UPDATE: ISI Group Initiates Coverage on KeyCorp with Neutral Rating, $12 PT on Plenty of Capital, Subdued ROEs

In a report published Tuesday, ISI Group analyst Keith Murray initiated coverage on KeyCorp KEY with a Neutral rating and $12.00 price target. In the report, ISI Group noted, “We are initiating coverage of KeyCorp with a Neutral rating and 12-month price target of $12. We think Key's management team deserves credit for executing on its expense initiatives (already at $171mm of the $200mm goal and we think more will come) while still focusing on finding ways to grow the top line. Unfortunately, given the sluggish macro backdrop and tepid loan demand top line improvement is tough to come by. At the same time, while KEY is very well positioned on the capital front (10.8% Basel 3 Tier 1 common ratio), this excess capital is weighing on returns and we think limits multiple expansion. With the Fed unlikely to allow CCAR banks with lending exposure to have payout ratios above 100% in the near term, capital will continue to build. We see limited upside in KEY shares over the next 12 months.” KeyCorp closed on Monday at $11.45.