KeyCorp at RBC Capital Markets Global Financial Institutions Conference Transcript

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

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : I know it's still earlier in the year. But with all the changes going on in the macroenvironment, especially with last night's news with the tariffs, can you say how or talk to us how you guys are positioned for this kind of turbulent -- I don't know, I want to call it turbulent, but changing times?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : And have any of your corporate or commercial customers in the last four weeks or so -- has there been any real definitive pullbacks or changes? Or can you tell? Or is it just too early to really tell? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 4:20PM, KEY.N - KeyCorp at RBC Capital Markets Global Financial Institutions Conference

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : I think your inventory comment is interesting because in Friday's H8 data, you've -- I don't know, if you've been noticing, but the C&I loans are clearly moving up. And it probably ties into your commentary there. The other -- as we look at the banks into '25, aside from this now new uncertainty, one of the real positive trends is the changes coming from regulation with all the new heads coming in, especially on Basel III endgame, and then, of course, CCAR in the stress test. What's your color? What are you guys hearing and seeing? And how do you feel about the direction it's moving in?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Yes, correct. There is even some talk. We're hearing that the LTD or the TLAC may actually go away, which would be a positive, no doubt about it. Mainly when we talk about the full-year outlook, when you think back to what your guide was in January, 20% growth in net interest income, which is very strong, some folks maybe could have been higher. So maybe how are you feeling about that at this point? Again, we're two months into the year, of course. But any color there?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : And if you had to paint an interest rate scenario that is ideal for Key the way you are today, is it the short end sticking around 4% and we get a positive slope or what -- if you had your ideal environment, what would it be?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Okay. Speaking of deposits, your deposit costs in the fourth quarter dropped 21 basis points sequentially, which obviously, very impressive. Non-interest-bearing now is about 23% of total deposits, including the hybrid accounts. How is the deposit pricing trending so far in the quarter? And what are your deposit beta expectations for this coming year?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Yes. It's interesting with the non-interest-bearing deposits that you folks have relative to total deposits, it's been a number of years, where we've had such a higher front end of the curve with those non-interest-bearing deposits are really quite golden. Do you see any ability -- I mean, they're quite high already -- as a percentage of total going higher? Or is this where they kind of settle out at?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Yes. When we were just chatting about interest rates, you talked about some extremes. But when you look at the full year on the net interest income guide, what's the biggest risk of that number not materializing? Is it an extreme move in rates one way or the other?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Either direction, okay.

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Got it, yes. It's similar when you think about hard moves, like during the pandemic when they dropped so dramatically there at the very beginning. The net interest margin coming out in the fourth quarter of '24 was 2.41%. You've been talking about achieving a 270 net interest margin or better as we go out. If we do have higher-for-longer run rates, how does that margin play out as we get into the end of the year?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Yes, got it. And moving now, obviously, net interest income is very important for your organization. But turning to fees, when you guys are talking about the upside this year in the fourth-quarter earnings call, you were talking about a 5% upside to fees in 2025. Can you walk us through the puts and takes of what you're seeing in achieving that number?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : And you're unique in this question because of your commercial mortgage servicing, and you just touched on special servicing. Can you share with us -- because as you pointed out, it grew very rapidly last year as the commercial real estate markets suffered, particularly office. What are your guys seeing now, the guys in special servicing, what are they telling you about what they're seeing in the commercial real estate markets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 4:20PM, KEY.N - KeyCorp at RBC Capital Markets Global Financial Institutions Conference

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Are your guys seeing it geographically in any -- is it more in the so-called gateway cities of Nashville or Austin or Fort Lauderdale versus Buffalo, New York?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : I'm going to say Cleveland, but I'm with M&T tomorrow.

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Key has obviously differentiated itself with its investment banking business. And over the years, you and Chris have hired investment bankers. And you talked about that on the fourth-quarter call about hiring more investment bankers for 2025 and into 2026. Can you talk to us how is that progressing? Where are you guys seeing that move?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Talking about investing, you mentioned hiring these investment bankers. You're also investing in wealth management and payments, of course, and you're upping your tech spend this year and you're committed to the mid-single-digit rate of growth in expenses. So can you talk to us about where the tech spending is going? And are you getting cost savings in other areas to help offset some of the increased spending in these areas?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Got it. Shifting over to credit, your net charge-off ratio in the fourth quarter was about 43 basis points. You've guided to 40 to 45 this year, which is quite low relative to history, of course. Where could we see some -- I mean, in that number, where do you see the charge-offs materializing within your range?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Right. When you think about leverage lending, obviously, as you mentioned, since you've been there, it's been flat relative to the size of the organization. Is it a better organized market? Or is it -- I mean, are people not doing crazy things in leverage lending yet? Or are those animal spirits about to kick in, and you're going to see higher debt levels and stuff like you normally see it as the economy takes off?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Speaking of the private credit side, you guys announced the joint venture with Blackstone. I think it was about last year or prior to that. How is it going? And how does it differ from what you've always done, which is lay off some of the risk?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Sure, no doubt. Maybe we could talk about the first quarter and how it's progressing for you guys if you want to give us an update. I know we're about two months, obviously, into the first quarter. And how loan growth is tracking and other metrics that you guys monitor the investment banking activity, et cetera. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 4:20PM, KEY.N - KeyCorp at RBC Capital Markets Global Financial Institutions Conference

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Good. And we only have a few seconds here. But coming back to provisions and reserves, do you think because of CECL now that you and your peers are just better reserved going into whatever -- I mean, more uncertainty in the future, just pre-January of 2020?

Question: Gerard Cassidy - RBC Capital Markets LLC - Analyst : Okay, and one final question, just on capital and with the potential softening of the rules with the regulators, how are you guys viewing your capital levels? Obviously, they're very strong since the investment from Scotiabank. How are you guys looking at that 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. MARCH 04, 2025 / 4:20PM, KEY.N - KeyCorp at RBC Capital Markets Global Financial Institutions Conference