KeyCorp leans on commercial lending gains in push for dealmaking fees

KeyCorp’s better quarter came with a clear message for investors: the Cleveland lender wants more of its growth to come from commercial clients, capital markets and fee businesses rather than a rebound in consumer lending.

The bank reported second-quarter net income from continuing operations to common shareholders of $472 million, or 44 cents a share, up from $387 million and 35 cents a year earlier. Taxable-equivalent revenue rose 6.7% to $1.96 billion, while net interest income climbed 9.4% to $1.26 billion as deposit costs fell and commercial-and-industrial loans took a larger share of the balance sheet.stocktitan Zacks said the 44-cent result beat the consensus estimate of 42 cents, though revenue missed its $1.98 billion estimate.tradingview

The commercial mix is the point. KeyCorp said period-end loans rose $1.2 billion from the first quarter, with C&I loans up $2.1 billion, or 3%. Average C&I balances were $62.1 billion, up 11.7% from a year earlier, while average consumer loans fell 7.4% as the bank continued running off lower-yielding credits.stocktitan Average deposits were roughly flat at $147.6 billion, but the cost of total deposits fell to 1.63% from 1.99% a year earlier.stocktitan

Management is pairing that balance-sheet shift with a bigger push into fee-generating businesses. Chief Executive Chris Gorman said investment banking pipelines rose 9% sequentially, commercial payments posted double-digit fee growth, and assets under management reached a record $74 billion.stocktitan The bank also repurchased $341 million of stock in the quarter, while its estimated common equity Tier 1 ratio stood at 11.2%.stocktitan

The most visible strategic move is outside the United States. In April, KeyCorp agreed to acquire Clearwater UK, a middle-market investment banking advisory firm, in a deal meant to give U.S. private-equity and corporate clients access to European targets and exit options, and European clients more access to the U.S. M&A market.prnewswire Banking Dive reported that the acquisition, still subject to regulatory approval including from the U.K. Financial Conduct Authority, is expected to close in the second half of 2026 and is structured as a tuck-in deal to expand fee-based revenue.bankingdive

There are still weak spots. Investment banking and debt placement fees fell 14.2% from the first quarter and 5.1% from a year earlier, while commercial mortgage servicing fees dropped 30% year over year.stocktitan Credit metrics also moved the wrong way: nonperforming loans rose to $809 million, or 0.73% of period-end portfolio loans, and net charge-offs increased to 0.42% of average loans.stocktitan For now, KeyCorp’s pitch is that commercial loan growth, cheaper deposits and a wider advisory platform can offset those pressure points.