KEY Q4 Earnings Beat as NII Jumps, Stock Down on Rise in Provisions

KeyCorp’s KEY fourth-quarter 2025 adjusted earnings per share from continuing operations of 41 cents outpaced the Zacks Consensus Estimate of 38 cents. The bottom line reflected a 7.9% rise from the prior-year quarter.

Shares of KeyCorp lost more than 2% in the early-market trading despite better-than-expected results. Bearish broader market trends and a substantial surge in provisions seem to be hurting investor sentiment, thus driving the company's stock lower.

Quarterly results primarily benefited from higher net interest income (NII) and non-interest income. The rise in average loans and deposit balances was another positive. However, higher expenses and a jump in provisions were the undermining factors.

Results excluded non-recurring items. Including these, net income from continuing operations attributable to common shareholders was $474 million or 43 cents per share against a net loss of $279 million or 28 cents per share in the prior-year quarter.

For 2025, adjusted earnings from continuing operations were $1.50 per share, which beat the consensus estimate of $1.48 and grew 29.3% year over year. Net income from continuing operations attributable to common shareholders (GAAP) was $1.69 billion or $1.52 per share against a net loss of $306 million or 32 cents per share in 2024.

KEY’s Revenues Improve, Expenses Rise

Total revenues (taxable-equivalent or TE) increased 12.5% year over year to $2 billion. Also, the top line beat the Zacks Consensus Estimate of $1.94 billion.

For 2025, total revenues (TE) were $7.51 billion, up 16.4% from the prior year. The top line surpassed the consensus estimate of $7.43 billion.

NII (TE basis) jumped 15.3% from the prior-year quarter to $1.22 billion. The net interest margin (NIM) (TE basis) from continuing operations expanded 41 basis points (bps) to 2.82%. Both metrics benefited from lower deposit costs, the reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, and the repositioning of the available-for-sale portfolio during the fourth quarter of 2024. These were partly offset by the impact of lower interest rates on variable-rate earning assets. 

Adjusted non-interest income was $782 million, up 8.3%. The rise was mainly driven by higher investment banking and debt placement fees, corporate services income and trust and investment services income.

Non-interest expenses increased almost 1% to $1.24 billion. The rise was due to an increase in almost all cost components except for operating lease expenses, marketing and other expenses. Adjusted expenses rose 2.4% to $1.26 billion.

At the end of the fourth quarter, average total loans were $106.32 billion, up marginally from the previous quarter. Average total deposits were $150.71 billion, up slightly.

KEY’s Credit Quality: A Mixed Bag

The provision for credit losses was $108 million, significantly up from $39 million in the prior-year quarter. The allowance for loan and lease losses was $1.43 billion, up 1.3%.

However, net loan charge-offs, as a percentage of average total loans, declined 4 bps year over year to 0.39%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets, and other non-performing assets, were 0.59%, down 15 bps.

KeyCorp’s Capital Ratios Strong

KEY's tangible common equity to tangible assets ratio was 8.4% as of Dec. 31, 2025, up from 7% in the corresponding period of 2024. The Tier 1 risk-based capital ratio was 13.4%, down from 13.7%. The Common Equity Tier 1 ratio was 11.7%, down from 11.9% as of Dec. 31, 2024.

Update on KEY’s Share Repurchases

During the reported quarter, KeyCorp repurchased shares worth $200 million.

Our Take on KEY

Decent loan balances, balance sheet repositioning efforts, strategic buyouts and stabilizing funding costs will likely support KeyCorp’s revenues in the near term. Weak asset quality amid a tough macroeconomic backdrop is concerning.
 

KeyCorp Price, Consensus and EPS Surprise

KeyCorp price-consensus-eps-surprise-chart | KeyCorp Quote

KeyCorp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of KeyCorp’s Peers

M&T Bank Corporation MTB reported fourth-quarter 2025 net operating earnings per share of $4.72, which beat the Zacks Consensus Estimate of $4.44. The bottom line compared favorably with earnings of $3.92 per share in the year-ago quarter.

Results were aided by higher non-interest income and NII, along with modest loan growth and higher deposits. A decline in provisions for credit losses was also a tailwind. However, an increase in expenses acted as a headwind for M&T Bank.

The PNC Financial Services Group, Inc.’s PNC fourth-quarter 2025 earnings per share of $4.88 surpassed the Zacks Consensus Estimate of $4.23. In the prior-year quarter, the company reported earnings of $3.77.

Results have been aided by record revenue growth, driven by a higher NII and fee income. Rising loan and deposit balances, along with a decline in provisions for credit losses, were other positives for PNC Financial. However, an increase in expenses acted as a spoilsport.

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This article originally published on Zacks Investment Research (zacks.com).

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