KeyCorp Reports First Quarter 2008 Earnings

- EPS of $0.54 for the first quarter

CLEVELAND, April 17 /PRNewswire-FirstCall/ -- KeyCorp (NYSE: KEY) today
announced first quarter income from continuing operations of $218 million, or
$0.54 per diluted common share. This compares to income from continuing
operations of $358 million, or $0.89 per share, for the first quarter of 2007,
and $22 million, or $0.06 per share, for the fourth quarter of 2007.
Net income totaled $218 million, or $0.54 per diluted common share, for
the first quarter of 2008, compared to net income of $350 million, or $0.87
per share, for the first quarter of 2007 and $25 million, or $0.06 per share,
for the fourth quarter of 2007.
The table below shows Key's continuing and discontinued operating results
for the three-month periods ended March 31, 2008, December 31, 2007, and
March 31, 2007.

Three months ended
in millions, except per share amounts 3-31-08 12-31-07 3-31-07

Summary of operations
Income from continuing operations $218 $22 $358
Income (loss) from discontinued
operations, net of taxes (a) --- 3 (8)
Net income $218 $25 $350

Per common share - assuming dilution (b)
Income from continuing operations $.54 $.06 $.89
Income (loss) from discontinued
operations (a) --- .01 (.02)
Net income $.54 $.06 $.87

(a) Key sold the subprime mortgage loan portfolio held by the Champion
Mortgage finance business in November 2006, and completed the sale of
Champion's origination platform in February 2007. As a result of
these actions, Key has accounted for this business as a discontinued
operation.

(b) Earnings per share may not foot due to rounding.

"While Key's first quarter earnings reflect the market volatility and
rising credit costs facing the financial services industry as a whole, overall
we are pleased that we achieved these financial results at the same time that
we have taken steps to significantly reduce the company's exposure to future
market volatility and have continued to bolster our loan loss reserves," said
Chairman and Chief Executive Officer Henry L. Meyer III.
"During the first quarter, we continued to take actions to mitigate the
effects of future market volatility on our held-for-sale and trading
portfolios. These actions include the placement of hedges on our remaining
previously unhedged commercial real estate mortgage loans held for sale to
protect against declines in market values that may result from changes in
credit spreads and other market-driven factors, and the transfer of $3.3
billion of education loans held for sale to the held-to-maturity loan
portfolio in response to the continued disruption in the student loan
securitization market.
"With nonperforming assets continuing to rise in this challenging credit
environment, we continue to add to our loan loss reserve, which represented
1.70% of total loans and 123% of Key's nonperforming loans at quarter end.
The current quarter's increase to the reserve, along with the actions we took
in the fourth quarter of 2007 to bolster our reserves, reduce expenses and
curtail certain higher risk or nonrelationship businesses, should help us
better weather the current softness in the economy.
"While current market conditions remain challenging, we believe by
continuing to focus on our relationship business model, managing our expenses
and upgrading our delivery platforms, we will keep Key positioned to respond
to business opportunities as they emerge."
As shown in the following table, the comparability of Key's earnings for
the current, prior and year-ago quarters is affected by several significant
items.

First Quarter 2008
Pre-tax After-tax Impact
in millions, except per share amounts Amount Amount on EPS

Gain from redemption of Visa Inc. shares $165 $103 $.26
Liability to Visa --- --- ---
Realized and unrealized gains
(losses) on loan and securities
portfolios held for sale or trading (128) (80) (.20)
Additional reserve for LILO
transactions (3) (38) (.10)
McDonald Investments branch network (a) --- --- ---
Gain from settlement of automobile
residual value insurance litigation --- --- ---
Loss from repositioning of securities
portfolio --- --- ---

Fourth Quarter 2007
Pre-tax After-tax Impact
in millions, except per share amounts Amount Amount on EPS

Gain from redemption of Visa Inc. shares --- --- ---
Liability to Visa $(64) $(40) $(.10)
Realized and unrealized gains
(losses) on loan and securities
portfolios held for sale or trading (30) (19) (.05)
Additional reserve for LILO
transactions --- --- ---
McDonald Investments branch network (a) --- --- ---
Gain from settlement of automobile
residual value insurance litigation --- --- ---
Loss from repositioning of securities
portfolio --- --- ---

First Quarter 2007
Pre-tax After-tax Impact
in millions, except per share amounts Amount Amount on EPS

Gain from redemption of Visa Inc. shares --- --- ---
Liability to Visa --- --- ---
Realized and unrealized gains
(losses) on loan and securities
portfolios held for sale or trading $22 $14 $.03
Additional reserve for LILO
transactions --- --- ---
McDonald Investments branch network (a) 159 99 .25
Gain from settlement of automobile
residual value insurance litigation 26 17 .04
Loss from repositioning of securities
portfolio (49) (31) (.08)

(a) Represents the financial effect of the McDonald Investments branch
network, including a gain of $171 million ($107 million after tax)
from the February 9, 2007, sale of that network.

LILO = Lease in, lease out transactions

EPS = Earnings per diluted common share

Key's provision for loan losses was $187 million for the first quarter of
2008, up from $44 million for the same period one year ago. The increase was
due primarily to continued weakness in the housing market and an additional
provision recorded in connection with the March 2008 transfer of $3.3 billion
of education loans from held-for-sale status to the loan portfolio. Also,
during the first quarter of 2008, credit spreads continued to widen, causing
the market values of Key's loan and securities portfolios held for sale or
trading to decrease. During the first quarter, Key recorded net losses of
$101 million from loan sales and write-downs, $21 million from dealer trading
and derivatives, and $6 million from certain real estate-related investments,
for a total of $128 million in net losses. This compares to net gains of $22
million from these activities for the first quarter of 2007 and net losses of
$30 million for the fourth quarter of 2007.
SUMMARY OF CONTINUING OPERATIONS
Taxable-equivalent net interest income was $704 million for the first
quarter of 2008, compared to $700 million for the year-ago quarter. Average
earning assets rose by $9.7 billion, or 12%, due primarily to strong growth in
commercial lending and the January 1 acquisition of U.S.B. Holding Co., Inc.,
which added approximately $1.5 billion to Key's loan portfolio. The net
interest margin for the current quarter declined to 3.14% from 3.50% for the
first quarter of 2007. The reduction was attributable largely to tighter loan
and deposit spreads, reflecting the effects of competitive pricing, and a
lease accounting adjustment related to certain leveraged lease transactions.
During the first quarter of 2008, Key increased its tax reserves for
certain lease in, lease out ("LILO") transactions, the deductions for which
have been disallowed by the Internal Revenue Service. The change in the level
of LILO reserves also necessitated a recalculation of lease income under FASB
Staff Position No. 13-2, "Accounting for a Change or Projected Change in the
Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease
Transaction." These actions reduced Key's taxable-equivalent net interest
income and net interest margin for the first quarter of 2008 by $34 million
and 15 basis points, respectively, and reduced Key's earnings by $38 million,
or $0.10 per diluted common share. As previously reported, the LILO
transactions represent a portion of Key's overall leveraged lease financing
portfolio, the tax deductions for which are under challenge by the Internal
Revenue Service.
Compared to the fourth quarter of 2007, taxable-equivalent net interest
income decreased by $46 million, and the net interest margin declined by 34
basis points. These reductions were due primarily to the charges recorded
during the current period in connection with the additional reserves recorded
for the above-mentioned LILO transactions, and a favorable lease accounting
adjustment of $18 million recorded during the fourth quarter of 2007 that
contributed approximately 9 basis points to Key's taxable-equivalent net
interest margin for that period. Average earning assets grew by $3.7 billion
from the fourth quarter as a result of strong demand for commercial loans in
Key's National Banking group and the January 1, 2008, acquisition of U.S.B.
Holding Co., Inc., which added approximately $1.7 billion to Key's average
earning assets in the first quarter.
Key's noninterest income was $528 million for the first quarter of 2008,
compared to $654 million for the year-ago quarter. Included in current year
results is a $165 million gain from the partial redemption of Visa Inc.
shares, and both realized and unrealized losses associated with several of
Key's capital markets-driven businesses. Noninterest income for the first
quarter of 2007 included a $171 million gain associated with the sale of the
McDonald Investments branch network, a $26 million gain from the settlement of
the automobile residual value insurance litigation and a $49 million loss
recorded in connection with the repositioning of the securities portfolio.
During the first quarter of 2008, Key recorded $101 million in net losses
from loan sales and write-downs, related primarily to commercial real estate
loans held for sale. This compares to net gains of $9 million for the same
period last year. Additionally, income from investment banking and capital
markets activities decreased by $36 million, due primarily to a $29 million
reduction from dealer trading and derivatives, and net gains from principal
investing were down $20 million from the year-ago quarter.
Trust and investment services income increased by $4 million from the same
period one year ago. Last year's first quarter results included $16 million
from the McDonald Investments operation. Adjusting for this revenue, trust
and investment services income rose by $20 million, or 18%, driven by growth
in institutional asset management income. The company also experienced a $13
million increase in income from deposit service charges.
Compared to the fourth quarter of 2007, noninterest income grew by $40
million. The gain from the redemption of Visa shares more than offset a $95
million increase in net losses from loan sales and write-downs, and a $21
million reduction in letter of credit and loan fees.
Key's noninterest expense was $732 million for the first quarter of 2008,
compared to $784 million for the same period last year. Personnel expense
decreased by $19 million, due to lower stock-based compensation and decreases
in costs associated with salaries and employee benefits. Approximately $13
million of the reduction in total personnel expense was attributable to the
sale of the McDonald Investments branch network. Nonpersonnel expense
decreased by $33 million from the year-ago quarter, reflecting a $27 million
reduction to the liability for credit losses on lending-related commitments in
the current quarter, compared to a reduction of $8 million recorded in the
first quarter of 2007. Also contributing to the decrease were declines in
marketing and computer processing expense of $5 million and $4 million,
respectively. The McDonald Investments sale reduced Key's total nonpersonnel
expense by approximately $14 million.
Compared to the fourth quarter of 2007, noninterest expense decreased by
$164 million. Personnel expense rose by $10 million as a result of higher
incentive compensation accruals and increases in costs associated with
employee benefits (employment taxes) and stock-based compensation. These
increases were offset in part by lower costs related to salaries and
severance. Nonpersonnel expense decreased by $174 million, reflecting the $27
million reduction to the liability for credit losses on lending-related
commitments, compared to a $25 million increase recorded in the prior quarter;
a $15 million decrease in professional fees and a $5 million decline in
computer processing expense. Additionally, noninterest expense for the fourth
quarter of 2007 included a $64 million charge, representing the estimated fair
value of Key's liability to Visa Inc. This liability was satisfied in the
first quarter of 2008 with proceeds resulting from Visa's initial public
offering.
ASSET QUALITY
Key's provision for loan losses from continuing operations was $187
million for the first quarter of 2008, compared to $44 million for the year-
ago quarter and $363 million for the fourth quarter of 2007. During the first
quarter of 2008, Key's provision exceeded its net loan charge-offs by $66
million. The additional provision was a result of continued weakness in the
housing market, which adversely affected Key's commercial real estate
portfolio, and an additional provision recorded in connection with the March
2008 transfer of $3.3 billion of education loans from held-for-sale status to
the held-to-maturity loan portfolio. The secondary markets for these loans
have been adversely affected by market liquidity issues, prompting the
company's decision to move them to a held-to-maturity classification.
Net loan charge-offs for the quarter totaled $121 million, or 0.67% of
average loans from continuing operations, compared to $44 million, or 0.27%,
for the same period last year and $119 million, or 0.67%, for the previous
quarter.
At March 31, 2008, Key's nonperforming loans totaled $1.054 billion and
represented 1.38% of period-end portfolio loans, compared to 0.97% at December
31, 2007, and 0.39% at March 31, 2007. At March 31, 2008, nonperforming
assets totaled $1.115 billion and represented 1.46% of portfolio loans, other
real estate owned and other nonperforming assets, compared to 1.08% at
December 31, 2007, and 0.54% at March 31, 2007. The increase in nonperforming
assets during the first quarter of 2008 was attributable primarily to the
continued deterioration of market conditions in the residential properties
segment of Key's commercial real estate construction portfolio, principally in
Florida and southern California.
Key's allowance for loan losses was $1.298 billion, or 1.70% of loans
outstanding, at March 31, 2008, compared to $1.200 billion, or 1.69%, at
December 31, 2007, and $944 million, or 1.44%, at March 31, 2007. The January
1, 2008, acquisition of U.S.B. Holding Co., Inc. added approximately $32
million to Key's allowance for loan losses.
CAPITAL
Key's capital ratios, as presented in the following table, continued to
exceed all "well-capitalized" regulatory benchmarks at March 31, 2008.

Capital Ratios
3-31-08 12-31-07 3-31-07
Tier 1 risk-based capital (a) 8.09% 7.44% 8.15%
Total risk-based capital (a) 11.90 11.38 12.20
Tangible equity to tangible assets 6.85 6.58 7.04

(a) 3-31-08 ratio is estimated.

During the first quarter of 2008, Key issued 9.9 million of its common
shares in connection with the acquisition of U.S.B. Holding Co., Inc. and
reissued 1.4 million shares under employee benefit plans. There was no
repurchase activity by Key during the first quarter and the company currently
does not anticipate any share repurchase activity in the second quarter of
2008. At March 31, 2008, Key had 14.0 million common shares remaining for
repurchase under the current authorization.
Share repurchases and other activities that caused the change in Key's
outstanding common shares over the past five quarters are summarized in the
table below.

Summary of Changes in Common Shares Outstanding

in thousands 1Q08 4Q07 3Q07 2Q07 1Q07
Shares outstanding at
beginning of period 388,793 388,708 389,362 394,483 399,153
Shares issued to acquire
U.S.B. Holding Co., Inc. 9,895 --- --- --- ---
Issuance of shares under
employee benefit plans 1,383 85 1,346 879 3,330
Repurchase of common shares --- --- (2,000) (6,000) (8,000)
Shares outstanding at end of
period 400,071 388,793 388,708 389,362 394,483

LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business
group to Key's taxable-equivalent revenue and income from continuing
operations for the periods presented. The specific lines of business that
comprise each of the major business groups are described under the heading
"Line of Business Descriptions." For more detailed financial information
pertaining to each business group and its respective lines of business, see
the tables at the end of this release. Key's line of business results for all
periods presented reflect a new organizational structure that took effect
January 1, 2008.

Major Business Groups
Percent change
1Q08 vs.
dollars in millions 1Q08 4Q07 1Q07 4Q07 1Q07
Revenue from continuing
operations (TE)

Community Banking $629 $652 $805 (3.5)% (21.9)%
National Banking 441 612 599 (27.9) (26.4)
Other Segments 27 17 (20) 58.8 N/M
Total Segments 1,097 1,281 1,384 (14.4) (20.7)
Reconciling Items (a) 135 (43) (30) N/M N/M
Total $1,232 $1,238 $1,354 (.5)% (9.0)%

Income (loss) from
continuing operations
Community Banking $113 $111 $203 1.8% (44.3)%
National Banking (23) (67) 157 65.7 N/M
Other Segments 22 21 (8) 4.8 N/M
Total Segments 112 65 352 72.3 (68.2)
Reconciling Items (a) 106 (43) 6 N/M N/M
Total $218 $22 $358 890.9% (39.1)%

(a) For the first quarter of 2008, reconciling items include a $165
million ($103 million after tax) gain from the partial redemption of
Key's equity interest in Visa Inc. For the fourth quarter of 2007,
reconciling items include a $64 million ($40 million after tax)
charge, representing the fair value of Key's potential liability to
Visa Inc. This liability was satisfied in the first quarter of 2008
with proceeds resulting from Visa's initial public offering.

TE = Taxable Equivalent, N/M = Not Meaningful

Community Banking
Percent change
1Q08 vs.
dollars in millions 1Q08 4Q07 1Q07 4Q07 1Q07
Summary of operations
Net interest income (TE) $423 $434 $418 (2.5)% 1.2%
Noninterest income 206 218 387 (5.5) (46.8)
Total revenue (TE) 629 652 805 (3.5) (21.9)
Provision for loan losses 18 36 14 (50.0) 28.6
Noninterest expense 430 438 466 (1.8) (7.7)
Income before income
taxes (TE) 181 178 325 1.7 (44.3)
Allocated income taxes
and TE adjustments 68 67 122 1.5 (44.3)
Net income $113 $111 $203 1.8% (44.3)%

Percent of consolidated
income from continuing
operations 52% 505% 57% N/A N/A

Average balances
Loans and leases $28,255 $27,237 $26,456 3.7% 6.8%
Total assets 31,404 29,912 29,293 5.0 7.2
Deposits 50,089 47,255 46,524 6.0 7.7

Assets under management
at period end $20,049 $21,592 $20,634 (7.1)% (2.8)%

TE = Taxable Equivalent, N/A = Not Applicable

Additional Community Percent change
Banking Data 1Q08 vs.
dollars in millions 1Q08 4Q07 1Q07 4Q07 1Q07

Average deposits
outstanding
NOW and money market
deposit accounts $19,886 $20,471 $19,616 (2.9)% 1.4%
Savings deposits 2,042 1,514 1,618 34.9 26.2
Certificates of deposit
($100,000 or more) 6,452 4,918 4,551 31.2 41.8
Other time deposits 12,765 11,454 12,051 11.4 5.9
Deposits in foreign
office 1,257 1,249 960 .6 30.9
Noninterest-bearing
deposits 7,687 7,649 7,728 .5 (.5)
Total deposits $50,089 $47,255 $46,524 6.0% 7.7%

Home equity loans
Average balance $9,693 $9,658 $9,677
Weighted-average
loan-to-value ratio 70% 70% 70%
Percent first lien
positions 56 57 59
Other data
On-line households /
household
penetration 749,512/45% 737,393/45% 719,736/43%
Branches 985 955 950
Automated teller machines 1,479 1,443 1,447

Community Banking Summary of Operations
Community Banking recorded net income of $113 million for the first
quarter of 2008, compared to $203 million for the year-ago quarter. Excluding
the impact of the sale of the McDonald Investments branch network during the
first quarter of 2007, net income for Community Banking was up $9 million, or
9%, from the comparable quarter last year. Increases in both net interest
income and noninterest income, and a reduction in noninterest expense drove
the improvement and more than offset a higher provision for loan losses.
Taxable-equivalent net interest income rose by $5 million, or 1%, from the
first quarter of 2007. The increase was attributable to a $2.0 billion, or
7%, rise in average earning assets, due largely to growth in the commercial
loan portfolio, and a $3.6 billion, or 8%, increase in average deposits. Both
loan and deposit growth benefited from the January 1 acquisition of U.S.B.
Holding Co., Inc. described below. The positive effect of this growth was
offset in part by the impact of tighter loan and deposit spreads.
Excluding the impact of the McDonald Investments sale, noninterest income
rose by $9 million, or 5%, from the same period one year ago, due to growth in
deposit service charge income, higher income from derivatives and growth in
bank channel investment product sales commission income.
The provision for loan losses increased by $4 million, or 29%, compared to
the first quarter of 2007.
Excluding the impact of the McDonald Investments sale, noninterest expense
declined by $9 million, or 2%, from the year-ago quarter, reflecting a
decrease in personnel expense, due primarily to reduced headcount.
Additionally, Community Banking results for the current quarter benefited from
a reduction to the liability for credit losses on lending-related commitments.
On January 1, 2008, Key acquired U.S.B. Holding Co., Inc., the holding
company for Union State Bank, a 31-branch state-chartered commercial bank
headquartered in Orangeburg, New York. The acquisition doubles Key's branch
penetration in the attractive Lower Hudson Valley area. Assets and deposits
acquired in this transaction were assigned to both the Community Banking and
National Banking groups.

National Banking
Percent change 1Q08
vs.
dollars in millions 1Q08 4Q07 1Q07 4Q07 1Q07
Summary of operations

Net interest income
(TE) $340 $389 $340 (12.6)% ---
Noninterest income 101 223 259 (54.7) (61.0)%
Total revenue (TE) 441 612 599 (27.9) (26.4)
Provision for loan
losses 169 327 30 (48.3) 463.3
Noninterest expense 309 389 317 (20.6) (2.5)
(Loss) income from
continuing operations
before income
taxes (TE) (37) (104) 252 64.4 N/M
Allocated income
taxes and TE
adjustments (14) (37) 95 62.2 N/M
(Loss) income from
continuing operations (23) (67) 157 65.7 N/M
Income (loss) from
discontinued
operations, net of
taxes --- 3 (8) (100.0) 100.0%
Net (loss) income $(23) $(64) $149 64.1% N/M

Percent of
consolidated
income from
continuing
operations N/M N/M 44% N/A N/A

Average balances from
continuing operations
Loans and leases $44,021 $42,037 $38,839 4.7% 13.3%
Loans held for sale 4,932 4,709 3,917 4.7 25.9
Total assets 56,079 53,323 48,411 5.2 15.8
Deposits 11,849 12,628 11,291 (6.2) 4.9

Assets under management
at period end $60,404 $63,850 $61,754 (5.4)% (2.2)%

TE = Taxable Equivalent, N/M = Not Meaningful, N/A = Not Applicable

National Banking Summary of Continuing Operations
National Banking recorded a net loss of $23 million from continuing
operations for the first quarter of 2008, compared to net income of $157
million from continuing operations for the same period last year. Lower
noninterest income and an increase in the provision for loan losses accounted
for the reduction and more than offset a decrease in noninterest expense. Net
interest income was essentially unchanged from the year-ago quarter.
During the first quarter of 2008, National Banking increased its tax
reserves for certain lease in, lease out transactions and, as a result,
recalculated its lease income in accordance with FASB Staff Position No. 13-2,
"Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction."
Excluding the additional charges associated with these actions, taxable-
equivalent net interest income grew by $34 million, or 10%, from the first
quarter of 2007 as a result of increases in average earning assets and
deposits, offset in part by tighter interest rate spreads. Average loans and
leases grew by $5.2 billion, or 13%, while average deposits rose by $558
million, or 5%, from the year-ago quarter.
Noninterest income declined by $158 million, or 61%, as several capital
markets-driven businesses were adversely affected by continued volatility in
the financial markets. Results for the current quarter include $105 million
in net losses from loan sales and write-downs, related primarily to commercial
real estate loans held for sale. This compares to net gains of $5 million for
the same period last year. Income from investment banking and capital markets
activities decreased by $47 million, due primarily to a $38 million reduction
from dealer trading and derivatives. These decreases were offset in part by a
$19 million increase in trust and investment services income. Additionally,
results for the first quarter of 2007 included a $26 million gain from the
settlement of the automobile residual value insurance litigation.
The provision for loan losses rose by $139 million, reflecting continued
deterioration of market conditions in the residential properties segment of
Key's commercial real estate construction portfolio, principally in Florida
and southern California, and an additional provision recorded in the Consumer
Finance line of business in connection with the March 2008 transfer of $3.3
billion of education loans from held-for-sale status to the loan portfolio.
Noninterest expense decreased by $8 million, or 3%, from the year-ago
quarter. Contributing to the improvement was a $22 million reduction to the
liability for credit losses on lending-related commitments in the current
quarter, compared to a reduction of $7 million recorded in the first quarter
of 2007. This positive effect of this change was offset in part by a $6
million increase in costs associated with operating leases.
Other Segments
Other segments consist of Corporate Treasury and Key's Principal Investing
unit. These segments generated net income of $22 million for the first
quarter of 2008, compared to a net loss of $8 million for the same period last
year. The improvement was due primarily to a $49 million loss recorded in the
first quarter of 2007 in connection with the repositioning of the securities
portfolio, offset in part by a decrease in net gains from principal investing.

Line of Business Descriptions

Community Banking
Regional Banking provides individuals with branch-based deposit and
investment products, personal finance services and loans, including
residential mortgages, home equity and various types of installment loans.
This line of business also provides small businesses with deposit, investment
and credit products, and business advisory services.
Regional Banking also offers financial, estate and retirement planning,
and asset management services to assist high-net-worth clients with their
banking, trust, portfolio management, insurance, charitable giving and related
needs.
Commercial Banking provides midsize businesses with products and services
that include commercial lending, cash management, equipment leasing,
investment and employee benefit programs, succession planning, access to
capital markets, derivatives and foreign exchange.
National Banking
Real Estate Capital and Corporate Banking Services consists of two
business units. Real Estate Capital is a national business that provides
construction and interim lending, permanent debt placements and servicing,
equity and investment banking, and other commercial banking products and
services to developers, brokers and owner-investors. This unit deals
primarily with nonowner-occupied properties (i.e., generally properties in
which at least 50% of the debt service is provided by rental income from
nonaffiliated third parties). Particular emphasis has been placed on
providing clients with finance solutions through access to the capital
markets.
Corporate Banking Services provides cash management, interest rate
derivatives, and foreign exchange products and services to clients throughout
the Community Banking and National Banking groups. Through its Public Sector
and Financial Institutions businesses, Corporate Banking Services provides a
full array of commercial banking products and services to government and not-
for-profit entities, and to community banks.
Equipment Finance meets the equipment leasing needs of companies worldwide
and provides equipment manufacturers, distributors and resellers with
financing options for their clients. Lease financing receivables and related
revenues are assigned to other lines of business (primarily Institutional and
Capital Markets, and Commercial Banking) if those businesses are principally
responsible for maintaining the relationship with the client.
Institutional and Capital Markets provides commercial lending, treasury
management, investment banking, derivatives and foreign exchange, equity and
debt underwriting and trading, and syndicated finance products and services to
large corporations and middle-market companies through the KeyBanc Capital
Markets subsidiary.
Through its Victory Capital Management unit, Institutional and Capital
Markets also manages or gives advice regarding investment portfolios for a
national client base, including corporations, labor unions, not-for-profit
organizations, governments and individuals. These portfolios may be managed
in separate accounts, common funds or the Victory family of mutual funds.
Consumer Finance includes Indirect Lending and Commercial Floor Plan
Lending.
Indirect Lending offers loans to consumers through dealers. This business
unit also provides federal and private education loans to students and their
parents, and processes tuition payments for private schools.
Commercial Floor Plan Lending finances inventory for automobile,
recreation and marine dealers.
Cleveland-based KeyCorp is one of the nation's largest bank-based
financial services companies, with assets of approximately $101 billion. Key
companies provide investment management, retail and commercial banking,
consumer finance, and investment banking products and services to individuals
and companies throughout the United States and, for certain businesses,
internationally. The company's businesses deliver their products and services
through 985 branches and additional offices; a network of 1,479 ATMs;
telephone banking centers (1.800.KEY2YOU); and a Web site,
https://www.key.com/ ,(R) that provides account access and financial products
24 hours a day.
Notes to Editors:
A live Internet broadcast of KeyCorp's conference call to discuss
quarterly earnings and currently anticipated earnings trends and to answer
analysts' questions can be accessed through the Investor Relations section at
https://www.key.com/ir at 9:00 a.m. ET, on Thursday, April 17, 2008. An audio
replay of the call will be available through April 24.
For up-to-date company information, media contacts and facts and figures
about Key's lines of business visit our Media Newsroom at
https://www.key.com/newsroom .
This news release contains forward-looking statements, including
statements about our financial condition, results of operations, earnings
outlook, asset quality trends and profitability. Forward-looking statements
express management's current expectations or forecasts of future events and,
by their nature, are subject to assumptions, risks and uncertainties.
Although management believes that the expectations and forecasts reflected in
these forward-looking statements are reasonable, actual results could differ
materially due to a variety of factors including: (1) changes in interest
rates; (2) changes in trade, monetary or fiscal policy; (3) continued
disruption in the fixed income markets; (4) adverse capital markets
conditions; (5) changes in general economic conditions, or in the condition of
the local economies or industries in which we have significant operations or
assets, which could, among other things, materially impact credit quality
trends and our ability to generate loans; (6) increased competitive pressure
among financial services companies; (7) the inability to successfully execute
strategic initiatives designed to grow revenues and/or manage expenses; (8)
consummation of significant business combinations or divestitures; (9)
operational or risk management failures due to technological or other factors;
(10) changes in accounting or tax practices or requirements; (11) new legal
obligations or liabilities or unfavorable resolution of litigation; (12)
heightened regulatory practices, requirements or expectations; and (13)
disruption in the economy and general business climate as a result of
terrorist activities or military actions. Forward-looking statements are not
guarantees of future performance and should not be relied upon as representing
management's views as of any subsequent date. We do not assume any obligation
to update these forward-looking statements. For further information regarding
KeyCorp, please read KeyCorp's reports that are filed with the Securities and
Exchange Commission and are available at www.sec.gov .

Financial Highlights
(dollars in millions, except per share amounts)

Three months ended
3-31-08 12-31-07 3-31-07
Summary of operations
Net interest income (TE) $704 $750 $700
Noninterest income 528 488 654
Total revenue (TE) 1,232 1,238 1,354
Provision for loan losses 187 363 44
Noninterest expense 732 896 784
Income from continuing operations 218 22 358
Income (loss) from discontinued
operations, net of taxes (a) -- 3 (8)
Net income 218 25 350

Per common share
Income from continuing operations $.55 $.06 $.90
Income from continuing operations -
assuming dilution .54 .06 .89
Income (loss) from discontinued
operations (a) -- .01 (.02)
Income (loss) from discontinued
operations - assuming dilution (a) -- .01 (.02)
Net income .55 .06 .88
Net income - assuming dilution .54 .06 .87
Cash dividends paid .375 .365 .365
Book value at period end 21.48 19.92 19.57
Market price at period end 21.95 23.45 37.47

Performance ratios - from continuing
operations
Return on average total assets .85% .09% 1.58%
Return on average equity 10.38 1.11 19.06
Net interest margin (TE) 3.14 3.48 3.50

Performance ratios - from consolidated
operations
Return on average total assets .85% .10% 1.54%
Return on average equity 10.38 1.26 18.63
Net interest margin (TE) 3.14 3.48 3.51

Capital ratios at period end
Equity to assets 8.47% 7.89% 8.37%
Tangible equity to tangible assets 6.85 6.58 7.04
Tier 1 risk-based capital (b) 8.09 7.44 8.15
Total risk-based capital (b) 11.90 11.38 12.20
Leverage (b) 8.96 8.39 9.17

Asset quality
Net loan charge-offs $121 $119 $44
Net loan charge-offs to average loans
from continuing operations .67% .67% .27%
Allowance for loan losses $1,298 $1,200 $944
Allowance for loan losses to period-
end loans 1.70% 1.69% 1.44%
Allowance for loan losses to
nonperforming loans 123.15 174.67 371.65
Nonperforming loans at period end $1,054 $687 $254
Nonperforming assets at period end 1,115 764 353
Nonperforming loans to period-end
portfolio loans 1.38% .97% .39%
Nonperforming assets to period-end
portfolio loans plus OREO and other
nonperforming assets 1.46 1.08 .54

Trust and brokerage assets
Assets under management $80,453 $85,442 $82,388
Nonmanaged and brokerage assets 30,532 33,918 32,838

Other data
Average full-time equivalent
employees 18,426 18,500 19,801
Branches 985 955 950

Taxable-equivalent adjustment $(9) $40 $21

(a) Key sold the subprime mortgage loan portfolio held by the Champion
Mortgage finance business in November 2006, and completed the sale of
Champion's origination platform in February 2007. As a result of
these actions, Key has accounted for this business as a discontinued
operation.

(b) 3-31-08 ratio is estimated.

TE = Taxable Equivalent

Consolidated Balance Sheets
(dollars in millions)

3-31-08 12-31-07 3-31-07
Assets
Loans $76,444 $70,823 $65,711
Loans held for sale 1,674 4,736 4,175
Securities available for sale 8,419 7,860 7,789
Held-to-maturity securities 29 28 38
Trading account assets 1,015 1,056 671
Short-term investments 577 516 1,313
Other investments 1,561 1,538 1,466
Total earning assets 89,719 86,557 81,163
Allowance for loan losses (1,298) (1,200) (944)
Cash and due from banks 1,730 1,814 2,052
Premises and equipment 712 681 590
Operating lease assets 1,070 1,128 1,074
Goodwill 1,599 1,252 1,202
Other intangible assets 164 123 115
Corporate-owned life insurance 2,894 2,872 2,805
Derivative assets 1,508 879 413
Accrued income and other assets 3,394 4,122 3,786
Total assets $101,492 $98,228 $92,256

Liabilities
Deposits in domestic offices:
NOW and money market deposit
accounts $26,527 $27,635 $23,317
Savings deposits 1,826 1,513 1,654
Certificates of deposit ($100,000
or more) 8,330 6,982 6,094
Other time deposits 12,933 11,615 12,086
Total interest-bearing
deposits 49,616 47,745 43,151
Noninterest-bearing deposits 10,896 11,028 13,473
Deposits in foreign office -
interest-bearing 4,190 4,326 3,149
Total deposits 64,702 63,099 59,773
Federal funds purchased and
securities sold under repurchase
agreements 3,503 3,927 5,770
Bank notes and other short-term
borrowings 5,464 5,861 922
Derivative liabilities 465 252 173
Accrued expense and other
liabilities 4,429 5,386 4,838
Long-term debt 14,337 11,957 13,061
Total liabilities 92,900 90,482 84,537

Shareholders' equity
Preferred stock -- -- --
Common shares 492 492 492
Capital surplus 1,659 1,623 1,614
Retained earnings 8,737 8,522 8,528
Treasury stock, at cost (2,689) (3,021) (2,801)
Accumulated other comprehensive
income (loss) 393 130 (114)
Total shareholders' equity 8,592 7,746 7,719

Total liabilities and shareholders'
equity $101,492 $98,228 $92,256

Common shares outstanding (000) 400,071 388,793 394,483

Consolidated Statements of Income
(dollars in millions, except per share amounts)

Three months ended
3-31-08 12-31-07 3-31-07
Interest income
Loans $1,123 $1,205 $1,161
Loans held for sale 87 89 75
Securities available for sale 109 115 100
Held-to-maturity securities 1 1 1
Trading account assets 13 12 7
Short-term investments 9 13 11
Other investments 12 12 13
Total interest income 1,354 1,447 1,368

Interest expense
Deposits 428 483 433
Federal funds purchased and
securities sold under repurchase
agreements 28 45 49
Bank notes and other short-term
borrowings 39 45 11
Long-term debt 146 164 196
Total interest expense 641 737 689

Net interest income 713 710 679
Provision for loan losses 187 363 44
Net interest income after provision
for loan losses 526 347 635

Noninterest income
Trust and investment services
income 129 131 125
Service charges on deposit accounts 88 90 75
Investment banking and capital
markets income 8 12 44
Operating lease income 69 72 64
Letter of credit and loan fees 37 58 38
Corporate-owned life insurance
income 28 37 25
Electronic banking fees 24 25 24
Net (losses) gains from loan
securitizations and sales (101) (6) 9
Net securities gains (losses) 3 6 (47)
Net gains from principal investing 9 6 29
Gain from redemption of Visa Inc.
shares 165 -- --
Gain from sale of McDonald
Investments branch network -- -- 171
Other income 69 57 97
Total noninterest income 528 488 654

Noninterest expense
Personnel 409 399 428
Net occupancy 66 64 63
Computer processing 47 52 51
Operating lease expense 58 59 52
Professional fees 23 38 26
Equipment 24 25 25
Marketing 14 16 19
Other expense 91 243 120
Total noninterest expense 732 896 784
Income (loss) from continuing
operations before income taxes 322 (61) 505
Income taxes 104 (83) 147
Income from continuing operations 218 22 358
Income (loss) from discontinued
operations, net of taxes -- 3 (8)
Net income $218 $25 $350

Per common share:
Income from continuing operations $.55 $.06 $.90
Net income .55 .06 .88

Per common share - assuming dilution:
Income from continuing operations $.54 $.06 $.89
Net income .54 .06 .87

Cash dividends declared per common
share -- $.74 $.365

Weighted-average common shares
outstanding (000) 399,121 388,841 397,875
Weighted-average common shares and
potential common shares outstanding
(000) 399,769 389,911 403,478

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
From Continuing Operations
(dollars in millions)

First Quarter 2008
Average
Balance Interest Yield/Rate
Assets
Loans: (a),(b)
Commercial, financial and
agricultural $25,411 $392 6.21%
Real estate - commercial
mortgage 10,283 175 6.84
Real estate - construction 8,468 134 6.36
Commercial lease financing 10,004 98 3.91
Total commercial loans 54,166 799 5.93
Real estate - residential 1,916 30 6.29
Home equity 10,953 178 6.54
Consumer - direct 1,305 34 10.59
Consumer - indirect 4,348 72 6.61
Total consumer loans 18,522 314 6.81
Total loans 72,688 1,113 6.15
Loans held for sale 4,984 87 7.01
Securities available for sale
(a),(c) 8,419 110 5.28
Held-to-maturity securities (a) 29 1 11.02
Trading account assets 1,075 13 4.84
Short-term investments 1,165 9 3.18
Other investments (c) 1,552 12 3.05
Total earning assets 89,912 1,345 6.01
Allowance for loan losses (1,236)
Accrued income and other assets 14,680
Total assets $103,356

Liabilities
NOW and money market deposit
accounts $26,996 139 2.07
Savings deposits 1,865 3 .62
Certificates of deposit
($100,000 or more) (d) 8,072 95 4.72
Other time deposits 12,759 146 4.59
Deposits in foreign office 5,853 45 3.13
Total interest-bearing deposits 55,545 428 3.10
Federal funds purchased and
securities sold under repurchase
agreements 3,863 28 2.91
Bank notes and other short-term
borrowings 4,934 39 3.22
Long-term debt (d),(e) 13,238 146 4.71
Total interest-bearing liabilities 77,580 641 3.36
Noninterest-bearing deposits 10,741
Accrued expense and other
liabilities 6,590
Total liabilities 94,911

Shareholders' equity 8,445

Total liabilities and shareholders'
equity $103,356

Interest rate spread (TE) 2.65%
Net interest income (TE) and net
interest margin (TE) 704 3.14%
TE adjustment (a) (9)
Net interest income, GAAP basis $713

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
From Continuing Operations
(dollars in millions)

Fourth Quarter 2007
Average
Balance Interest Yield/Rate
Assets
Loans: (a),(b)
Commercial, financial and
agricultural $23,825 $419 6.98%
Real estate - commercial
mortgage 9,351 175 7.42
Real estate - construction 8,192 153 7.42
Commercial lease financing 10,252 171 6.65
Total commercial loans 51,620 918 7.06
Real estate - residential 1,596 27 6.72
Home equity 10,917 192 7.02
Consumer - direct 1,308 35 10.73
Consumer - indirect 4,276 73 6.76
Total consumer loans 18,097 327 7.20
Total loans 69,717 1,245 7.10
Loans held for sale 4,748 89 7.53
Securities available for sale
(a),(c) 7,858 115 5.89
Held-to-maturity securities (a) 30 1 6.24
Trading account assets 1,042 12 4.40
Short-term investments 1,226 13 3.94
Other investments (c) 1,589 12 3.02
Total earning assets 86,210 1,487 6.86
Allowance for loan losses (966)
Accrued income and other assets 13,547
Total assets $98,791

Liabilities
NOW and money market deposit
accounts $25,687 197 3.05
Savings deposits 1,523 1 .19
Certificates of deposit
($100,000 or more) (d) 6,887 86 4.98
Other time deposits 11,455 135 4.68
Deposits in foreign office 5,720 64 4.42
Total interest-bearing deposits 51,272 483 3.74
Federal funds purchased and
securities sold under repurchase
agreements 4,194 45 4.23
Bank notes and other short-term
borrowings 4,233 45 4.15
Long-term debt (d),(e) 11,851 164 5.72
Total interest-bearing liabilities 71,550 737 4.11
Noninterest-bearing deposits 12,948
Accrued expense and other liabilities 6,405
Total liabilities 90,903

Shareholders' equity 7,888

Total liabilities and
shareholders' equity $98,791

Interest rate spread (TE) 2.75%
Net interest income (TE) and net
interest margin (TE) 750 3.48%
TE adjustment (a) 40
Net interest income, GAAP basis $710

Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates
From Continuing Operations
(dollars in millions)

First Quarter 2007
Average
Balance Interest Yield/Rate
Assets
Loans: (a),(b)
Commercial, financial and
agricultural $21,562 $392 7.38%
Real estate - commercial
mortgage 8,426 163 7.83
Real estate - construction 8,227 166 8.20
Commercial lease financing 10,094 146 5.78
Total commercial loans 48,309 867 7.26
Real estate - residential 1,444 24 6.60
Home equity 10,706 191 7.22
Consumer - direct 1,450 36 10.15
Consumer - indirect 3,760 64 6.79
Total consumer loans 17,360 315 7.32
Total loans 65,669 1,182 7.28
Loans held for sale 3,940 75 7.70
Securities available for sale
(a),(c) 7,548 100 5.27
Held-to-maturity securities (a) 39 1 7.21
Trading account assets 754 7 3.78
Short-term investments 853 11 5.22
Other investments (c) 1,400 13 3.65
Total earning assets 80,203 1,389 6.99
Allowance for loan losses (942)
Accrued income and other assets 12,835
Total assets $92,096

Liabilities
NOW and money market deposit
accounts $23,424 177 3.06
Savings deposits 1,629 1 .19
Certificates of deposit
($100,000 or more) (d) 6,151 76 5.03
Other time deposits 12,063 138 4.64
Deposits in foreign office 3,258 41 5.12
Total interest-bearing deposits 46,525 433 3.77
Federal funds purchased and
securities sold under repurchase
agreements 3,903 49 5.04
Bank notes and other short-term
borrowings 1,113 11 3.98
Long-term debt (d),(e) 13,617 196 5.90
Total interest-bearing liabilities 65,158 689 4.29
Noninterest-bearing deposits 13,237
Accrued expense and other
liabilities 6,083
Total liabilities 84,478

Shareholders' equity 7,618

Total liabilities and
shareholders' equity $92,096

Interest rate spread (TE) 2.70%
Net interest income (TE) and net
interest margin (TE) 700 3.50%
TE adjustment (a) 21
Net interest income, GAAP basis $679

(a) Interest income on tax-exempt securities and loans has been adjusted
to a taxable-equivalent basis using the statutory federal income tax
rate of 35%.
(b) For purposes of these computations, nonaccrual loans are included in
average loan balances.
(c) Yield is calculated on the basis of amortized cost.
(d) Rate calculation excludes basis adjustments related to fair value
hedges.
(e) Results from continuing operations exclude the dollar amount of
liabilities assumed necessary to support interest-earning assets held
by the discontinued Champion Mortgage finance business. The interest
expense related to these liabilities, which also is excluded from
continuing operations, was calculated using a matched funds transfer
pricing methodology.
TE = Taxable Equivalent
GAAP = U.S. generally accepted accounting principles

Noninterest Income
(in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Trust and investment services income (a) $129 $131 $125
Service charges on deposit accounts 88 90 75
Investment banking and capital
markets income (a) 8 12 44
Operating lease income 69 72 64
Letter of credit and loan fees 37 58 38
Corporate-owned life insurance income 28 37 25
Electronic banking fees 24 25 24
Net (losses) gains from loan
securitizations and sales (101) (6) 9
Net securities gains (losses) 3 6 (47)
Net gains from principal investing 9 6 29
Gain from redemption of Visa Inc.
shares 165 -- --
Gain from sale of McDonald
Investments branch network -- -- 171
Other income:
Insurance income 15 10 14
Loan securitization servicing
fees 4 5 5
Credit card fees 4 3 3
Litigation settlement -
automobile residual value
insurance -- -- 26
Miscellaneous income 46 39 49
Total other income 69 57 97
Total noninterest income $528 $488 $654

(a) Additional detail provided in tables below.

Trust and Investment Services Income
(in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Brokerage commissions and fee income $33 $31 $40
Personal asset management and custody
fees 41 43 40
Institutional asset management and
custody fees 55 57 45
Total trust and investment
services income $129 $131 $125

Investment Banking and Capital Markets Income
(in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Investment banking income $22 $21 $21
(Loss) income from other investments (6) (23) 5
Dealer trading and derivatives (loss)
income (21) (1) 8
Foreign exchange income 13 15 10
Total investment banking and
capital markets income $8 $12 $44

Noninterest Expense
(dollars in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Personnel (a) $409 $399 $428
Net occupancy 66 64 63
Computer processing 47 52 51
Operating lease expense 58 59 52
Professional fees 23 38 26
Equipment 24 25 25
Marketing 14 16 19
Other expense:
Postage and delivery 11 13 12
Franchise and business taxes 8 7 9
Telecommunications 8 7 7
(Credit) provision for losses on
lending-related commitments (27) 25 (8)
Liability to Visa Inc. -- 64 --
Miscellaneous expense 91 127 100
Total other expense 91 243 120
Total noninterest expense $732 $896 $784

Average full-time equivalent
employees 18,426 18,500 (b) 19,801 (b)

(a) Additional detail provided in table below.

(b) The number of average full-time equivalent employees has not been
adjusted for discontinued operations.

Personnel Expense
(in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Salaries $239 $255 $245
Incentive compensation 74 52 75
Employee benefits 76 65 82
Stock-based compensation 14 3 24
Severance 6 24 2
Total personnel expense $409 $399 $428

Loan Composition
(dollars in millions)

Percent change
3-31-08 vs.
3-31-08 12-31-07 3-31-07 12-31-07 3-31-07
Commercial, financial and
agricultural $25,777 $24,797 $21,476 4.0% 20.0%
Commercial real estate:
Commercial mortgage 10,479 9,630 8,519 8.8 23.0
Construction 8,473 8,102 8,355 4.6 1.4
Total commercial real
estate loans 18,952 17,732 16,874 6.9 12.3
Commercial lease financing 10,000 10,176 10,036 (1.7) (.4)
Total commercial loans 54,729 52,705 48,386 3.8 13.1
Real estate - residential
mortgage 1,954 1,594 1,440 22.6 35.7
Home equity 10,898 10,917 10,669 (.2) 2.1
Consumer - direct 1,266 1,298 1,375 (2.5) (7.9)
Consumer - indirect:
Marine 3,653 3,637 3,203 .4 14.0
Education (a) 3,608 331 336 990.0 973.8
Other 336 341 302 (1.5) 11.3
Total consumer -
indirect loans 7,597 4,309 3,841 76.3 97.8
Total consumer loans 21,715 18,118 17,325 19.9 25.3
Total loans $76,444 $70,823 $65,711 7.9% 16.3%

Loans Held for Sale Composition
(dollars in millions)

Percent change
3-31-08 vs.
3-31-08 12-31-07 3-31-07 12-31-07 3-31-07

Commercial, financial and
agricultural $291 $250 $68 16.4% 327.9%
Real estate - commercial
mortgage 1,139 1,219 1,224 (6.6) (6.9)
Real estate - construction 25 35 163 (28.6) (84.7)
Commercial lease financing 31 1 1 N/M N/M
Real estate - residential
mortgage 58 47 26 23.4 123.1
Home equity 1 1 -- -- N/M
Education (a) 123 3,176 2,681 (96.1) (95.4)
Automobile 6 7 12 (14.3) (50.0)
Total loans held for sale $1,674 $4,736 $4,175 (64.7)% (59.9)%

(a) On March 31, 2008, Key transferred $3.3 billion of education loans
from loans held for sale to the loan portfolio.
N/M = Not Meaningful

Summary of Loan Loss Experience
(dollars in millions)

Three months ended
3-31-08 12-31-07 3-31-07
Average loans outstanding from
continuing operations $72,688 $69,717 $65,669

Allowance for loan losses at
beginning of period $1,200 $955 $944
Loans charged off:
Commercial, financial and
agricultural 50 48 17

Real estate -- commercial
mortgage 4 3 6
Real estate -- construction 25 44 1
Total commercial real estate loans 29 47 7
Commercial lease financing 15 18 13
Total commercial loans 94 113 37
Real estate -- residential mortgage 4 3 1
Home equity 16 12 8
Consumer -- direct 9 8 7
Consumer -- indirect 25 16 11
Total consumer loans 54 39 27
148 152 64
Recoveries:
Commercial, financial and
agricultural 14 13 7

Real estate -- commercial mortgage -- 2 3
Commercial lease financing 6 12 3
Total commercial loans 20 27 13
Home equity 1 -- 1
Consumer -- direct 2 2 2
Consumer -- indirect 4 4 4
Total consumer loans 7 6 7
27 33 20
Net loan charge-offs (121) (119) (44)
Provision for loan losses from
continuing operations 187 363 44
Allowance related to loans acquired, net 32 -- --
Foreign currency translation
adjustment -- 1 --
Allowance for loan losses at end of
period $1,298 $1,200 $944

Net loan charge-offs to average loans
from continuing operations .67% .67% .27%
Allowance for loan losses to period-
end loans 1.70 1.69 1.44
Allowance for loan losses to
nonperforming loans 123.15 174.67 371.65

Changes in Liability for Credit Losses on Lending-Related Commitments
(in millions)

Three months ended
3-31-08 12-31-07 3-31-07

Balance at beginning of period $80 $55 $53
(Credit) provision for losses on lending-
related commitments (27) 25 (8)
Balance at end of period (a) $53 $80 $45

(a) Included in "accrued expense and other liabilities" on the
consolidated balance sheet.

Summary of Nonperforming Assets and Past Due Loans
(dollars in millions)

3-31-08 12-31-07 9-30-07 6-30-07 3-31-07
Commercial, financial and
agricultural $147 $84 $94 $83 $70

Real estate - commercial
mortgage 113 41 41 41 44
Real estate - construction 610 415 228 23 10
Total commercial real estate
loans 723 456 269 64 54
Commercial lease financing 38 28 30 34 31
Total commercial loans 908 568 393 181 155
Real estate - residential mortgage 34 28 29 27 32
Home equity 74 66 61 55 52
Consumer - direct 2 2 2 2 2
Consumer - indirect 36 23 13 11 13
Total consumer loans 146 119 105 95 99
Total nonperforming loans 1,054 687 498 276 254

Nonperforming loans held for sale 9 25 6 4 3

OREO 29 21 21 27 42
Allowance for OREO losses (2) (2) (1) (2) (2)
OREO, net of allowance 27 19 20 25 40

Other nonperforming assets (a) 25 33 46 73 56
Total nonperforming assets $1,115 $764 $570 $378 $353

Accruing loans past due 90 days
or more $283 $231 $190 $181 $146
Accruing loans past due 30
through 89 days 1,169 843 717 623 626
Nonperforming loans to period-
end portfolio loans 1.38% .97% .72% .41% .39%
Nonperforming assets to period-
end portfolio loans plus OREO
and other nonperforming assets 1.46 1.08 .83 .57 .54

(a) Primarily investments held by the Private Equity unit within Key's
Real Estate Capital and Corporate Banking Services line of business.

Summary of Changes in Nonperforming Loans
(in millions)

1Q08 4Q07 3Q07 2Q07 1Q07

Balance at beginning of period $687 $498 $276 $254 $215
Loans placed on nonaccrual
status 566 378 337 130 129
Charge-offs (144) (147) (81) (72) (61)
Loans sold -- (13) (6) (7) --
Payments (22) (17) (13) (21) (7)
Transfers to OREO (20) (5) (12) -- (9)
Transfer to nonperforming
loans held for sale (8) -- -- -- --
Loans returned to accrual
status (5) (7) (3) (8) (13)
Balance at end of period $1,054 $687 $498 $276 $254

Line of Business Results
(dollars in millions)

Community Banking

1Q08 4Q07 3Q07 2Q07 1Q07
Summary of operations
Total revenue (TE) $629 $652 $626 $629 $805
Provision for loan
losses 18 36 -- 21 14
Noninterest expense 430 438 415 446 466
Net income 113 111 132 101 203
Average loans and
leases 28,255 27,237 26,948 26,578 26,456
Average deposits 50,089 47,255 46,729 46,127 46,524
Net loan charge-offs 30 31 19 26 19
Return on average
allocated equity 15.15% 17.43% 20.88% 16.41% 33.36%
Average full-time
equivalent employees 8,779 8,515 8,683 9,080 9,529

Supplementary information (lines of business)
Regional Banking
Total revenue (TE) $530 $555 $532 $536 $713
Provision for loan
losses 11 25 8 22 16
Noninterest expense 386 385 369 397 417
Net income 83 90 97 73 175
Average loans and
leases 19,653 18,771 18,667 18,471 18,499
Average deposits 46,499 43,696 43,236 42,723 43,056
Net loan charge-offs 29 26 17 20 18
Return on average
allocated equity 15.28% 20.51% 22.03% 16.92% 40.63%
Average full-time
equivalent employees 8,430 8,162 8,322 8,709 9,156

Commercial Banking
Total revenue (TE) $99 $97 $94 $93 $92
Provision for loan losses 7 11 (8) (1) (2)
Noninterest expense 44 53 46 49 49
Net income 30 21 35 28 28
Average loans and
leases 8,602 8,466 8,281 8,107 7,957
Average deposits 3,590 3,559 3,493 3,404 3,468
Net loan charge-offs 1 5 2 6 1
Return on average
allocated equity 14.80% 10.61% 18.25% 15.22% 15.75%
Average full-time
equivalent employees 349 353 361 371 373

Line of Business Results
(dollars in millions)

Community Banking
Percent change 1Q08 vs.
4Q07 1Q07
Summary of operations
Total revenue (TE) (3.5)% (21.9)%
Provision for loan losses (50.0) 28.6
Noninterest expense (1.8) (7.7)
Net income 1.8 (44.3)
Average loans and leases 3.7 6.8
Average deposits 6.0 7.7
Net loan charge-offs (3.2) 57.9
Return on average allocated equity N/A N/A
Average full-time equivalent employees 3.1 (7.9)

Supplementary information (lines of business)
Regional Banking
Total revenue (TE) (4.5)% (25.7)%
Provision for loan losses (56.0) (31.3)
Noninterest expense .3 (7.4)
Net income (7.8) (52.6)
Average loans and leases 4.7 6.2
Average deposits 6.4 8.0
Net loan charge-offs 11.5 61.1
Return on average allocated equity N/A N/A
Average full-time equivalent employees 3.3 (7.9)

Commercial Banking
Total revenue (TE) 2.1% 7.6%
Provision for loan losses (36.4) N/M
Noninterest expense (17.0) (10.2)
Net income 42.9 7.1
Average loans and leases 1.6 8.1
Average deposits .9 3.5
Net loan charge-offs (80.0) --
Return on average allocated equity N/A N/A
Average full-time equivalent employees (1.1) (6.4)

Line of Business Results (continued)
(dollars in millions)

National Banking

1Q08 4Q07 3Q07 2Q07 1Q07
Summary of operations
Total revenue (TE) $441 $612 $509 $616 $599
Provision for loan
losses 169 327 69 32 30
Noninterest expense 309 389 327 330 317
(Loss) income from
continuing operations (23) (67) 71 159 157
Net (loss) income (23) (64) 57 156 149
Average loans and
leases (a) 44,021 42,037 40,276 39,322 38,839
Average loans held for
sale (a) 4,932 4,709 4,692 4,377 3,917
Average deposits (a) 11,849 12,628 12,631 12,082 11,291
Net loan charge-offs
(a) 91 88 40 27 25
Return on average
allocated equity (a) (1.89)% (5.86)% 6.54% 14.86% 15.22%
Return on average
allocated equity (1.89) (5.59) 5.25 14.58 14.44
Average full-time
equivalent employees 3,727 3,945 3,791 3,768 4,157

Supplementary information
(lines of business)
Real Estate Capital and
Corporate Banking Services
Total revenue (TE) $79 $159 $129 $214 $191
Provision for loan
losses 45 270 43 8 1
Noninterest expense 61 117 88 91 85
Net (loss) income (17) (143) (1) 72 66
Average loans and
leases 16,358 15,003 14,160 13,713 13,636
Average loans held
for sale 989 1,257 1,584 1,246 1,146
Average deposits 9,749 10,396 10,243 9,446 8,538
Net loan charge-offs 38 45 7 3 1
Return on average
allocated equity (3.74)% (36.46)% (.27)% 19.61% 19.04%
Average full-time
equivalent employees 1,235 1,313 1,311 1,295 1,278

Equipment Finance
Total revenue (TE) $100 $185 $139 $153 $134
Provision for loan
losses 24 23 16 16 13
Noninterest expense 97 98 94 94 86
Net (loss) income (13) 40 18 27 22
Average loans and
leases 10,595 10,729 10,681 10,609 10,479
Average loans held
for sale 32 15 6 10 4
Average deposits 14 17 16 16 13
Net loan charge-offs 24 18 16 16 13
Return on average
allocated equity (5.49)% 16.55% 7.59% 11.72% 9.75%
Average full-time
equivalent employees 872 930 906 901 891

Institutional and
Capital Markets
Total revenue (TE) $158 $169 $155 $160 $158
Provision for loan
losses 16 15 (2) -- --
Noninterest expense 102 115 104 101 102
Net income 25 25 33 37 34
Average loans and
leases 7,631 7,216 6,713 6,563 6,550
Average loans held
for sale 555 394 373 463 139
Average deposits 1,459 1,560 1,844 2,073 2,168
Net loan charge-offs 2 6 6 -- 1
Return on average
allocated equity 8.37% 8.54% 12.20% 13.53% 12.76%
Average full-time
equivalent employees 905 911 939 902 925

Consumer Finance
Total revenue (TE) $104 $99 $86 $89 $116
Provision for loan
losses 84 19 12 8 16
Noninterest expense 49 59 41 44 44
(Loss) income from
continuing operations (18) 11 21 23 35
Net (loss) income (18) 14 7 20 27
Average loans and
leases (a) 9,437 9,089 8,722 8,437 8,174
Average loans held for
sale (a) 3,356 3,043 2,729 2,658 2,628
Average deposits (a) 627 655 528 547 572
Net loan charge-offs (a) 27 19 11 8 10
Return on average
allocated equity (a) (7.87)% 5.06% 10.38% 11.57% 18.15%
Return on average
allocated equity (7.87) 6.44 3.46 10.07 14.00
Average full-time
equivalent employees 715 791 635 670 1,063

(a) From continuing operations.

TE = Taxable Equivalent
N/A = Not Applicable
N/M = Not Meaningful

Line of Business Results (continued)
(dollars in millions)

National Banking
Percent change 1Q08 vs.
4Q07 1Q07
Summary of operations
Total revenue (TE) (27.9)% (26.4)%
Provision for loan losses (48.3) 463.3
Noninterest expense (20.6) (2.5)
(Loss) income from continuing
operations 65.7 N/M
Net (loss) income 64.1 N/M
Average loans and leases (a) 4.7 13.3
Average loans held for sale (a) 4.7 25.9
Average deposits (a) (6.2) 4.9
Net loan charge-offs (a) 3.4 264.0
Return on average allocated
equity (a) N/A N/A
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (5.5) (10.3)

Supplementary information (lines of
business)
Real Estate Capital and Corporate
Banking Services
Total revenue (TE) (50.3)% (58.6)%
Provision for loan losses (83.3) N/M
Noninterest expense (47.9) (28.2)
Net (loss) income 88.1 N/M
Average loans and leases 9.0 20.0
Average loans held for sale (21.3) (13.7)
Average deposits (6.2) 14.2
Net loan charge-offs (15.6) N/M
Return on average allocated equity N/A N/A
Average full-time equivalent employees (5.9) (3.4)

Equipment Finance
Total revenue (TE) (45.9)% (25.4)%
Provision for loan losses 4.3 84.6
Noninterest expense (1.0) 12.8
Net (loss) income N/M N/M
Average loans and leases (1.2) 1.1
Average loans held for sale 113.3 700.0
Average deposits (17.6) 7.7
Net loan charge-offs 33.3 84.6
Return on average allocated equity N/A N/A
Average full-time equivalent employees (6.2) (2.1)

Institutional and Capital Markets
Total revenue (TE) (6.5)% --
Provision for loan losses 6.7 N/M
Noninterest expense (11.3) --
Net income -- (26.5)%
Average loans and leases 5.8 16.5
Average loans held for sale 40.9 299.3
Average deposits (6.5) (32.7)
Net loan charge-offs (66.7) 100.0
Return on average allocated equity N/A N/A
Average full-time equivalent employees (.7) (2.2)

Consumer Finance
Total revenue (TE) 5.1% (10.3)%
Provision for loan losses 342.1 425.0
Noninterest expense (16.9) 11.4
(Loss) income from continuing
operations N/M N/M
Net (loss) income N/M N/M
Average loans and leases (a) 3.8 15.5
Average loans held for sale (a) 10.3 27.7
Average deposits (a) (4.3) 9.6
Net loan charge-offs (a) 42.1 170.0
Return on average allocated
equity (a) N/A N/A
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (9.6) (32.7)

(a) From continuing operations.

TE = Taxable Equivalent
N/A = Not Applicable
N/M = Not Meaningful

SOURCE KeyCorp

Vernon L. Patterson, Analyst, +1-216-689-0520, Vernon_Patterson@KeyBank.com;
or William C. Murschel, Media, +1-216-828-7416,
William_C_Murschel@KeyBank.com, both of KeyCorp