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KeyBank reports record revenue, predicts more loan growth

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Cleveland, Ohio – KeyBank reported record revenue for both the year and the fourth quarter on Thursday, beating analyst expectations.

The Cleveland-based bank reported $7.29 billion in annual revenue, up from $6.72 billion for 2020. Net income was $2.63 billion, up from $1.34 billion in 2020. The company said annual revenue was a record.

Fourth-quarter revenue was $1.95 billion, up from $1.85 billion in the fourth quarter of 2020.

Fourth-quarter earnings per share came in at 64 cents, beating analysts’ expectations of 56 cents, according to stock market analysis website Seeking Alpha.

CEO Chris Gorman said on a call with investors Thursday morning that there is strong momentum — in both consumer and business loans.

Gorman said the company is also seeing growth among people under the age of 30, and its digital banking brand, Laurel Road, is doing well. The company is also seeing growth from its investment banking business and the fees generated by it, said Don Kimball, vice chairman and chief financial officer.

Key has benefited from fewer bad loans and less bad credit, likely because consumers saved more money from the COVID-19-related stimulus. Non-performing loans, which are loans that are unlikely to be repaid in full, are down 42% compared to this time last year. Net discounts, which are outstanding debts that are unlikely to be recovered, are now less than a tenth of a percent of average loans.

Both types of bad loans are a small part of the bank’s portfolio.

Gorman said the bank expects consumer trends to return to normal in 2022 or later, with lag rates returning to normal. Right now, the bank has $5 billion more in consumer deposits than it did in the pre-pandemic period, showing that consumers are still pouring cash.

He said the bank also expects to increase commercial loans. Currently, companies use 27% of the credit allocated to them, and historically they use about 35%, he said. Gorman said he expects companies to use more credit as supply chain problems ease, and he predicted they will fill up from inventory when possible.

KeyBank is also targeting renewable energy and affordable housing as areas for more business loans.

In its guidance for 2022, the company said it expects loan growth in low double digits, excluding the impact of paycheck protection loans being forgiven.

The bank expects deposits to rise by about 1% to 3%. Income is also expected to grow at a slow and steady rate.

KeyBank, like many other companies, is seeing increases in expenses due to higher wages. Gorman said the starting salary is 40 percent higher than it was five years ago on average, and the company has 10 percent more senior bankers than it did last year.

When asked by an analyst, Gorman said KeyBank will continue to invest dividends in the company, rather than just increasing profits.

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