KeyCorp at Barclays Global Financial Services Conference Transcript

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

Question: Jason Goldberg - Barclays - Analyst : It's certainly not been adult summer for Key. And just maybe if you could start there and just with your perspective on how the Bank of Nova Scotia deal came about and why it's a lot of hard work, come over the past few years to get Key back on solid footing, you decided to go down this path now?

Question: Jason Goldberg - Barclays - Analyst : So we put up the first ARS question. I meant to put on the beginning. And Clark, I'll ask you my next question. Maybe just talk about the transaction itself. What are some of the things you structured into the deal to ensure Scotiabank and Key's incentives are and will stay a line moving forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : I guess a couple of follow-up questions. I guess first is how do you respond to the concerns that you now anchored yourself to Scotiabank and that other banks are less able or less like to want to acquire Key?

Question: Jason Goldberg - Barclays - Analyst : One of the things maybe we get questions on is this five years stand-still agreement, hypothetically, I'm not saying it would happen. If Scotiabank wanted to acquire more share before then and Key would agree. Is that something you could agree upon?

Question: Jason Goldberg - Barclays - Analyst : I guess on the notion of regulatory hoops, I guess, as you went to announce this unless you had some comfort that they could get to the 14.9% early next year. I guess any way you can get us comfortable, we've seen before you in this room was First Horizon, they obviously had their issues getting through those regulatory hoops with their transaction with another Canadian player. So just how do you think about that?

Question: Jason Goldberg - Barclays - Analyst : Got it. And you mentioned partnership opportunities, maybe just elaborate a bit on that? And is that something you actually think could be additive to earnings and revenues over time?

Question: Jason Goldberg - Barclays - Analyst : Got it. We could put up the next ARS question, please. Yes, maybe shift to use of capital. I guess there's a first 8-K this morning. I guess you started to restructure the securities portfolio. For those in the room that maybe you think you get to see maybe update us in terms of what you announced today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : And just maybe beyond the restructuring? Can we dig into how else you intend to minimize the longer-term dilution from the capital raise?

Question: Jason Goldberg - Barclays - Analyst : And then you mentioned using some of the proceeds to accelerate organic growth initiatives. Maybe just elaborate on specific areas where you tend to invest. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : All right. So you talked about some areas of potential growth, so people are thinking what are the expense implications 2025, 2026. And how should we think about expense growth next year? It's been relatively flat. I think we're four straight years now, how are you approaching next year?

Question: Jason Goldberg - Barclays - Analyst : Got it. I don't want to go back to something you said earlier, when we're talking about acquisitions. I mentioned a couple of different fee income verticals bank M&A? Is that something now that you have a Scotiabank as a partner potentially capital? Just how does that influence your thoughts on bank M&A?

Question: Jason Goldberg - Barclays - Analyst : And then you talked about uses of capital and potential share repurchase at some point, you think that could be a 2025 event? And any other potential uses of capital you want to highlight?

Question: Jason Goldberg - Barclays - Analyst : Got it. And maybe pull back to where we are in the quarter, two months in, obviously, a lot of puts and takes, but any trends you want to highlight anything you want to call out, NII, I would say, investment banking, credit quality are probably the three areas on top of your mind.

Question: Jason Goldberg - Barclays - Analyst : And when you gave that NII guide up mid-single digits from 3Q to 2Q?

Question: Jason Goldberg - Barclays - Analyst : And that is inclusive of the securities portfolio restructuring last week? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : It's not include that. So that would be in addition to --

Question: Jason Goldberg - Barclays - Analyst : Okay. You don't want to help us quantify that, or I'm going to go back, and pull is very sheet.

Question: Jason Goldberg - Barclays - Analyst : I have not touched a spreadsheet all day.

Question: Jason Goldberg - Barclays - Analyst : And then I guess maybe just sticking with NII and maybe just looking ahead to the fourth quarter. In the past, you've talked about an exit run rate this year of $1 billion plus, I think, in NII -- I guess any maybe updated thoughts around that?

Question: Jason Goldberg - Barclays - Analyst : So assuming the Fed cuts, say, 3, 4x, $1 billion-plus exit could be a little tough?

Question: Jason Goldberg - Barclays - Analyst : With pre-restructuring or --

Question: Jason Goldberg - Barclays - Analyst : And then with the restructuring --

Question: Jason Goldberg - Barclays - Analyst : Understood. Understood. Maybe more so as we think into 2025 and maybe that's maybe an easier way to think about it. Just how do you think about that, particularly with expectations for additional security portfolio restructuring in the first part of the year. I know it's early, but clearly, it's a big question that investors have. Is there you can help us frame 2025 NII expectations?

Question: Jason Goldberg - Barclays - Analyst : So if we take whatever 2024 NII is inclusive of this or last week's restructuring and tack-on 20%, it should be 2025 NII?

Question: Jason Goldberg - Barclays - Analyst : And that, I guess, assumes the forward curve as we sit today?

Question: Jason Goldberg - Barclays - Analyst : And I think we put up the next ARS question. And I guess you talked about -- we'll come to this, I know you talked about the whole repricing benefit on the treasuries and swaps. I think you had a $950 million number in the third quarter. I guess, I imagine that a little bit less than we thought any update on that number and I guess more than offset by all those other factors you talked about? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : And then I guess when you think about NII up 20% Again, I haven't had a spreadsheet in front of you all day. In terms of like a NIM perspective, I mean Key is obviously NIM low normal, we all agree -- at one point, you're talking about I think an exit rate NIM this year, like [2% to 2.5%] and a lot of puts and takes. And then restructuring impacts that and the proceeds. But how are you thinking about next year maybe from a NIM perspective, given all the five factors you laid out?

Question: Jason Goldberg - Barclays - Analyst : Got it. And then the audience thinks next year would be [2.6 to 2.7].

Question: Jason Goldberg - Barclays - Analyst : Okay. We'll see. I guess the other factor from other than NIM is just loan growth and maybe just expand in terms of what you're seeing there. I think on the earnings call, you talked about commercial loan pipelines were building nicely, you're starting to see any pull through? And then does -- since the the BNS announcement, any impact in terms of client engagement and how that's transpired?

Question: Jason Goldberg - Barclays - Analyst : Maybe throw up the next ARS question. While I ask Clark my question. Maybe talk to deposit situation in terms of balances or pricing competition, what you're seeing, particularly as the market is now pricing in lower rates. I think on the last earnings call, you talked about a down data of [20%, 25%] in the fourth quarter, but that was two cuts. Now we have four cuts and how that just plays through?

Question: Jason Goldberg - Barclays - Analyst : And in terms of deposit balances that you would call out mix? Anything?

Question: Jason Goldberg - Barclays - Analyst : And I ask it a Clark, credit quality you haven't gotten to that yet at all. Clearly, I think the first half of this year running low-30s in terms of charge-offs, historical use a long-term driver of [40% to 60%]. Just anything on credit quality you would call out at the moment, what areas are you focused on and just how you're thinking about that?

Question: Jason Goldberg - Barclays - Analyst : Interestingly, the audience response shows a larger increase in expected charter of the Key that I think several of the other regional banks have presented this morning. Maybe it makes sense to remind people that Key today is not the Key that was 10 years ago. And your commercial real estate exposure is particularly on a relative basis, a lot smaller than it was, your office exposure is, I think, the smallest among your regional bank coverage as a percentage of?

Question: Jason Goldberg - Barclays - Analyst : Got it. You gave us, I think, good color in terms of what the third quarter should look like, come October when we see your full year outlook slide, I guess, how different do you think it's going to look in October versus the one that you published in July?

Question: Jason Goldberg - Barclays - Analyst : Got it. I can pull up and see if there's any questions from the audience. I guess one question we get is when he always gives its earnings outlook in the slide deck. It always had this long-term targets underneath. We talked about net charge-offs, there's some other ones. The Bank of Nova Scotia investment change at all how you think about what this company could do going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2024 / 6:45PM, KEY.N - KeyCorp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays - Analyst : And I guess, maybe with the rate environment, changing fairly rapidly during the third quarter. I guess, come next year, is there a chance that you maybe forego to security portfolio restructuring and look to do something else with that capital? Or is your mind made up and that's the route you're going to go?