KeyCorp Strategic Minority Equity Investment from Scotiabank Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Ebrahim Poonawala - Bank of America - Analyst : Hey, good morning.

Question: Ebrahim Poonawala - Bank of America - Analyst : So first congrats on the transaction Chris. And the question is I think it's a unique transaction for those of us from the outside having on financial institution take a stake. So if you don't mind, and I think I heard you talk about you had a reverse inquiry from Scotia on the transaction. So just give us a sense of the thought process around going down this path relative to raising capital via your shareholders or even looking for a more holistic strategic transaction that led you to close on this transaction, if you don't mind and is this purely financial in nature at this point, should we be reading into a more closer strategic integration with Scotia anytime soon? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call

Question: Ebrahim Poonawala - Bank of America - Analyst : No, that's helpful. Thank you. And I guess a separate question, you have the slide 7, I think pro forma for the bond book restructuring, you'll still be at the higher end of your peer group that you have there. I mean, over the last 6 to 12 months. I think just speaking to investors, the narrative has been -- Keys been in a capital deficit, RWA died. Digging out of that. Give us a sense of what kind of how this transaction changes that your ability to defend market share or even actually now be on the offense and gain market share?

Question: Ebrahim Poonawala - Bank of America - Analyst : Got it. Thank you for taking my questions.

Question: Scott Siefers - Piper Sandler Companies - Analyst : Good morning everybody. So first congrats on the transaction (multiple speakers) Chris, maybe I was hoping sort of along the lines of selling a stake to another bank specifically, can you sort of walk through the pros and cons of having that sort of ownership structure. What I guess what sort of rights, if any, would Scotiabank have like, could they have? I'd say, in strategic actions such as if you wanted to buy or sell in the future? Or do you have any sort of first refusal or just overall strategic influence? What how does that all flush out?

Question: Scott Siefers - Piper Sandler Companies - Analyst : Okay. Perfect. Thank you. And then maybe one for Clark. Do you have to match the timing of the balance sheet restructuring with the timing of the receipt of the capital in other words, would capital potentially go down initially when you only have part of the money, but do the balance sheet restructuring and then go back up upon receipt of the second tranche or how should we be thinking about how that works, just in terms of timing?

Question: Scott Siefers - Piper Sandler Companies - Analyst : Got it. Okay, perfect. Thank you very much.

Question: John Pancari - Evercore ISI - Analyst : Morning (multiple speakers) Could you on just on that later. They I think are the call broke up just a little bit there. Can you maybe talk about the forward curve expectation again, that's baked into the securities portfolio repositioning assumptions that you gave when you walk through? And if you could just maybe talk through how you're looking at the interest rate outlook from here. Thanks.

Question: John Pancari - Evercore ISI - Analyst : Okay. Great. Thanks, Clark. And then I know this is separately on the regulatory front. I know it's a sale of a stake in that though company. But can you just discuss the confidence in getting this deal through on the regulatory front, we have seen some past transactions have some issues in getting closed. And then I guess as a follow-up to a question was brought up earlier. Could this be viewed by some as a precursor to a larger transaction with Scotia? Thanks.

Question: John Pancari - Evercore ISI - Analyst : Great. Thank you, Chris.

Question: Ken Usdin - Jefferies LLC - Analyst : Hey, thanks. Good morning. A couple of questions that I know there won't be your decision, but is there potential for this to be a potential positive improvement in the light of the rating agencies and what that might mean? And if that's contemplated at all?

Question: Ken Usdin - Jefferies LLC - Analyst : Okay. And related to having more capital is any thought I'm sorry, this is way down the road, but now you're in a much better position, both with and without AOCI. You just got some capital, but how do you think about the buyback relative or a buyback relative to the other potential opportunities that you just you and Chris discussed earlier? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call

Question: Ken Usdin - Jefferies LLC - Analyst : Okay. And just one more dovetailing off of that last point, Chris, so the I'm just wondering, is it just timing the low single digit accretion in '25 and then slightly accretive '26, can you just -- is that just the math of where consensus sits or is it the math share count rates, et cetera? Can you just kind of walk us through why it's not as accretive and I know you're not giving us a specific number in '26 as '25. And I understand that some of it is a pull forward?

Question: Ken Usdin - Jefferies LLC - Analyst : Okay. Got it. All right. Thanks a lot.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi. Just a couple of clarifications. When you say it's accretive to EPS, do you mean relative to consensus or to what your own internal models have?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. And then you said the securities repositioning would be roughly what date, if you had to guess?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. So the usual regulatory process, whenever that's done is when you intend to do the securities repositioning?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. And you said, so I guess you're doing this like if we go into recession, you have more capital, you have more capital to have (inaudible) unforeseen problems. You'll be in a position of strength you can capitalize. And if we're in a good environment, then you can do more of your lending. I think that's what you're saying. But I it's hard to see why Scotia Bank's doing this? You say it's a financial transaction. We have partnerships with them. I don't know what the word partnership means. Investment banking well, payments in Canada, Mexico, Latin America, the US reshoring consumer medical vertical. I also have nice partnership, but I don't really know how that actually plays out in reality. I think we've heard a lot of and these joint ventures partnerships over the last three decades, but don't really amount to much. But why is Scotiabank doing this? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay, okay. (inaudible) , you're just talking about the increased opportunity, Canada, US, Mexico business coming back from Asia (multiple speakers) closer to the US. Okay. I understand (multiple speakers) And then just a really simple question. Why does tangible book value go up by 10%. What are the mechanics there? Or just layman's terms?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Okay. And if you just break that down one more level. It's like so they're paying a premium two, I mean. (multiple speakers)

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Right. Okay. I think that's clear then. All right. Thank you.

Question: Matt O'Connor - Deutsche Bank - Analyst : Good morning. Can you highlight near term accretion since you're accelerating the bond book reinvestment? I guess how are you thinking about the longer-term earnings impact and how much of that 15% equity issuance do you think you can offset? I know you show the illustrative percentage or from cash. Obviously, you're hoping to lean into lending and some other areas. But as we think out beyond kind of just front-loading or accelerating the bond reinvestment or how are you going to offset that 15% equity issuance? And how much do you think you can? Thanks.

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. And then in terms of capital, the 9%-plus, including AOCI, I guess is that the new level, but we think folks like you the debate or what's your targeted level as you can [count] the medium term?

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. I guess just to follow-up on that, like it seems like most of the kind of non (inaudible) banks are managing the capital more for the rating agencies and the regulators and all you guys have well above what you need from what we see to kind of give (inaudible) And I don't know if you have any sense of what the rating agencies are looking for on that adjusted basis because it actually might that 9%-plus is it's a level folks are selling to. So I don't know if it's just a coincidence or that seems to be the road map, and that's it for me. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call

Question: Matt O'Connor - Deutsche Bank - Analyst : Okay. Thank you.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi Chris, hi Clark (multiple speakers) Congratulations as others have pointed out to you, Chris, this reminds me of Toronto Dominion's investment in Banknorth 20 years ago, there was a bit higher their initial investment, but eventually, obviously they bought the whole bank. I know you said at the outset in response to a question, new franchise was obviously not for sale. As you work through the five-year standstill. Can you share with us what happens? I mean, can things change even though you have a standstill, if you guys choose to change it or no, you're locked in at the end of five years, the game could change?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : I got it. Thank you. And then I don't know if you know this answer and we'll probably get it on the Scotia call at [9:00]. But do does I know you guys have your regulatory approval process that you've already outline very clearly do they have they get obviously that's their primary regulator in Canada. Did they have to get us the approval for this investment to your knowledge?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Right. Okay. Great. Thank you.

Question: Manan Gosalia - Morgan Stanley - Analyst : Hey, good morning. Just as a follow-up to the capital question. You also mentioned from a liquidity perspective, you'd be at a 10% cash to assets ratio. Is that the right place you want to be going forward or is there some room to maybe bring that loan to deposit ratio lower?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. And then as you're thinking about a more normalized level with this securities repositioning, the yield curve has changed quite a bit since the earnings call as well. So can you talk about how you're thinking about them evolving over the next year or two after the securities repositioning and what the normalized level for [Nymex]?

Question: Manan Gosalia - Morgan Stanley - Analyst : Got it. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call

Question: Erika Najarian - UBS - Analyst : Hey good morning. (multiple speakers) I guess following up to both Mike and Manon's question, I think investors are wondering, what the you know what the base is for the $400 million of additional NII. On slide 14 of your earnings presentation, it's pretty clear that your baseline, in terms of NI for 4Q '24 and Clark, if I'm hearing you right, it sounds like balance sheet restructuring is unlikely going to comment on what that 1Q '25 slug comes. But can you help us think through the baseline? I mean, either I know now we're in a more public forum. I think everybody was waiting for you guys to comment at Barclays in September. I'm just wondering, I mean, I'm on maternity leave. I haven't kept Bloomberg this morning, but I think we have 4.5 rate cuts. I mean, the cloud versus the one and two that you have on slide 14 to help us think through what that NII may look like under the current curve that we would put the restructuring on top of?

Question: Erika Najarian - UBS - Analyst : But that fair deduction not over the near term, the curve pressure, is that right?

Question: Erika Najarian - UBS - Analyst : And one more for Chris we're at [845], but on slide 3 of the Scotia presentation, it says that it generate this transaction generates near-term attractive returns while creating future optionality for the bank in a North American quarter. I know the bank is not for sale, but I'm sure you're very aware of the conversation that this will (inaudible) from investors but my question is could, maybe going back to Gerard's question, this -- you this capital allow you in theory to accelerate being faster, stronger, better rate was very even become an even more attractive bank in a few years' time, the Navy would have been what are the capital? And I'm wondering this mix you said you don't have the right of first refusal in terms of strategy, but do they have the right of first refusal in terms of other partners coming in, that would potentially want to partner with Key?

Question: David Long - Raymond James - Analyst : Great. Thank you for squeezing me in here, Chris, if we could fast forward, say five years and everything goes according to plan, what do you see as the single or maybe one or two best opportunities for Key. And then how will that be measured by the bank to show your progress to the Street? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 12, 2024 / 12:00PM, KEY.N - KeyCorp Strategic Minority Equity Investment from Scotiabank Call