KeyCorp Earnings: Strong Net Interest Income Growth and Guidance Raise

Key Morningstar Metrics for KeyCorp

• Fair Value Estimate
  : $21.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of KeyCorp’s Earnings

KeyCorp KEY delivered strong results in the first quarter, with net interest income growth of 11% from a year ago. Along with earnings, the bank raised its 2026 net interest income guidance by 1% at the low end to full-year growth of 9%-10%.

Why it matters: KeyCorp performed slightly better than we expected for its balance sheet growth, and the bank also increased its 2026 average loan growth guidance to 2%-4% from 1%-2%, mostly driven by strong commercial lending.

• The updated guidance implies flat-to-2% average loan growth for the remainder of 2026, with some headwinds from the continued roll-off of residential mortgages, which we estimate will take several years. While the newly proposed bank capital regulations will provide capital relief to both residential mortgages and commercial lending, KeyCorp still wants to prioritize its commercial lending growth
• KeyCorp also targets to cross-sell its capital market, wealth, and payment products to these commercial lending clients. If successful in increasing fee penetration, the bank could improve its profitability and return profile.

The bottom line: As we incorporate the latest results and updated guidance, we plan to increase our $21 fair value estimate for no-moat-rated KeyCorp by high single digits, primarily due to higher near-term net interest income growth. We also plan to increase our forecast of KeyCorp’s leverage ratio.

• We view the shares as slightly undervalued after around 1% positive share reaction following its April 16 earnings release.

Big picture: KeyCorp is a regional bank with greater exposure to investment banking fee income, which accounts for around 27% of its total fee base and 10% of its total revenue base.

• While KeyCorp’s investment banking fees posted a record quarter revenue of $197 million and 12.6% year-over-year growth, the bank expects a step-down in the second quarter from volatility in the market and maintains full-year growth of mid-single digits.