KeyCorp (KEY)

Regional banking company KeyCorp (NYSE:KEY) announced better-than-expected revenue in Q3 CY2025, with sales up 177% year on year to $1.90 billion. Its non-GAAP profit of $0.41 per share was 7.6% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1849 during the California Gold Rush era, KeyCorp (NYSE:KEY) operates KeyBank, a full-service regional bank providing retail and commercial banking, wealth management, and investment services across 15 states.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

KeyCorp competes with other regional banks like Fifth Third Bancorp (NASDAQ:FITB), Huntington Bancshares (NASDAQ:HBAN), and Citizens Financial Group (NYSE:CFG), as well as larger national institutions including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Unfortunately, KeyCorp struggled to consistently increase demand as its $6.35 billion of revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. KeyCorp’s recent performance shows its demand remained suppressed as its revenue has declined by 3% annually over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, KeyCorp reported magnificent year-on-year revenue growth of 177%, and its $1.90 billion of revenue beat Wall Street’s estimates by 0.9%.

Net interest income made up 67.1% of the company’s total revenue during the last five years, meaning lending operations are KeyCorp’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, KeyCorp’s efficiency ratio has increased by 2.3 percentage points, going from 60.1% to 62.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, KeyCorp’s efficiency ratio was 61.8%, beating analysts’ expectations by 110.7 basis points (100 basis points = 1 percentage point). This result was 94.6 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects KeyCorp to maintain its trailing one-year ratio with a projection of 61.8%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

KeyCorp’s EPS grew at an unimpressive 4.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its flat revenue and tells us management responded to softer demand by adapting its cost structure.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For KeyCorp, its two-year annual EPS growth of 8.9% was higher than its five-year trend. This acceleration made it one of the faster-growing banking companies in recent history.

In Q3, KeyCorp reported adjusted EPS of $0.41, up from negative $0.47 in the same quarter last year. This print beat analysts’ estimates by 7.6%. Over the next 12 months, Wall Street expects KeyCorp’s full-year EPS of $1.47 to grow 13.4%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

KeyCorp’s TBVPS was flat over the last five years. However, TBVPS growth has accelerated recently, growing by 24.8% annually over the last two years from $8.59 to $13.38 per share.

Over the next 12 months, Consensus estimates call for KeyCorp’s TBVPS to grow by 4.6% to $13.99, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, KeyCorp has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, KeyCorp has averaged an ROE of 9.1%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for KeyCorp.

We enjoyed seeing KeyCorp beat analysts’ tangible book value per share expectations this quarter. We were also happy its net interest income narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $17.85 immediately after reporting.

Updated: December 4, 2025 at 11:21 PM EST

Are you wondering whether to buy KeyCorp or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

KeyCorp isn’t a terrible business, but it doesn’t pass our bar. First off, its revenue growth was weak over the last five years. And while its expanding net interest margin shows its loan book is becoming more profitable, the downside is its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal.. On top of that, its net interest income growth was weak over the last five years.

KeyCorp’s P/B ratio based on the next 12 months is 1.2x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $21.56 on the company (compared to the current share price of $19.06).