KeyCorp’s Valuation Is Close to Industry Average
KeyCorp’s valuation looks slightly overvalued compared to KBE. However, it’s undervalued compared to KRE, the regional banking ETF.
KeyCorp is a large regional bank with about $94 billion in assets. It competes with JP Morgan (JPM) and Bank of America (BAC) in various service segments.
KeyCorp (KEY) is represented in key ETFs focused on the banking sector. The SPDR S&P Bank ETF (KBE) has KeyCorp comprising ~1.7% of its portfolio.
Capital payout ratio is dividends plus share repurchases divided by adjusted net income available to shareholders. KeyCorp’s at 82% is one of the highest.
KeyCorp’s net interest margin (or NIM) is marginally lower than the peer average. NIM determines how effectively a bank is using its earning assets.
KeyCorp’s deposit growth at a CAGR (compound annual growth rate) was 3.5% since 2010. This is lower than the industry average.
Higher nonperforming loans (or NPLs) indicate poor asset quality. KeyCorp’s nonperforming loans to end-of-period loans ratio is 0.73.
Commercial loans account for 72% of KeyCorp’s loan portfolio. KeyCorp’s two largest industry exposures for commercial loans are services and manufacturing.
Interest and non-interest income for the Corporate Bank segment increased in 2014 since an increase in asset balances more than offset the decrease in spread.
Community Bank is the largest segment at KeyCorp. It provides services to individuals and small to medium businesses. It has a branch network in 12 states.
SunTrust Bank (STI) paid common dividends totaling $371 million or $0.70 per share in 2014.
This article focuses on SunTrust’s Consumer Banking and Private Wealth Management segment.
The Wholesale Banking segment’s net interest income increased in 2014 compared to 2013.
SunTrust’s Mortgage Banking segment reported a net loss of $56 million for 2014 compared to a net loss of $527 million for 2013.
The loan portfolio of SunTrust Bank (STI) has three segments: commercial, residential, and consumer.
Since 2010, the loan portfolio of SunTrust Bank (STI) has had a compound annual growth rate (or CAGR) of 3.5%. Commercial loans have had a CAGR of 8.2%.
The asset quality of SunTrust Bank’s loan portfolio is improving, partly because of positive changes in the economy and the residential housing market.
STI’s deposit growth is clearly lagging behind the industry average. Other banks are experiencing strong growth in this area.
SunTrust Bank’s net interest income in 2014 remained stable compared to 2013 as strong loan growth offset the decline in net interest margin.
The average loan-to-deposit ratio for regional banks is currently 85%–90%. The ratio for SunTrust Bank (STI) is 95%.