KeyCorp’s Corporate Bank Segment Shows Growth
KeyCorp’s (KEY) Corporate Bank segment primarily focuses on middle-market clients. It offers banking and capital market products, including syndicated finance, debt and equity capital markets, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance. The segment contributes ~40% to KeyCorp’s total revenues.
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The Corporate Bank segment offers services to clients in consumer, energy, healthcare, industrial, public sector, real estate, and technology sectors. KeyCorp forms ~3.1% of the iShares U.S. Regional Banks ETF (IAT).
Other regional peers such as U.S. Bancorp (USB) and PNC Financial Services (PNC) also offer all the services offered by KeyCorp’s Corporate Bank segment. Big banks such as Bank of America (BAC) also offer all the corporate banking services, but they typically target bigger clients. The banking sector forms ~37% of the Financial Select Sector SPDR ETF (XLF).
Non-interest income contributes about 49% to the Corporate Bank segment’s total operating income. The non-interest income is diversified with the highest contribution from trust and investment services. The above chart provides a breakdown of the segment’s non-interest income.
Growth in the segment’s income
Both interest and non-interest income for KeyCorp’s Corporate Bank segment increased in 2014 compared to the previous year. Interest income increased since the increase in asset balances more than offset the decrease in spread.
Investment banking and debt placement fees, corporate services income, and trust and investment services income increased. These drove the growth in non-interest income during 2014. The above graph shows the segment’s net interest, non-interest, and net income over the last three years.
Provisions and charge-offs decreased due to improvements in asset quality. The Corporate Bank segment’s net income increased in 2014 compared to 2013.