KeyCorp's third-quarter profit attributable to common shareholders rises to $537 million on record revenue

KeyCorp reported third-quarter net income available to common shareholders of $537 million, or $0.51 per diluted common share, against $454 million a year earlier, as record revenue of $2.04 billion and a wider net interest margin offset higher personnel costs.

The quarter was carried by lending economics rather than by fees. Net interest income on a taxable-equivalent basis rose 9.6% from a year earlier to $1.31 billion, and the net interest margin widened to 2.95%, 20 basis points higher than a year earlier and 6 basis points above the second quarter.

Deposit costs fall year over year; loan growth drives the quarter

Total deposit costs were 1.66% in the third quarter, 31 basis points below the 1.97% Key paid a year earlier. The release credits that year-over-year decline, along with securities and swap reinvestment, an expanding balance sheet and a shift toward commercial and industrial loans, for the 20-basis-point yearly margin gain, partly offset by lower rates on repricing earning assets.

The 6-basis-point sequential gain looked different in the presentation's NIM walk: funding optimization contributed 3 basis points, securities and swap repricing 2, and yield, cost and other items 1, while loan growth and day count each rounded to zero. That funding credit appeared even though the average cost of total deposits rose 3 basis points, to 1.66% from 1.63%. The release's narrative separately cites growth in commercial and industrial loans and deposit balances, securities and swap reinvestment, higher repricing rates and one additional day. Average deposits grew $3.6 billion to $151.2 billion, and average loans held for investment were $111.6 billion, up $1.5 billion.

Fee income added to the total. Noninterest income was $744 million, up 6% from a year earlier, including $214 million of investment banking and debt placement fees that rose 27% from the second quarter. Noninterest expense of $1.25 billion was 5.8% above the year-earlier quarter, with personnel expense up 9.8% from a year earlier as incentive pay followed the fee growth. Revenue of $2.04 billion, a record for the company, grew faster than expenses.

Charge-offs fall while the securities mark deepens

Credit costs fell on the consolidated statements. The provision for credit losses was $61 million, against $107 million a year earlier, and it reflected a $28 million reserve release; net charge-offs of $89 million equaled 32 basis points of average loans, versus 42 basis points in the third quarter of 2025. Nonperforming assets ended September at $627 million, down from $668 million a year earlier, and the allowance for credit losses covered 1.50% of period-end loans against 1.64%. The consolidated totals are not mirrored at every segment: the release shows Consumer Bank's provision rising from both the second quarter and a year earlier.

Capital told a different story. The estimated common equity tier 1 ratio was 11.1%, down from 11.8% a year earlier, and tangible common equity to tangible assets slipped to 6.9% from 7.7% at June 30. Book value per share fell to $15.01 at September 30 from $16.19 at June 30 and from $15.86 a year earlier, declines of 7.3% sequentially and 5.4% year over year, while return on average tangible common equity was 15.11%. The balance sheet carries the reason: accumulated other comprehensive loss widened to $3.87 billion at September 30 from $2.35 billion at June 30, a $1.51 billion swing that ran through equity without touching earnings. In the marked common equity tier 1 reconciliation, the available-for-sale and pension piece of that loss was $3.22 billion, against $2.15 billion at mid-year, and the marked common equity tier 1 ratio was 9.0%, against 9.8% at June 30. Key repurchased $320 million of common stock in the quarter and still expects $1.3 billion of buybacks in 2026.

The outlook hinges on a 3% margin

Management's 2026 outlook, published in the earnings presentation, projects revenue up about 8% and net interest income up about 10% from 2025 on a taxable-equivalent, operating basis, with a fourth-quarter net interest margin exit rate of about 3.00%. It also narrows expected net charge-offs to 37 to 39 basis points of average loans, from a prior range of 40 to 45 basis points.

Chief Executive Chris Gorman tied the quarter to the company's stated ambition of a return on tangible common equity of 15%+ by the end of 2027. "Average deposit balances increased $3.6 billion sequentially, supporting continued net interest margin expansion", he said. The outlook leaves two tests for the fourth quarter: whether the margin reaches the 3.00% exit rate and whether charge-offs stay inside the narrowed range. Key has not scheduled its fourth-quarter release in these documents.