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WIKI ANALYSIS
KeyCorp (NYSE: KEY) is a regional bank with outlets throughout the northern United States. Under the name KeyBank, KeyCorp operates 985 banking branches in 14 northern US states.[1]
Business Overview
Business Segments[2]
KeyCorp operates in two main segments: "Community Banking" and "National Banking."
- Community Banking (55.8% of total revenue): Community banking consists mainly of the company's savings-and-loan business, earning money off the interest paid on loans by individual customers and small to mid-size businesses.[3]
- National Banking (42.3% of total revenue): National banking consists of the company's investment banking business and its financing operations for large companies and lenders, earning money off of interest paid on loans and fees for financing and cash management services.[3]
Business & Financial Metrics[2]
In 2009, KEY incurred a net loss of $1.29 billion on revenues of $4.44 billion. This represents a 0.61% decrease in net loss on a 19.7% increase in total revenue from 2008.
Trends & Forces
KeyCorp is Highly Exposed to Commercial Real Estate Construction Loans and Other Credit Risk
A number of KeyCorp's products expose it to credit risk, including loans, leases and lending commitments, derivatives, trading account assets and assets held-for-sale. When one of these products is judged to be noncollectable, the company must write down the product's value and record a loss, lowering net income. Although KeyCorp limited exposure to subprime borrowers by selling its subprime portfolio in 2006,[4] it is affected by the secondary effects of falling house prices and decreased demand for new home construction. When housing prices fall, homeowners with home equity loans find themselves with more in loans than their house is worth. Similarly, developers find themselves building projects that may be worth far less than the cost to build them.
KeyCorp Relies On Growth Through Acquisitions of Traditional Banks and Loan Servicing Companies
KeyCorp has focused its geographic growth through acquisitions of traditional savings and loans banks outside its 14 state footprint. In order to maintain revenue growth in its Community Banking Segment, KeyCorp must acquire other regional banks outside of its current geographic footprint. Additionally, the company has expanded its financial service offerings through the acquisitions of several mortgage servicing companies and a college tuition servicing company.[5] Through these acquisitions, KeyCorp hopes to earn more non-interest revenue, decreasing its exposure to credit risk. Because loan service companies earn income through fees instead of an interest rate spread, they provide income even during times of low interest rates.
Competition
KeyCorp is the 17th largest bank holding company by domestic deposits.[6] The company faces competition for deposits from both national banks and regional banks in the northern United States.
Regional Competitors
- National City (NCC) is the 11th largest bank holding company by domestic deposits.[6] With 1400 retail banking branches in 9 states, National City and KeyCorp intersect in Ohio, Indiana, Kentucky, and Michigan.[7] Addtionally, National City has a larger percentage of its loans in mortgages, and operates 410 retail mortgage outlets throughout the United States.[7]
- U.S. Bancorp (USB) is the 7th largest bank holding company by domestic deposits.[6] With 2518 retail banking branches in 24 states, U.S. Bancorp and KeyCorp intersect in Colorado, Indiana, Idaho, Kentucky, Ohio, Oregon, Utah, and Washington.[8]
NCC was acquired by PNC in October 2008 for $5.6 billion. PNC is now a formidable competitor to Key Corp in overlapping markets.
National Competitors
- Bank of America (BAC) is the largest bank holding company by domestic deposits.[9] With 6100 retail banking branches in 32 states, Bank of America and KeyCorp intersect in Idaho, Maine, Michigan, New York, Oregon, and Washington.[10] Bank of America also operates in 30 foreign countries.[10]
- J P Morgan Chase (JPM) is the second largest bank holding company by domestic deposits.[9] With 3100 retail banking branches in 17 states, JP Morgan Chase and Keycorp intersect in Colorado, Indiana, Kentucky, Michigan, New York, Ohio, Utah.[11][10]
References
- ↑
- ↑ 2.0 2.1 KEY 2009 10-K pg. Ex. 13 22
- ↑ 3.0 3.1 KEY 2007 10-K, Exhibit 13 pg. 75
- ↑ KEY 2007 10-K, Exhibit 13 pg. 37
- ↑
- ↑ 6.0 6.1 6.2 Top 50 Bank Holding Companies by Total Domestic Deposits.
- ↑ 7.0 7.1 National City Corp.
- ↑ U.S.Bancorp.
- ↑ 9.0 9.1
- ↑ 10.0 10.1 10.2 Bank of America.
- ↑ JP Morgan Chase.
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