Balanced Risk-Reward for KeyCorp - Analyst Blog

On Mar 10, 2014, we issued an updated research report on KeyCorp. KEY. Moreover, the company reported better-than-expected fourth-quarter 2013 results, based on improvement in fee income and lower provisions.

KeyCorp's fourth-quarter earnings per share surpassed the Zacks Consensus Estimate by 16.7%. The results were mainly driven by prudent expense management, higher non-interest income and decreased provision for loan and lease losses. Additionally, consistent improvement in asset quality, growth in loan and deposit balances and strong capital ratios were the other highlights.

Further, KeyCorp is an asset for yield-seeking investors. In 2013, the company returned 76% of its earnings in the form of dividends and share repurchases. We believe that steady capital deployment activities will continue to boost investors' confidence in the stock, going forward.

Over the last 60 days, the Zacks Consensus Estimate for 2014 has remained stable at $1.02 per share while for 2015, it decreased nearly 1% to $1.12 per share.

However, continued pressure on net interest margin remains a concern for KeyCorp. We anticipate the margin pressure to continue in the near term due to the soft new loan demand, low interest rate environment and the company's asset sensitivity. Also, with the changes in the financial services industry and stringent regulations, KeyCorp's profitability will likely be impacted due to increased costs and fee restrictions.

KeyCorp now has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banking stocks include Fifth Third Bancorp FITB, The PNC Financial Services Group, Inc. PNC and Hancock Holding Co. HBHC. All of these have a Zacks Rank #2 (Buy).