KeyCorp Gets Analyst Upgrade Due To Superior Balance Sheet, Net Interest Income

Shares of KeyCorp KEY have climbed steadily over the past month.

While the bank failures earlier this year exerted pressure on the sector, shares of KeyCorp underperformed, shedding around 18% year to date versus around a 5% decline in the KBW Nasdaq Bank Index BKX, according to Stephens.

The KeyCorp Analyst: Terry McEvoy upgraded the rating for KeyCorp from Equal Weight to Overweight, while keeping the price target unchanged at $16.50.

The KeyCorp Thesis: With expectations for net interest income to bottom early next year, the conversation is likely to shift to which banks can generate the strongest net interest income growth in 2024 and 2025, McEvoy said in the upgrade note.

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“Key's balance sheet composition puts the company in a superior position relative to peers,” the analyst wrote.

“Management anticipates incrementally higher net interest income going forward as low-yielding securities and swaps with a negative carrying value mature, supporting peer-leading NII growth over the next few years,” McEvoy stated. He expressed optimism around KeyCorp’s net interest income trajectory to outpace peers from 2023 to 2025.

“History suggests a resurgence in large bank M&A activity should help KEY's valuation,” the analyst further mentioned.

KEY Price Action: Shares of KeyCorp were down 1.9% to $14.08 on Wednesday.

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