Balanced View On KeyCorp - Analyst Blog

On Jun 9, 2014, we issued an updated research report on KeyCorp. KEY. The company's better-than-expected results and impressive organic growth strategy will continue to support its financials in the future. However, sluggish economic recovery and a still low interest rate environment make us apprehensive.

KeyCorp reported first-quarter 2014 results on Apr 17. Earnings of 26 cents per share surpassed the Zacks Consensus Estimate by 8.3% on the back of prudent expense management, increased fee income and a fall in provisions, which were partially offset by a decline in net interest income.

Additionally, KeyCorp is an attractive asset for yield-seeking investors. The company recently raised its dividend by nearly 18% to 6.5 cents per share. Further, its 2014 capital plan also includes share repurchase of up to $542 million through first-quarter 2015. We believe that the company's sound capital health will enhance shareholders' value going forward.

Further, following the earnings release, the Zacks Consensus Estimate over the last 60 days has been revised upward. For 2014, the Zacks Consensus Estimate climbed 3.9% to $1.06 per share, while for 2015 it rose 1.8% to $1.14 per share.

On the flip side, persistent pressure on net interest margin remains a major concern for KeyCorp. We expect the margin pressure to continue in the near term due to softness in new loan demand as well as a continually low interest-rate environment. Also, stringent regulatory environment and slow client activity remain other major near-term concerns.

Presently, KeyCorp has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked finance companies include CVB Financial Corp. CVBF, Western Alliance Bancorporation WAL and BofI Holding, Inc. BOFI. All these stocks sport a Zacks Rank #1 (Strong Buy).