Magazine article American Banker

KeyCorp Earnings Up 7%, Miss Estimates by a Penny

Magazine article American Banker

KeyCorp Earnings Up 7%, Miss Estimates by a Penny

Article excerpt

KeyCorp reported third-quarter net income Thursday of $270 million, a 7% gain.

Earnings per share of 60 cents missed consensus estimates by a penny.

Nancy Bush, an analyst with Ryan, Beck & Co., called the Cleveland-based company's performance "soft across the board. There just don't seem to be any particular areas of strength."

The results come at a pivotal juncture for the $83 billion-asset banking company. Many analysts were hoping KeyCorp's results would reverse a long history of slow, unremarkable growth and prove the company's strong second-quarter performance was not a fluke.

KeyCorp earned $280 million for the second quarter, a 12% rise, driven mainly by fee income, which was up 38%, to $536 million.

However, "they didn't hit the cover off the ball this quarter," said Michael Mayo, an analyst with Credit Suisse First Boston.

KeyCorp's weak performance, particularly in investment banking, shows the hazards banks face when they focus on building fee income rather than lending to middle-market companies. Investment banking income dropped 33% from the second quarter to the third, to $77 million.

The banking company, the nation's 11th-largest, earned $489 million in noninterest income during the third quarter, up 25% from a year earlier. However that figure was down 9% from this year's second quarter.

Robert W. Gillespie, KeyCorp's chairman and chief executive officer, attributed the decline to "less favorable conditions in the financial markets that we serve. …

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