key corpof (key – Free report) Earnings from continuing operations for the fourth quarter of 2022 were 38 cents per share, lagging the Sachs consensus estimate of 55 cents. Revenues were also down 40.6% year-on-year. The metric estimate was 54 cents per share.
KEY shares fell 2% in pre-market trading after a disappointing quarterly performance. Rising provisions and weak fee income weighed on investor sentiment.
Strong average loan growth and rising interest rates boosted Net Interest Income (NII), supporting KEY’s performance. A gradual decline in expenses also provided a tailwind. However, a decline in non-interest income and an increase in reserves due to the difficult business environment were a drag.
Net income from continuing operations attributable to common shareholders was $356 million, down 40.7% from the prior year period. The same amount he predicted at $506.6 million.
Earnings from continuing operations for 2022 were $1.94 per share, below consensus expectations of $2.09 and down 26.5% from $2.64 a year ago. Net income from continuing operations available to common stockholders decreased 28.5% to $1.79 billion.
Revenue down, expenses down slightly
Total revenue was $1.89 billion, down 2.5% year over year. The top line also lags behind the Zachs consensus estimate of $1.92 billion. The estimate for this indicator was $1.92 billion.
Total revenue in 2022 decreased from the previous year to $7.27 billion. The top line missed out on the Zacks consensus estimate of $7.29 billion.
NII (tax equivalent basis) increased 18.2% to $1.23 billion. The increase was primarily due to higher earning asset balances and higher interest rates. NII’s estimate was $1.24 billion.
Tax equivalent net interest margin from continuing operations increased 29 basis points (bps) to 2.73%. The NIM estimate was 2.76%.
Non-interest income was $671 million, down 26.2%. The decrease was primarily due to lower consumer loan income, investment banking and bond issuance fees and other income.
Noninterest expense decreased 1.2% to $1.16 billion. The metric predicted $1.13 billion.
Average gross deposits at the end of the fourth quarter were $145.7 billion, up 1% from the prior quarter. Average total loans increased 2.9% to $117.7 billion. This growth was primarily due to the solid strength of our commercial loan portfolio.
The net charge-off ratio to average loans increased 6 bps year-over-year to 0.14%. Loan loss reserves were $265 million, compared with $4 million in the prior year period. This primarily reflected the uncertain economic outlook and loan growth.
Provision for losses on loans and leases was $1.33 billion, up 26% from the prior year.
The ratio of non-performing assets to ending portfolio loans, other property holdings and other non-performing assets decreased 13 bps to 0.35%.
Deterioration of capital adequacy ratio
KeyCorp’s ratio of tangible common stock to tangible assets was 4.4% as of December 31, 2022, down from 6.9% for the corresponding period in 2021. The Tier 1 risk-based capital ratio was 10.6%, down from 10.8%.
The Common Equity Tier 1 ratio was 9.1%, down from 9.5% on December 31, 2021.
Solid loan and deposit balances, along with rising interest rates, may continue to support Keycorp’s earnings. However, rising costs and a weakening mortgage business in a challenging macroeconomic environment are immediate concerns.
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Performance of other major banks
Citizens Financial Group (CFGMore – Free Report) reported underlying earnings per share of $1.32 for the fourth quarter of 2022, beating the Zachs Consensus estimate of $1.30. Earnings were also up from $1.26 a year ago.
Results reflect NII growth based on strong loan and deposit balances. However, higher expenses, lower non-interest income and higher provisions were the disabling factors.
signature bankof (SBNY – (free report) Earnings per share for the fourth quarter of 2022 were $4.65, lagging Sachs’ consensus forecast of $4.92. However, revenue increased he by 7.1% from the same period last year. We had expected earnings of $5.42 per share.
Performance was hit by higher noninterest expenses and provisions. However, increased revenue provided a tailwind.