KEY Q4 Earnings Beat as NII Jumps, Stock Down on Rise in Provisions

KeyCorp’s KEY fourth-quarter 2025 adjusted earnings per share from continuing operations of 41 cents outpaced the Zacks Consensus Estimate of 38 cents. The bottom line reflected a 7.9% rise from the prior-year quarter.Shares of KeyCorp lost more than 2% in the early-market trading despite better-than-expected results. Bearish broader market trends and a substantial surge in provisions seem to be hurting investor sentiment, thus driving the company's stock lower.Quarterly results primarily benefited from higher net interest income (NII) and non-interest income. The rise in average loans and deposit balances was another positive. However, higher expenses and a jump in provisions were the undermining factors.Results excluded non-recurring items. Including these, net income from continuing operations attributable to common shareholders was $474 million or 43 cents per share against a net loss of $279 million or 28 cents per share in the prior-year quarter.For 2025, adjusted earnings from continuing operations were $1.50 per share, which beat the consensus estimate of $1.48 and grew 29.3% year over year. Net income from continuing operations attributable to common shareholders (GAAP) was $1.69 billion or $1.52 per share against a net loss of $306 million or 32 cents per share in 2024.KEY’s Revenues Improve, Expenses RiseTotal revenues (taxable-equivalent or TE) increased 12.5% year over year to $2 billion. Also, the top line beat the Zacks Consensus Estimate of $1.94 billion.For 2025, total revenues (TE) were $7.51 billion, up 16.4% from the prior year. The top line surpassed the consensus estimate of $7.43 billion.NII (TE basis) jumped 15.3% from the prior-year quarter to $1.22 billion. The net interest margin (NIM) (TE basis) from continuing operations expanded 41 basis points (bps) to 2.82%. Both metrics benefited from lower deposit costs, the reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, and the repositioning of the available-for-sale portfolio during the fourth quarter of 2024. These were partly offset by the impact of lower interest rates on variable-rate earning assets. Adjusted non-interest income was $782 million, up 8.3%. The rise was mainly driven by higher investment banking and debt placement fees, corporate services income and trust and investment services income.Non-interest expenses increased almost 1% to $1.24 billion. The rise was due to an increase in almost all cost components except for operating lease expenses, marketing and other expenses. Adjusted expenses rose 2.4% to $1.26 billion.At the end of the fourth quarter, average total loans were $106.32 billion, up marginally from the previous quarter. Average total deposits were $150.71 billion, up slightly.KEY’s Credit Quality: A Mixed BagThe provision for credit losses was $108 million, significantly up from $39 million in the prior-year quarter. The allowance for loan and lease losses was $1.43 billion, up 1.3%.However, net loan charge-offs, as a percentage of average total loans, declined 4 bps year over year to 0.39%. Also, non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets, and other non-performing assets, were 0.59%, down 15 bps.KeyCorp’s Capital Ratios StrongKEY's tangible common equity to tangible assets ratio was 8.4% as of Dec. 31, 2025, up from 7% in the corresponding period of 2024. The Tier 1 risk-based capital ratio was 13.4%, down from 13.7%. The Common Equity Tier 1 ratio was 11.7%, down from 11.9% as of Dec. 31, 2024.Update on KEY’s Share RepurchasesDuring the reported quarter, KeyCorp repurchased shares worth $200 million.Our Take on KEYDecent loan balances, balance sheet repositioning efforts, strategic buyouts and stabilizing funding costs will likely support KeyCorp’s revenues in the near term. Weak asset quality amid a tough macroeconomic backdrop is concerning. KeyCorp Price, Consensus and EPS Surprise KeyCorp price-consensus-eps-surprise-chart | KeyCorp QuoteKeyCorp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance of KeyCorp’s PeersM&T Bank Corporation MTB reported fourth-quarter 2025 net operating earnings per share of $4.72, which beat the Zacks Consensus Estimate of $4.44. The bottom line compared favorably with earnings of $3.92 per share in the year-ago quarter.Results were aided by higher non-interest income and NII, along with modest loan growth and higher deposits. A decline in provisions for credit losses was also a tailwind. However, an increase in expenses acted as a headwind for M&T Bank.The PNC Financial Services Group, Inc.’s PNC fourth-quarter 2025 earnings per share of $4.88 surpassed the Zacks Consensus Estimate of $4.23. In the prior-year quarter, the company reported earnings of $3.77.Results have been aided by record revenue growth, driven by a higher NII and fee income. Rising loan and deposit balances, along with a decline in provisions for credit losses, were other positives for PNC Financial. However, an increase in expenses acted as a spoilsport.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report M&T Bank Corporation (MTB): Free Stock Analysis Report KeyCorp (KEY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks