KeyCorp Q3 2026 EPS Rises 24% on NII and Fee Growth

KeyCorp (NYSE: KEY) reported stronger third-quarter 2026 earnings as higher net interest income, commercial loan growth and investment banking fees lifted revenue, while credit metrics improved from the prior quarter. Diluted earnings per share from continuing operations rose 24% year over year and 16% sequentially to $0.51.

GAAP revenue reached a record $2.04 billion, up 8% from a year earlier. On a taxable-equivalent basis, a non-GAAP measure, revenue was $2.05 billion, rising 4% sequentially and 8% year over year. Net income attributable to common shareholders was $537 million, compared with $473 million in the second quarter and $453 million a year earlier.

Return on average tangible common equity, a non-GAAP measure, increased to 15.1% from 12.9% in the preceding quarter and 12.5% a year earlier. The cash efficiency ratio improved to 60.6%, down 129 basis points sequentially and 154 basis points year over year.

Net interest income benefits from loan growth and repricing

Taxable-equivalent net interest income rose 4% from the second quarter and 10% year over year to $1.31 billion. The net interest margin expanded to 2.95%, up 6 basis points sequentially and 20 basis points from the prior-year period. KeyCorp attributed the sequential increase in net interest income primarily to loan growth, funding optimization and securities and swap repricing.

Average loans increased by $1.5 billion, or 1.4%, from the second quarter to $111.6 billion. Average commercial and industrial loans grew 3.7%, partially offset by a 2% decline in consumer loans as KeyCorp continued the intentional runoff of lower-yielding balances. Period-end C&I loans increased 5% sequentially, and C&I line utilization rose by about 200 basis points to 33.1%, which the company said reflected clients investing in their businesses.

Average deposits grew by $3.6 billion, or 2.4%, to $151.2 billion. Growth included a 2.9% increase in demand deposits, a 2.7% rise in money market deposits and a 1.6% increase in noninterest-bearing deposits. Client deposits were up 1.9% sequentially and 1.6% year over year. Total deposit costs increased by 3 basis points, with interest-bearing deposit costs also rising 3 basis points to 2.04%. The period-end loan-to-deposit ratio was 74%.

Investment banking leads fee-income growth

Noninterest income increased 5% sequentially and 6% year over year to $744 million. Investment banking and debt placement fees rose 27% from the second quarter and 16% from a year earlier to $214 million, supported by higher merger-and-acquisition fees and syndications.

Trust and investment services income increased 4% sequentially and 10% year over year to $165 million. Cards and payments income declined 1% from the prior quarter but rose 8% year over year to $93 million. Collectively, KeyCorp’s priority fee businesses—wealth management, investment banking and commercial payments—grew 12% from the third quarter of 2025.

Noninterest expense was $1.25 billion, up 2% sequentially and 6% on a reported year-over-year basis. Excluding a selected item in the prior-year quarter, expenses increased 5%. Personnel expense rose 10% year over year to $815 million, reflecting investments in frontline bankers, employee benefits and incentive compensation. Computer-processing costs increased 10% to $116 million as the company continued investing in technology.

Credit measures improve, capital ratios decline

Net charge-offs fell to $89 million, or 32 basis points of average loans, down 10 basis points both sequentially and year over year. The provision for credit losses declined 34% from the second quarter and 43% from a year earlier to $61 million, including a $28 million reserve release.

Nonperforming assets declined to $627 million from $818 million in the second quarter. The ratio of nonperforming assets to loans plus other real estate owned fell 19 basis points sequentially to 0.55%. Criticized assets increased to $5.55 billion from $5.40 billion, though the criticized-asset ratio remained at 4.9%. The allowance for credit losses decreased to $1.69 billion, equivalent to 1.50% of period-end loans.

KeyCorp’s estimated Common Equity Tier 1 ratio was 11.1% at September 30, down about 10 basis points sequentially and 70 basis points year over year. Its marked CET1 ratio, a non-GAAP measure incorporating accumulated other comprehensive income effects from securities and pensions, declined to 9.0% from 9.8% in the second quarter. Tangible book value per common share fell 9% sequentially and 8% year over year to $12.35.

The company repurchased $320 million of common stock during the quarter at an average price of $22.57 per share and expects total 2026 repurchases of $1.3 billion.

2026 outlook emphasizes revenue and commercial loan growth

For full-year 2026, KeyCorp expects operating revenue to increase about 8% from its 2025 baseline and taxable-equivalent net interest income to rise about 10%. The previous net interest income range was growth of 9% to 11%. Management expects a fourth-quarter net interest margin exit rate of approximately 3.00%.

Average loans are now expected to grow about 5%, compared with the previous 4% to 5% range, while average commercial loans are expected to rise about 10%, versus the earlier 8% to 10% range. The company projects noninterest income growth of 4% to 5% and adjusted noninterest expense growth of about 4%.

KeyCorp expects full-year net charge-offs of 37 to 39 basis points of average loans, compared with its previous range of 40 to 45 basis points. The outlook consists of forward-looking estimates based on assumptions subject to risks and uncertainties, and the company cautioned that actual results could differ materially from its projections.