Magazine article American Banker

Stocks: KeyCorp Said to Be Lagging Analysts' Projections for 3Q

Magazine article American Banker

Stocks: KeyCorp Said to Be Lagging Analysts' Projections for 3Q

Article excerpt

Two analysts warned Wednesday that KeyCorp's third-quarter results could be hurt by softness in the capital markets and slackening loan growth.

"We think the latter part of the third quarter must improve in order for the company to meet consensus," said Kenneth Hemauer, a banking analyst at Robert W. Baird & Co. in Milwaukee, referring to the analysts' mean estimate of 62 cents a share for the quarter for the Cleveland-based banking company .

Mr. Hemauer said that revenues from investment banking through KeyCorp's McDonald & Co. were not as strong as expected early in the quarter and that the market for securitizations has become "less friendly in recent months," conditions that may restrict some of the revenues anticipated from loan sales in the second half.

Michael Mayo of Credit Suisse First Boston, who has lowered earnings targets for several major banks for similar reasons, said the reduction in his projection for KeyCorp is "due to concerns about market sensitive revenues, including investment banking and capital markets."

KeyCorp shares slipped 37.5 cents, to $27.625, amid a broad selloff, as a positive report on consumer prices failed to convince investors that the Federal Reserve's open market committee would refrain from another rate hike at its October meeting.

Mr. Mayo, who took action after meeting with KeyCorp management, lowered his earnings estimate to 60 cents a share for the quarter and $2.35 eight cents below consensus for the year.

He said revenue from investment banking is likely to slip to $66 million or lower, from the $100 million KeyCorp took in in the second quarter.

"The company also expressed an unknown impact to capital markets due to Y2K factors," Mr. Mayo said.

"This is another data point showing that banks are likely to fall short of expectations due to capital markets and potentially other weakness,"

Mr. …

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