KeyCorp(NYSE: KEY) stock lost over 2.8% on Jan 18th, 2018 post their lower than expected fourth quarter of 2017 performance. The group faced a major item in the fourth quarter from the Tax Cuts and Jobs Act that was passed in December leading to number of actions including the revaluation of deferred tax assets and liabilities as well as certain tax-advantaged assets. The revaluation led to a further tax expense of $147 million recognized in the fourth quarter.
They reported $11.5 billion of commercial mortgage loans placing them the market including $4 billion in the fourth quarter. Moreover, average commercial loans fell during the quarter on the back of lower line utilization. This led to fall in commercial balances by $540 million during the quarter. On a period-end basis, commercial industrial loans enhanced $712 million with much of the growth occurring late in December. Year-over-year loan growth was boosted by commercial and industrial loans which rose 4.5%.
Moreover, the group forecasts their first quarter performance to be lower than the fourth quarter run rate on the back of the normal seasonality and a return to more normal levels of investment banking and debt placement fees from a record performance in the fourth quarter.
The group is also revising their cash efficiency ratio target to 54% to 56% and aiming a return on tangible common equity target to a range of 15% to 18%. For 2017, they delivered a $400 million in annual run-rate cost savings from the merger, with another $50 million expected to be realized early this year.
The group’s cash efficiency ratio for the year enhanced 410 basis points to 60.2%, against the pcp. They generated a revenue synergies which continued to offer a major upside over the next several years, and boosted return on tangible common equity to 13.1% for the year, which is over 280 basis points rise against last year.
Since the last five years, they bought over $2.2 billion in common shares and compounded annual growth rate for the dividend has been 14%. For fourth quarter, they enhanced common share dividend for the second time in 2017 to $0.105 per common share.
Going forward, they forecast 2018 to be another good year for their customers and is well-positioned to continue to grow and deliver returns to our shareholders.