KeyCorp Earnings: Net Interest Income Growth Drives Strong Performance

Key Morningstar Metrics for KeyCorp

• Fair Value Estimate: $19.20
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of KeyCorp’s Earnings

KeyCorp KEY delivered strong fourth-quarter results, including net interest income growth of 15% from a year ago. The bank reported earnings per share of $0.43, an 8% improvement from the prior-year quarter. The results translate into a return on tangible common equity of 12.4%.

Why it matters: KeyCorp performed slightly better than we expected for the full year. This was driven primarily by higher net interest income growth and strong performance in investment banking fee income and commercial mortgage service fees.

• Net interest margin improved 53 basis points from 2.41% a year ago, mostly due to fixed-asset repricing and lower-yielding hedges rolling off. KeyCorp has reiterated a 3.25% NIM and a 15% return on tangible common equity coming out of the fourth quarter of 2027.
• Commercial lending will be the major loan growth driver in 2026, while the continued roll-off of lower-yielding residential mortgages will be a headwind to balance-sheet growth. Overall, the bank’s average loan balances are expected to grow by 1%-2% in 2026.

The bottom line: As we incorporate the latest results and updated guidance, we plan to increase our $19.20 fair value estimate for no-moat-rated KeyCorp by mid-single digits on higher near-term earnings growth. We view the shares as fairly valued after the contemplated valuation update.

Big picture: Despite recent changes to the board, we think KeyCorp will stick with its current strategy and that the new members will be aligned with the bank’s medium-term targets.

• CEO and Chair Chris Gorman reiterated the bank’s focus on organic growth and investments in its technology platform, payouts to shareholders via dividends and share buybacks, and bolt-on acquisitions in fee income businesses.