KeyCorp.’s (KEY - Analyst Report) first-quarter 2015 earnings from continuing operations of 26 cents per share came in line with the Zacks Consensus Estimate. Further, the bottom line was stable with the year-ago figure.
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Rise in revenues and continued growth in loan and deposit balances were the tailwinds. However, higher expenses and an increase in provision for loan and lease losses acted as dampeners. Moreover, credit quality was a mixed bag, while capital ratios deteriorated.
Net income from continuing operations attributable to common shareholders in the reported quarter came in at $222 million, down 4.3% year over year.
Behind the Headlines
Total revenue came in at $1.01 billion, up 1% from the prior-year quarter. However, it lagged the Zacks Consensus Estimate of $1.03 billion.
Tax-equivalent net interest income (“NIIâ€) increased 1.4% from the prior-year quarter to $577 million. The rise reflected higher loan balances, partly mitigated by lower earning asset yields. However, net interest margin decreased 9 basis points (bps) year over year to 2.91%.
Non-interest income grew 0.5% year over year to $437 million. The rise was mainly attributable to higher trust and investment services income, net gains from principal investing, corporate-owned life insurance income, cards and payments income, and other income. These increases were, nevertheless, partially offset by a fall in investment banking and debt placement fees.
Non-interest expense inched up 0.8% from the prior-year quarter to $669 million. The increase was mainly led by higher employee benefits costs, partially offset by lower business services and professional fees, as well as continued cost savings across the company.
As of Mar 31, 2015, average total deposits came in at $68.4 billion, up 4.9% year over year. Further, average total loans were $57.5 billion, up 5.1% from Mar 31, 2014.
Credit Quality
Credit quality depicted a mixed bag during the quarter. Provision for loan and lease losses increased significantly to $35 million. Also, net loan charge-offs, as a percentage of average loans, increased 5 bps year over year to 0.20%.
