KeyCorp (NYSE: KEY) stock rose 2.07% after the company reported better than expected results for the second quarter 2018 driven by overall growth and momentum in the commercial and consumer businesses. Continued loan growth, higher fees, and expense discipline has resulted in positive operating leverage for the second quarter. KEY’s cash efficiency ratio improved to 58.8% and the return on tangible common equity was 16.7%. Across the franchise, KEY benefitted from efforts to do more for the new and existing clients, while also increasing the productivity and efficiency of the businesses.
KEY in the second quarter of FY 18 has reported the adjusted earnings per share of 44 cents, beating the analysts’ estimates for the adjusted earnings per share of 42 cents. The company had reported the adjusted revenue growth of 0.4 percent to $1.65 billion in the second quarter of FY 18, beating the analysts’ estimates for revenue of $1.59 billion.
Moreover, Key’s capital position is strong in the second quarter. At June 30, 2018, Key’s estimated Common Equity Tier 1 and Tier 1 risk-based capital ratios stood at 10.12% and 10.94%, respectively. Key’s tangible common equity ratio is 8.32% at June 30, 2018.
Additionally, during the second quarter 2018, average loans were $88.6 billion, which is a rise of $2.1 billion compared to the second quarter of 2017, due to broad-based growth in commercial and industrial loans, partially offset by a decline in commercial real estate balances related to higher paydowns. Average deposits had totaled $104 billion for the second quarter of 2018, which is a rise of $1.2 billion compared to the year-ago quarter, due to a shift to higher-yielding deposit products, as well as strength in Key’s retail banking franchise and growth from commercial relationships. However, the growth was partially offset by the managed exit of certain higher cost corporate and public sector deposits.
As per Key’s 2017 Capital Plan, during the second quarter of 2018, Key has declared a dividend of $.12 per common share, and completed $126 million of common share repurchases during the second quarter. These repurchases had included $123 million of common share repurchases in the open market and $3 million of share repurchases related to employee equity compensation programs. Key’s 2018 Capital Plan has received no objection from the Federal Reserve. This plan includes a 42% increase in the quarterly common share dividend from $0.12 per share to $0.17 per share, which is payable in the third quarter of 2018. Also included in the plan is a common share repurchase program of up to $1.225 billion. This authorization includes repurchases to offset issuances of common shares under the employee compensation plans. Repurchases are expected to be executed over the next four quarters.