REFILE-KeyCorp Q2 profit rises on higher interest income and fees

By Atharva Singh

July 22 (Reuters) - KeyCorp KEY.N posted a 63% jump in its second-quarter profit on Tuesday, helped by increased interest income and a surge in investment banking fees.

Lower deposit costs at regional lenders in the U.S., which are falling faster than the returns on assets, have helped keep profit margins steady and boosted net interest income, even as loan demand remains uneven.

Net interest income — difference between earnings on loans and payments on deposits — jumped nearly 28% to $1.15 billion in the quarter.

KeyCorp expects its NII to grow roughly 20-22% in 2025 compared to analysts' expectation of a near 22% jump.

Peer lenders, including PNC Financial PNC.N and Citizens Financial CFG.N, posted higher quarterly profits last week, driven by improved fee income and stabilizing credit trends, though NII pressures remained in focus.

Recent rate cuts and easing bond yields have prompted some U.S. banks to cut losses on low-yielding investment securities and redeploy funds into higher-yielding assets to improve returns and liquidity.

KeyCorp used half of Scotiabank's capital injection last year to sell about $10 billion of its low-yield investments.

The banks' investment banking and debt placement fees jumped over 41% to $178 million.

"With 189 U.S. IPOs already priced this year, nearly double last year’s pace, fee income is shifting from rounding error to rescue rope for balance sheets," said Michael Ashley Schulman, partner at Running Point Capital Advisors.

"Capital-markets activity is no longer the lonely ATM in the lobby; KeyCorp and the regionals are hearing the ka-ching again," Schulman added.

KeyCorp was a joint book runner on Hinge Health's IPO in May 2025.

The Cleveland-based lender reported income from continuing operations of 35 cents per share, up from 25 cents per share, reported a year ago.

Shares of the bank were up marginally in premarket trading.