across the business.
The company also achieved record quarterly revenue of over $2 billion, representing an 8% year-over-year growth. Furthermore, KeyCorp reported a PPNR (pre-provision net revenue) growth of $60 million on a linked quarter basis, exceeding expectations. The return on tangible common equity exceeded 15%, putting the company on track to achieve its long-term target of 16% to 19% by year end 2027.
KeyCorp's deposit franchise continues to perform well in a competitive environment. Average total deposits grew $3.6 billion during the quarter, while interest-bearing deposit costs increased only 3 basis points. Overall funding costs rose just 1 basis point. Net interest margin expanded 6 basis points sequentially to 2.95%, reflecting the continued fixed asset repricing and funding optimization.
The company's capital markets team delivered strong results, with investment banking and debt placement fees increasing 27% sequentially, driven by growth in M&A and syndications. Asset quality remains strong, with a net charge-off ratio improved to 32 basis points and non-performing asset ratio improved 19-55 basis points during the quarter.
KeyCorp repurchased $320 million of common stock, keeping it on pace to achieve its full-year share repurchase target of $1.3 billion. The company remains comfortable with its current capital levels, citing strong organic capital generation as a key factor in their measured approach to capital management.
As Chris Gorman emphasized during the conference call, KeyCorp's economic environment remains constructive and momentum continues to be strong across all businesses. Client engagement and activity remain healthy, with commercial clients increasing 3% and relationship households increasing 2% from the prior year. Commercial loan growth remains strong and broad-based by both industry and geography.
The company's consumer trends continue to show resilience, as clients benefit from a healthy labor market and wealth effect. KeyCorp's priority fee-based businesses, including investment banking, commercial payments, and wealth management, collectively grew 12% compared to the prior year. Investment banking pipelines are up 5% sequentially, despite significant pull-through in the third quarter, and remain at historically elevated levels, supported by record M&A pipelines.
