Regional banking company KeyCorp (NYSE: KEY) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 12.5% year on year to $2.01 billion. Its non-GAAP profit of $0.41 per share was 6.3% above analysts’ consensus estimates.

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StockStory’s Take

KeyCorp’s fourth quarter results outpaced Wall Street’s expectations, supported by double-digit revenue growth and disciplined expense management. Management credited the quarter’s performance to strong momentum in commercial and fee-based businesses, as well as continued investments in technology and talent. CEO Chris Gorman highlighted a focus on organic growth across middle market lending, investment banking, and wealth management, stating, “We added nearly 10% to our frontline banker staff across wealth management, commercial payments, middle market, and investment banking.” The company also reported improvements in asset quality and proactive deposit management, which helped optimize funding costs and maintain peer-leading capital ratios.

Looking forward, KeyCorp’s guidance emphasizes further operating leverage through expense control, continued investment in digital capabilities, and expansion in priority fee-based segments. Management expects returns from recent hiring and technology investments to build throughout 2026, with particular optimism around investment banking backlogs and middle market M&A activity. CFO Clark Khayat noted that “operating leverage of approximately 300 to 400 basis points” is anticipated in 2026, and management remains focused on achieving a return on tangible common equity above 15% by 2027. While macroeconomic uncertainty persists, the company believes its diversified business model and ongoing balance sheet optimization position it well for another year of growth.

Key Insights from Management’s Remarks

Management attributed the quarter’s growth to robust performance in commercial lending, strong fee-based revenue expansion, and disciplined expense management, while also highlighting board changes and increased technology investment.

• Commercial loan momentum: C&I (commercial and industrial) loan growth was a key driver, with management pointing to increased commitment activity and effective recycling of lower-yielding consumer loans into higher-yielding commercial assets. This shift is designed to proactively manage funding costs and improve margins.
• Fee-based business expansion: All priority fee-based segments—investment banking, wealth management, and commercial payments—delivered high single- to low double-digit growth rates. CEO Chris Gorman emphasized the ongoing success of new hires and expanded platforms in scaling these businesses.
• Investment in technology and talent: KeyCorp invested an additional $100 million in technology, with a focus on customer-facing digital capabilities and AI, and increased its frontline banker staff by nearly 10%. Management believes these investments will improve client experience and operating efficiency.
• Improved asset quality: Net charge-offs, nonperforming assets, criticized loans, and delinquencies all declined sequentially, reflecting positive credit trends and the company’s continued emphasis on strong risk discipline.
• Board and governance updates: Several board changes were announced, including the nomination of Tony D’Spirito and Chris Henson as directors and the transition of the lead independent director role to Todd Vasos. Management sees these changes as reinforcing the company’s commitment to governance and long-term value creation.

Drivers of Future Performance

KeyCorp’s outlook centers on expanding fee-based businesses, controlling expenses, and leveraging recent investments in talent and technology to drive revenue and margin growth.

• Expansion in fee-based segments: Management expects mid- to high single-digit growth in investment banking, wealth management, and commercial payments, supported by a healthy deal pipeline and anticipated improvement in middle market M&A activity. The company believes that increased sponsor activity and favorable capital markets will boost fee income.
• Expense discipline and operating leverage: The company targets expense growth at roughly half the rate of expected revenue growth, aiming for substantial operating leverage. Management plans to control costs through efficiency initiatives and benefit from the ramp-up of recent hiring, while continuing to invest in technology and digital banking capabilities.
• Balance sheet optimization and credit quality: KeyCorp will continue remixing its loan portfolio toward higher-yielding commercial assets and reducing reliance on brokered deposits. Management expects stable credit trends and views disciplined underwriting as a foundation for sustainable growth, while closely monitoring consumer discretionary, healthcare, and agriculture portfolios for emerging risks.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will monitor (1) the pace of new business wins and productivity gains from recent banker hires, (2) the impact of continued technology investments—particularly in AI and digital platforms—on client growth and efficiency, and (3) trends in middle market M&A activity, which could materially influence fee income. We’ll also watch for sustained improvements in asset quality and successful execution on deposit and loan mix strategies.

KeyCorp currently trades at $21.09, in line with $21.17 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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