UBS Upgrades KeyCorp To Buy, Firm Draws 'Line In The Sand'

• KeyCorp (NYSE: KEY) shares have lost 14 percent since January 4.
• UBS' David Eads upgraded the rating for the company from Neutral to Buy, while raising the price target from $13.50 to $14.
• KeyCorp’s earnings risk appears lower than average, given the company’s strong organic growth trajectory and relatively low energy exposures, Eads stated.

In the event that there is no downturn in the banking sector, KeyCorp appears poised for organic growth, given its “targeted commercial loan growth, strong and diverse fee revenue capabilities and the potential for accretion related to the FNFG deal,” analyst David Eads said.

He noted further that if the environment does turn unfavorable, the company “is not counting on rate hikes to the same degree as peers, has little energy exposure, and should have above average flexibility on expenses.”

While the deal with First Niagara Financial Group Inc. (NASDAQ: FNFG) has caused some concerns around KeyCorp, “meaningful upside” from the deal “is far from necessary,” in view of the latter’s current valuation, Eads commented. He added that the deal is a “logical geographic fit” for KeyCorp and that adding scale would likely become “increasingly important” for regional banks on account of regulatory and technology expense pressures.