# Key (KEY) Financial Model Free Excel 3-statement financial model and company analysis for Key. - Canonical: https://finamodel.com/companies/key - Industry: Banking - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/KEY.xlsx ## Model Purpose This model provides a comprehensive equity valuation and capital adequacy assessment for KeyCorp, enabling an equity research analyst to forecast Net Interest Margin expansion, evaluate the earnings accretion from the recent Scotiabank strategic investment, and determine the intrinsic value of the bank's shares using a Dividend Discount Model. ## Company Overview KeyCorp is a premier United States regional bank holding company headquartered in Cleveland, Ohio, operating primarily through its principal subsidiary, KeyBank National Association. The company provides a wide range of retail and commercial banking, investment management, consumer finance, and investment banking products to individual, corporate, and institutional clients. Business segments include: * **Commercial Bank** (approx. 60% of revenue): Serves middle-market clients and large corporate institutions with lending, equipment financing, treasury management, and capital markets products (KeyBanc Capital Markets). * **Consumer Bank** (approx. 40% of revenue): Serves individuals and small businesses with deposit products, residential mortgages, home equity, student loan refinancing (Laurel Road), and wealth management services. KeyCorp operates across 15 states, primarily in the Midwest, Northeast, and Pacific Northwest, with approximately 1,000 branches. The business model is a traditional spread-based banking operation complemented by a robust fee-based capital markets and wealth management franchise. A major recent event was the 2024 strategic investment by Scotiabank, which acquired a 14.9% equity stake for approximately $2.8 billion. KeyCorp utilised these proceeds to restructure its bond portfolio, selling low-yielding securities and reinvesting at higher rates to accelerate Net Interest Income growth. In early 2026, Scotiabank announced plans to increase its stake to 19.99%. ## Revenue Deep Dive For a regional bank, revenue is split into Net Interest Income (NII) and Noninterest Income. ### Net Interest Income (Taxable Equivalent) * **Segment name:** Net Interest Income * **Revenue driver formula:** Average Earning Assets x Net Interest Margin (NIM) * **Historical growth rate:** Highly cyclical; grew approximately 8-10% in 2025 following a period of compression in 2023. * **Key growth levers and headwinds:** Driven by loan growth, deposit beta management, and the yield curve. The recent bond portfolio restructuring serves as a major tailwind, pushing NIM from the mid-2.00% range in 2023 toward a target of 3.00% or higher in 2026. * **Pricing dynamics:** Highly sensitive to US Federal Reserve interest rate policy. Commercial loans are largely floating rate, while consumer loans and the securities portfolio are a mix of fixed and floating. * **Seasonality:** Generally not seasonal, but day-count conventions make the first quarter slightly lower due to fewer days. ### Noninterest Income * **Segment name:** Noninterest Income * **Revenue driver formula:** (Assets Under Management x Fee Rate) + (Investment Banking Deal Volume x Take Rate) + (Deposit Accounts x Service Fees) * **Historical growth rate:** 3-5% CAGR. * **Key growth levers and headwinds:** Investment banking and debt placement fees are the largest swing factor, heavily dependent on capital markets activity. Wealth management fees grow steadily with market appreciation and net inflows. * **Pricing dynamics:** Highly competitive for wealth management; investment banking fees are transactional and market-driven. * **Seasonality:** Investment banking revenues often peak in the fourth quarter. ## Cost Structure ### Interest Expense * **Line-by-line breakdown:** Interest on deposits, interest on short-term borrowings, and interest on long-term debt. * **Margin range:** Cost of total deposits peaked around 1.97% in mid-2024 and declined to approximately 1.81% by late 2025. * **Key input costs:** Federal Funds rate and competitive deposit pricing pressure. ### Provision for Credit Losses * **Line-by-line breakdown:** Net charge-offs plus the change in the allowance for credit losses. * **Margin range:** Net charge-offs typically run at 0.25% to 0.40% of average loans (0.39% in Q4 2025). * **Key input costs:** Macroeconomic forecasts, commercial real estate valuations, and consumer credit health. ### Noninterest Expense * **Personnel:** The largest component, driven by headcount (approx. 17,200 FTEs) and variable compensation tied to capital markets revenue. * **Technology and Operations:** KeyCorp is investing heavily here, with technology spend reaching approximately $900 million in 2025. * **Efficiency Ratio:** Total Noninterest Expense / Total Revenue. Historically ranges between 60% and 65%. The bank targets positive operating leverage to drive this ratio down. ## Balance Sheet Structure * **Total assets:** Approximately $187 billion to $190 billion. * **Key asset categories:** * Loans and Leases (approx. $110 billion): Primarily Commercial and Industrial (C&I) and Commercial Real Estate (CRE). * Investment Securities (approx. $45 billion): Mostly agency mortgage-backed securities and US Treasuries. * Cash and Short-Term Investments. * **Working capital profile:** Not applicable for a bank. Liquidity is measured by the Loan-to-Deposit ratio (LDR), which typically runs between 75% and 80% (Loans of $110 billion vs Deposits of $145 billion). * **Goodwill & intangibles:** Modest, stemming from historical acquisitions like First Niagara. * **PP&E:** Minimal, consisting of branch real estate and capitalized software. ## Capital Expenditure & Investment * **Capex as % of revenue:** Traditional capex is low, but capitalized software and technology investments are significant. * **Maintenance capex vs. growth capex:** The $900 million annual technology budget is split between running the bank (maintenance) and changing the bank (digital platforms, Laurel Road enhancements). * **M&A pattern:** Historically a bolt-on acquirer, but currently focused on organic growth and integrating the Scotiabank capital injection. * **Strategic Investments:** The Scotiabank transaction injected $2.8 billion in fresh equity, fundamentally altering the bank's capital trajectory and allowing for the absorption of losses on the sale of underwater bonds. ## Debt & Capital Structure * **Total debt:** Long-term debt fluctuates around $15 billion to $20 billion, primarily senior and subordinated notes used for holding company liquidity and regulatory requirements (TLAC/debt requirements). * **Capital Ratios:** * Common Equity Tier 1 (CET1) ratio: 11.8% as of late 2025 (significantly boosted by the Scotiabank investment). * Target CET1: Management targets a robust buffer above regulatory minimums. * **Credit rating:** Investment grade (typically BBB+ to A- range depending on the agency). * **Share repurchase programme:** Reactivated following the Scotiabank investment and bond restructuring, providing a major support for EPS growth. * **Dividend policy:** KeyCorp maintains a strong dividend, yielding approximately 4.0% to 4.5%, with a payout ratio typically targeted between 35% and 45% of earnings. ## Cash Flow Characteristics * **Operating cash flow conversion:** Standard corporate cash flow metrics do not apply to banks. * **Capital Generation:** The primary cash flow metric is internal capital generation (Net Income less Dividends). * **Free Cash Flow to Equity (FCFE):** Calculated as Net Income minus the increase in required regulatory capital. This is the cash available to be returned to shareholders via dividends and buybacks. * **Cash tax rate:** Generally aligns closely with the statutory rate, adjusted for tax-exempt municipal bond income and low-income housing tax credits. ## Sheet Structure 1. **Assumptions**: Hardcoded macroeconomic drivers (interest rates), loan growth rates, deposit betas, fee income growth, and capital return targets. 2. **Summary**: Dashboard displaying EPS, Return on Tangible Common Equity (ROTCE), Net Interest Margin, Efficiency Ratio, and CET1 ratio. 3. **Average Balance Sheet**: Detailed projection of average earning assets (by loan and security type) and average interest-bearing liabilities (by deposit type and borrowing). 4. **Net Interest Income**: Calculation of interest income and interest expense by multiplying balances from Sheet 3 by projected yields and costs. 5. **Noninterest Income & Expense**: Line-item projections for trust and investment services, investment banking, card fees, personnel, and technology expenses. 6. **Asset Quality**: Roll-forward of the Allowance for Credit Losses (ACL), projecting net charge-offs and provision expense based on macroeconomic scenarios. 7. **Income Statement**: Consolidated P&L pulling from Sheets 4, 5, and 6. 8. **Period-End Balance Sheet**: Actual period-end balances, reconciling retained earnings and Accumulated Other Comprehensive Income (AOCI). 9. **Capital & RWA**: Calculation of Risk-Weighted Assets, Tier 1 Capital, and the CET1 ratio, incorporating the Scotiabank share issuances. 10. **Valuation**: Dividend Discount Model (DDM) and Price/Tangible Book Value (P/TBV) regression analysis. ## Key Financial Relationships 1. "Net Interest Income = (Average Earning Assets x Earning Asset Yield) - (Average Interest-Bearing Liabilities x Cost of Funds)" 2. "Net Interest Margin = Net Interest Income (Taxable Equivalent) / Average Earning Assets" 3. "Total Revenue = Net Interest Income + Noninterest Income" 4. "Efficiency Ratio = Noninterest Expense / Total Revenue" 5. "Allowance for Credit Losses (Ending) = Allowance for Credit Losses (Beginning) + Provision for Credit Losses - Net Charge-Offs" 6. "Net Charge-Off Rate = Annualised Net Charge-Offs / Average Total Loans" 7. "Return on Tangible Common Equity (ROTCE) = (Net Income - Preferred Dividends + Intangible Amortisation) / Average Tangible Common Equity" 8. "Tangible Book Value per Share = (Total Equity - Preferred Stock - Goodwill and Intangibles) / Period-End Shares Outstanding" 9. "CET1 Capital = Total Equity - Preferred Stock - Goodwill and Intangibles +/- AOCI Opt-Out Adjustments" 10. "CET1 Ratio = CET1 Capital / Risk-Weighted Assets" 11. "Loan-to-Deposit Ratio = Period-End Total Loans / Period-End Total Deposits" 12. "Earnings Per Share = (Net Income - Preferred Dividends) / Weighted Average Diluted Shares Outstanding" ## Cross-Sheet Dependencies The **Average Balance Sheet** is the foundational sheet. It feeds the **Net Interest Income** sheet to calculate spread revenues. The **Asset Quality** sheet relies on loan balances from the Average Balance Sheet to calculate charge-offs and provision expense. The **Income Statement** aggregates NII, Noninterest Income, Noninterest Expense, and Provision. Net Income from the Income Statement flows into the **Period-End Balance Sheet** via Retained Earnings. The Period-End Balance Sheet feeds the **Capital & RWA** sheet to determine capital adequacy. Finally, the Capital sheet dictates how much excess capital can be returned to shareholders via buybacks, which loops back to reduce the share count on the **Income Statement** (a deliberate circularity that requires an iterative calculation or a macro to resolve). ## Sign Convention * **Income Statement:** Revenues are positive. Expenses (including Provision for Credit Losses and Noninterest Expense) are positive. Net Income is calculated as Revenue minus Expenses. * **Balance Sheet:** Assets are positive. Liabilities and Equity are positive. Contra-assets (like the Allowance for Credit Losses) are positive but subtracted from Gross Loans to reach Net Loans. * **Asset Quality:** Net Charge-Offs and Provision are positive numbers. ## Things Most Likely to Go Wrong 1. "Failing to account for the Scotiabank share issuance inflates EPS; the model must increase the share count by approximately 163 million shares (14.9% stake) issued at $17.17." 2. "Ignoring the AOCI (Accumulated Other Comprehensive Income) impact on tangible book value; unrealised losses on the bond portfolio must be tracked, even if KeyCorp opts out of AOCI for regulatory capital purposes." 3. "Miscalculating Taxable Equivalent (TE) adjustments; NII is often reported on a TE basis to account for tax-exempt municipal bonds, requiring a gross-up in revenue and a corresponding increase in tax expense." 4. "Confusing Net Charge-Offs with Provision Expense; charge-offs reduce the allowance, while provision is the income statement expense that replenishes it." 5. "Applying standard corporate DCF valuation; banks must be valued using a Dividend Discount Model (DDM) or Residual Income Model because cash flows cannot be separated from regulatory capital requirements." 6. "Overestimating deposit betas in a falling rate environment; deposit costs do not fall as quickly as asset yields reprice, temporarily compressing NIM." 7. "Double-counting the bond portfolio restructuring; the historical 2024/2025 financials include massive one-time losses on bond sales that must be excluded from core run-rate earnings." 8. "Misaligning average balances with period-end balances; interest income is driven by average balances, while capital ratios are driven by period-end balances." ## Validation Checks 1. "Net Interest Margin should be in the 2.80% to 3.10% range; flag if outside this band." 2. "Loan-to-Deposit ratio should remain between 75% and 85% based on historical liquidity management." 3. "CET1 ratio must remain above 10.0%; flag if capital falls below management's target buffer." 4. "Efficiency ratio should trend between 60% and 65%; flag if expenses grow significantly faster than revenue." 5. "Net Charge-Off rate should be between 0.25% and 0.50% in a normalized environment." 6. "Balance sheet must balance: Total Assets = Total Liabilities + Total Equity in every period." 7. "Effective tax rate should be 18% to 20%, reflecting the benefit of tax-exempt investments." 8. "Dividend payout ratio should remain within 35% to 45% of net income to common shareholders." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Commercial Loan Growth | 3.0 | % | Modest growth reflecting middle-market demand and tighter credit standards. | | Consumer Loan Growth | 2.0 | % | Subdued mortgage and auto origination in a higher rate environment. | | Deposit Growth | 1.5 | % | Reflects stabilization of commercial deposits and retail retention. | | Net Interest Margin (NIM) | 2.95 | % | Reflects the benefit of the 2024/2025 bond portfolio restructuring. | | Noninterest Income Growth | 4.0 | % | Driven by recovery in investment banking and steady wealth management fees. | | Noninterest Expense Growth | 3.5 | % | Reflects continued $900M tech spend offset by branch optimization. | | Net Charge-Off Rate | 0.39 | % | Aligns with Q4 2025 actuals and normalized credit environment. | | Effective Tax Rate | 19.0 | % | Historical average accounting for tax-exempt municipal income. | | Dividend per Share | 0.82 | $ | Annualised based on recent quarterly declarations. | | Scotiabank Issue Price | 17.17 | $ | Actual price paid per share for the 14.9% stake. | | Target CET1 Ratio | 10.5 | % | Management's stated operating target, providing a buffer over regulatory minimums. | | Cost of Equity (Ke) | 10.5 | % | Standard assumption for regional banks given current risk-free rates and beta. | | Terminal Growth Rate | 2.0 | % | Long-term macroeconomic growth proxy for the DDM terminal value. | ## Data Sources & Benchmarks * **Filings:** KeyCorp Investor Relations website (investor.key.com), SEC EDGAR (Form 10-K, 10-Q, 8-K). * **Key Peers for Benchmarking:** Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), Citizens Financial Group (CFG), M&T Bank (MTB). * **Industry Data Sources:** Federal Reserve H.8 data (Assets and Liabilities of Commercial Banks), FDIC Quarterly Banking Profile. * **Consensus Estimates:** FactSet or Bloomberg for forward EPS, NIM, and NII estimates. * **Proprietary Data:** Dealogic for investment banking league tables and deal volumes; S&P Global Market Intelligence for detailed bank-level regulatory data (Call Reports). ## Sources * KeyCorp Q4 2025 Earnings Release and Supplemental Presentation (January 20, 2026) * KeyCorp 2025 Annual Report on Form 10-K * Scotiabank Press Releases regarding KeyCorp Investment (August 2024, December 2024, March 2026) * Federal Reserve Board Approval Orders for Scotiabank Investment * FDIC Resolution Plan Public Section (KeyBank National Association) --- ## Frequently asked questions ### What kind of bank is KeyCorp and what services does it offer? KeyCorp is a premier United States regional bank holding company headquartered in Cleveland, Ohio, operating primarily through its principal subsidiary, KeyBank National Association. It provides a wide range of retail and commercial banking, investment management, consumer finance, and investment banking products to individual, corporate, and institutional clients across 15 states. ### How does KeyCorp generate its revenue? KeyCorp's revenue is primarily split into Net Interest Income (NII) from its traditional spread-based banking operations and Noninterest Income from its robust fee-based capital markets and wealth management franchise. The Commercial Bank segment contributes approximately 60% of revenue, while the Consumer Bank accounts for about 40%. ### What are the key assumptions for KeyCorp's financial model regarding revenue growth and capital expenditures? The financial model for KeyCorp assumes a revenue growth rate of approximately 0.12% and a Capex_Pct_Revenue of about 5.89%. While traditional capital expenditure is low for a bank, significant investments are made in capitalized software and technology, split between maintenance and growth initiatives. ### What valuation method is used in the KeyCorp financial model? The KeyCorp financial model uses a Dividend Discount Model to determine the intrinsic value of the bank's shares. This method is part of a comprehensive equity valuation and capital adequacy assessment provided by the model. ### Can I download an Excel financial model for KeyCorp, and what is its forecast horizon? Yes, an Excel financial model for KeyCorp is available for download, offering a comprehensive equity valuation and capital adequacy assessment. The model's forecast horizon extends from fiscal year 2026 through fiscal year 2030. ### What was the significance of Scotiabank's strategic investment in KeyCorp? The 2024 strategic investment by Scotiabank injected $2.8 billion in fresh equity into KeyCorp. This transaction fundamentally altered the bank's capital trajectory, enhancing its capital adequacy and allowing for the absorption of losses on the sale of underwater bonds. [Interactive forecast calculator](https://finamodel.com/companies/key/forecast)