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Loans, Rates & Fee Income to Aid KeyCorp's (KEY) Q2 Earnings
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KeyCorp (KEY - Free Report) is scheduled to report second-quarter 2022 results on Jul 21, before the opening bell. The overall lending scenario was impressive in the to-be-reported quarter.
Per the Federal Reserve’s latest data, consumer loans, which account for roughly 30% of KeyCorp’s average loan balances, recorded a rise in the quarter. Also, commercial and industrial loan balances (accounting for almost 50% of KEY’s average loan balances) witnessed solid improvement.
The Zacks Consensus Estimate for average earning assets is pegged at $166.6 billion, suggesting a marginal rise on a sequential basis.
With the Federal Reserve having increased the interest rates by 125 basis points (bps) during the quarter, KeyCorp’s net interest margin (NIM) and net interest income (NII) are expected to have been favorably impacted. Also, decent loan growth is expected to have offered support.
The consensus estimate for NII (on a fully tax-equivalent basis) is $1.08 billion, reflecting a rise of 5.7% from the previous quarter’s reported number.
Other Factors at Play
Non-Interest Income: Deal-making came to a grinding halt during the second quarter as the ongoing Russia-Ukraine conflict and macroeconomic concerns weighed on business sentiments globally. Likewise, the IPOs and follow-up equity issuances dried up as equity markets turned extremely volatile. Also, bond issuances were weak. So, KeyCorp’s investment banking (IB) business is expected to have been muted in the to-be-reported quarter.
Nonetheless, heightened volatility and a substantial rise in client activity in the capital markets seem to have positively impacted trading activities in the quarter. The consensus estimate for KeyCorp’s IB and capital markets income of $183 million indicates 12.3% growth sequentially.
Rising mortgage rates (that touched a 14-year high in June) weighed on mortgage originations and refinancing activities during the second quarter, hurting KeyCorp’s mortgage banking business. Thus, the Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $21.19 million and $36 million, implying a marginal increase and no change, respectively, on a sequential basis.
While rising inflation hurt consumer sentiments, decent economic growth and pent-up demand are expected to have driven consumers toward using cards. Thus, this might have positively impacted KEY’s card business. The Zacks Consensus Estimate for cards and payments income of $83 million suggests a 3.8% rise from the prior quarter.
Further, the Zacks Consensus Estimate of $93 million for service charges on deposit accounts implies a 2.2% increase. The consensus estimate for trust and investment services income of $136 million suggests no change from the prior quarter.
Therefore, the consensus estimate for KeyCorp’s total non-interest income of $720 million indicates growth of 6.5% on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses have helped it save costs in the past. Yet, as the company continues to invest in franchise, technological upgrades and inorganic growth strategy, expenses are expected to have witnessed an uptrend in the second quarter.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, KeyCorp is expected to have built reserves in the second quarter.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for KeyCorp this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for KeyCorp is +0.77%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at 52 cents, which has been revised 3.7% lower over the past 30 days. The figure suggests a 27.8% plunge from the prior-year quarter’s reported number.
The consensus estimate for sales of $1.76 billion indicates a modest decline of 0.3%.
Other Bank Stocks Worth Considering
Here are a few other bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Regions Financial (RF - Free Report) is +0.89% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 22.
Over the past week, the Zacks Consensus Estimate for RF’s quarterly earnings has been revised 1.9% lower.
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Loans, Rates & Fee Income to Aid KeyCorp's (KEY) Q2 Earnings
KeyCorp (KEY - Free Report) is scheduled to report second-quarter 2022 results on Jul 21, before the opening bell. The overall lending scenario was impressive in the to-be-reported quarter.
Per the Federal Reserve’s latest data, consumer loans, which account for roughly 30% of KeyCorp’s average loan balances, recorded a rise in the quarter. Also, commercial and industrial loan balances (accounting for almost 50% of KEY’s average loan balances) witnessed solid improvement.
The Zacks Consensus Estimate for average earning assets is pegged at $166.6 billion, suggesting a marginal rise on a sequential basis.
With the Federal Reserve having increased the interest rates by 125 basis points (bps) during the quarter, KeyCorp’s net interest margin (NIM) and net interest income (NII) are expected to have been favorably impacted. Also, decent loan growth is expected to have offered support.
The consensus estimate for NII (on a fully tax-equivalent basis) is $1.08 billion, reflecting a rise of 5.7% from the previous quarter’s reported number.
Other Factors at Play
Non-Interest Income: Deal-making came to a grinding halt during the second quarter as the ongoing Russia-Ukraine conflict and macroeconomic concerns weighed on business sentiments globally. Likewise, the IPOs and follow-up equity issuances dried up as equity markets turned extremely volatile. Also, bond issuances were weak. So, KeyCorp’s investment banking (IB) business is expected to have been muted in the to-be-reported quarter.
Nonetheless, heightened volatility and a substantial rise in client activity in the capital markets seem to have positively impacted trading activities in the quarter. The consensus estimate for KeyCorp’s IB and capital markets income of $183 million indicates 12.3% growth sequentially.
Rising mortgage rates (that touched a 14-year high in June) weighed on mortgage originations and refinancing activities during the second quarter, hurting KeyCorp’s mortgage banking business. Thus, the Zacks Consensus Estimate for consumer mortgage income and mortgage servicing fees is pegged at $21.19 million and $36 million, implying a marginal increase and no change, respectively, on a sequential basis.
While rising inflation hurt consumer sentiments, decent economic growth and pent-up demand are expected to have driven consumers toward using cards. Thus, this might have positively impacted KEY’s card business. The Zacks Consensus Estimate for cards and payments income of $83 million suggests a 3.8% rise from the prior quarter.
Further, the Zacks Consensus Estimate of $93 million for service charges on deposit accounts implies a 2.2% increase. The consensus estimate for trust and investment services income of $136 million suggests no change from the prior quarter.
Therefore, the consensus estimate for KeyCorp’s total non-interest income of $720 million indicates growth of 6.5% on a sequential basis.
Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable/non-core businesses have helped it save costs in the past. Yet, as the company continues to invest in franchise, technological upgrades and inorganic growth strategy, expenses are expected to have witnessed an uptrend in the second quarter.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, KeyCorp is expected to have built reserves in the second quarter.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for KeyCorp this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for KeyCorp is +0.77%.
Zacks Rank: The company currently carries a Zacks Rank #3.
KeyCorp Price and EPS Surprise
KeyCorp price-eps-surprise | KeyCorp Quote
The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at 52 cents, which has been revised 3.7% lower over the past 30 days. The figure suggests a 27.8% plunge from the prior-year quarter’s reported number.
The consensus estimate for sales of $1.76 billion indicates a modest decline of 0.3%.
Other Bank Stocks Worth Considering
Here are a few other bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Regions Financial (RF - Free Report) is +0.89% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 22.
Over the past week, the Zacks Consensus Estimate for RF’s quarterly earnings has been revised 1.9% lower.
Bank OZK (OZK - Free Report) is scheduled to release second-quarter 2022 earnings on Jul 21. OZK, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +2.69%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
OZK’s quarterly earnings estimates have moved almost 1% upward over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.