KeyCorp Reports Second Quarter 2008 Results

- Net loss of $2.70 per common share for the second quarter

CLEVELAND, July 22 /PRNewswire-FirstCall/ -- KeyCorp (NYSE: KEY) today
announced a second quarter loss from continuing operations of $1.126 billion,
or $2.70 per common share. This compares to income from continuing operations
of $337 million, or $0.85 per diluted common share, for the second quarter of
2007, and $218 million, or $0.54 per diluted common share, for the first
quarter of 2008.
Key's results for the second quarter include after-tax charges of $1.011
billion, or $2.43 per common share, resulting from a previously announced
adverse federal tax court ruling on a service contract lease transaction -- a
ruling that the company intends to appeal based on its position that the tax
treatment it applied to its leveraged lease transactions complied with all
applicable tax laws and regulations in effect at the time and was consistent
with industry practice. Results also reflect an increase in loan loss
reserves to 1.87% of loans to address current economic conditions.
"The federal tax court ruling notwithstanding, Key's performance this
quarter reflects an ongoing effort to fortify the company against a difficult
economic environment for lenders," said Chief Executive Officer Henry L. Meyer
III. "For our part, Key has been aggressive about reducing exposure in the
residential properties segment of the construction loan portfolio through the
planned sale of certain loans. Additionally, we have taken action to bolster
Key's loan loss reserve.
"All the while," he continued, "our earning capacity has remained strong
as evidenced by the performance of a number of our fee-based businesses,
including trust and investment services and investment banking. These
outcomes, along with a capital base that is essentially unchanged thanks to
the capital raise we initiated last month, affirm our relationship banking
approach and should put us in a good position in the periods ahead."
During the first quarter of 2008, Key increased its tax reserves for
certain lease in, lease out transactions and recalculated its lease income in
accordance with prescribed accounting standards, resulting in after-tax
charges of $38 million, or $0.10 per common share. Excluding the lease
financing charges recorded in the first and second quarters, Key had a loss
from continuing operations of $115 million, or $0.28 per common share, for the
second quarter of 2008, compared to income from continuing operations of $337
million, or $0.85 per diluted common share, for the second quarter of 2007,
and $256 million, or $0.64 per diluted common share, for the first quarter of
2008.
For the first six months of 2008, Key reported a loss from continuing
operations of $908 million, or $2.23 per common share. Adjusting for the
lease financing charges, Key had income from continuing operations of $141
million, or $0.34 per diluted common share, compared to $695 million, or $1.74
per diluted common share, for the first half of 2007.
Key reported a net loss of $1.126 billion, or $2.70 per common share, for
the second quarter of 2008, compared to net income of $334 million, or $0.84
per diluted common share, for the second quarter of 2007, and $218 million, or
$0.54 per diluted common share, for the first quarter of 2008. For the first
half of 2008, Key reported a net loss of $908 million, or $2.23 per common
share, compared to net income of $684 million, or $1.71 per diluted common
share, for the same period last year.
In addition to the lease financing charges, Key's results for the second
quarter of 2008 were adversely affected by a higher provision for loan losses
recorded in connection with the company's previously reported efforts to
aggressively reduce its exposure to the residential properties segment of its
commercial real estate construction loan portfolio. Key's provision for loan
losses for the second quarter of 2008 was $647 million, compared to $53
million for the same period one year ago and $187 million for the first
quarter of 2008. The current quarter's provision exceeded net loan
charge-offs by $123 million and increased Key's reserve for loan losses to
$1.421 billion, or 1.87% of period-loans.

The following table shows Key's continuing and discontinued operating
results for comparative quarters and for the six-month periods ended June 30,
2008 and 2007.

Three months ended Six months ended
in millions, except per
share amounts 6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Summary of operations
(Loss) income from
continuing operations $(1,126) $218 $337 $(908) $695
Loss from discontinued
operations, net of
taxes (a) --- --- (3) --- (11)
Net (loss) income $(1,126) $218 $334 $(908) $684

Per common share - assuming
dilution
(Loss) income from
continuing operations $(2.70) $.54 $.85 $(2.23) $1.74
Loss from discontinued
operations (a) --- --- (.01) --- (.03)
Net (loss) income $(2.70) $.54 $.84 $(2.23) $1.71

(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.

"We took aggressive steps in the second quarter to fortify our
already-strong capital position in light of the adverse court ruling on the
tax treatment of a service contract lease transaction," said Meyer. "The
successful $1.65 billion capital raise, plus a reduction of our dividend
effective in the third quarter, will position the company to respond to future
business opportunities and are prudent steps in light of the challenging
industry environment.
"In a process that is well underway, we have also moved to reduce our
exposure in the residential homebuilder portfolio through the planned sale of
certain assets. We have been pleased with the level of bidding interest.
Although our actions in this regard resulted in additional net charge-offs and
provisioning for the quarter, the sale of these loans, once closed, will
reduce the level of Key's total nonperforming assets. With the number of
assets and bidders involved in the process, it will take additional time to
consummate the transactions, but we anticipate that the majority of the loan
sales will close in the third quarter.
"During the second quarter, we experienced positive trends in several
fee-based businesses, notably trust and investment services, and our
investment banking, syndications and capital markets businesses. Expenses
continued to be well controlled, we benefited from the actions taken in the
first quarter to significantly reduce the company's exposure to future market
volatility and we continue to gain traction in our Community Banking model.
While we work through this difficult credit cycle, we continue to focus on our
relationship business model," Meyer concluded.

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.

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

Charges related
to leveraged lease
tax litigation $(359) $(1,011) $(2.43) $(3) $ (38) $(.10)
Gain from redemption
of Visa Inc. shares --- --- --- 165 103 .26
Realized and
unrealized gains
(losses) on loan
and securities
portfolios held
for sale or trading 62 39 .09 (128) (80) (.20)
Litigation reserve --- --- --- --- --- ---
Gains related to
MasterCard
Incorporated shares --- --- --- --- --- ---

EPS = Earnings per diluted common share

Second Quarter 2007

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

Charges related to leveraged lease
tax litigation --- --- ---
Gain from redemption of Visa Inc. shares --- --- ---
Realized and unrealized gains(losses) on
loan and securities portfolios held for
sale or trading $51 $32 $.08
Litigation reserve (42) (26) (.07)
Gains related to MasterCard
Incorporated shares 40 25 .06

EPS = Earnings per diluted common share

SUMMARY OF CONTINUING OPERATIONS
Key's taxable-equivalent net interest income for the second quarter of
2008 was reduced significantly as a result of an adverse federal court ruling
on the company's tax treatment of a service contract lease transaction entered
into by AWG Leasing Trust, in which Key is a partner. The court's decision
applies only to the single AWG Leasing transaction and Key has determined to
appeal the trial court decision. Notwithstanding the appeal, management
believes that the applicable accounting guidance requires Key to recalculate
lease income recognized on its entire portfolio of contested leveraged leases,
not just the single leveraged lease subject to the court's decision. 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," Key has recalculated the lease income recognized from
inception for all of the contested leases. Key's second quarter results also
reflect a $475 million charge to income taxes for the interest cost associated
with the contested tax liabilities. Key estimates that the interest accrual
associated with the contested liabilities will approximate $32 million to $34
million (after tax) per quarter for the third and fourth quarters of 2008.
The level of future interest accruals will depend on the applicable interest
rate at the time. This amount will be included in income tax expense in
future quarters. These actions reduced Key's taxable-equivalent net interest
income and net interest margin for the second quarter of 2008 by $838 million
and 376 basis points, respectively, and reduced Key's earnings by $1.011
billion, or $2.43 per common share.
The impacts of the leveraged lease accounting charges on the components of
Key's interest income and related yields for the second quarter of 2008 are
shown in the following table.
Second Quarter 2008
As Reported Adjusted Basis

Average Yield/ Average Yield/
dollars in millions Balance Interest Rate Balance Interest Rate

Total commercial loans $54,932 $(83) (.58)% $54,932 $755 5.52%

Total earning assets 89,742 422 1.89 89,742 1,260 5.63
Total interest-bearing
liabilities 77,172 522 2.75 77,172 522 2.75
Interest rate spread (TE) (.86)% 2.88%
Net interest income (TE)
and net interest
margin (TE) (100) (.44)% 738 3.32%
TE adjustment (458) 21
Net interest income $358 $717

TE = Taxable Equivalent

Excluding the charges associated with the leveraged lease tax litigation,
Key's taxable-equivalent net interest income was $738 million for the second
quarter of 2008, compared to $706 million for the year-ago quarter. Average
earning assets rose by $8.2 billion, or 10%, due primarily to 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 adjusted
net interest margin for the current quarter declined to 3.32% from 3.46% for
the second quarter of 2007. The reduction was attributable largely to tighter
loan and deposit spreads caused by competitive pricing, and a higher level of
nonperforming assets.
Compared to the first quarter of 2008, Key's taxable-equivalent net
interest income and net interest margin were essentially unchanged, after
excluding the effects of charges recorded in connection with leveraged lease
transactions in both periods. During the first quarter of 2008, Key increased
its tax reserves for certain lease in, lease out transactions and recalculated
its income under FASB Staff Position No. 13-2. 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. On an
adjusted basis, Key had taxable-equivalent net interest income of $738 million
and a net interest margin of 3.29% for the first quarter of 2008.
Key's noninterest income was $555 million for the second quarter of 2008,
compared to $649 million for the year-ago quarter. The decrease was
attributable largely to net losses of $14 million from principal investing in
the second quarter of 2008, compared to net gains of $90 million for the same
period last year. Additionally, results for the second quarter of 2007
benefited from a $40 million gain related to the sale of MasterCard
Incorporated shares. These factors were offset in part by higher income from
several fee-based businesses. Income from investment banking and capital
markets activities rose by $28 million, trust and investment services income
was up $23 million, and income from deposit service charges grew by $9
million.
The major components of Key's fee-based income for the past five quarters
are shown in the following table.

in millions 2Q08 1Q08 4Q07 3Q07 2Q07

Trust and investment services income $138 $129 $131 $119 $115
Service charges on deposit accounts 93 88 90 88 84
Investment banking and capital
markets income 80 8 12 9 52
Operating lease income 68 69 72 70 66
Letter of credit and loan fees 51 37 58 51 45
Corporate-owned life insurance income 28 28 37 27 32
Electronic banking fees 27 24 25 25 25

Compared to the first quarter of 2008, noninterest income increased by $27
million. Excluding the $165 million gain from the partial redemption of Visa
Inc. shares recorded in the first quarter, noninterest income was up $192
million, reflecting improvements in both capital markets-driven businesses and
other fee-based businesses. The improvement in Key's capital markets-driven
businesses was attributable to improved execution, market conditions and the
previously announced actions taken by management during the first quarter of
2008 to mitigate the effects of future market volatility on Key's
held-for-sale and trading portfolios.
During the second quarter of 2008, Key recorded $33 million in net gains
from loan sales and mark-to-market adjustments, compared to $101 million in
net losses from loan sales and write-downs (primarily commercial real estate
loans held for sale) for the first quarter. Additionally, income from
investment banking and capital markets activities increased by $72 million,
due primarily to a $49 million contribution from dealer trading and
derivatives, and a $14 million increase in investment banking income. Net
losses from principal investing totaled $14 million for the second quarter of
2008, compared to net gains of $9 million for the prior quarter.
Trust and investment services income grew by $9 million from the first
quarter of 2008, driven by growth in income from brokerage commissions and
fees. The company also experienced increases of $14 million in syndication
and other loan-related fees, and $5 million in income from deposit service
charges.
Key's noninterest expense was $781 million for the second quarter of 2008,
compared to $815 million for the same period last year. Personnel expense
decreased by $7 million, due primarily to a reduction in costs associated with
employee benefits. Nonpersonnel expense decreased by $27 million from the
year-ago quarter, due to a $42 million litigation charge recorded during the
second quarter of 2007, offset in part by a $7 million increase in
professional fees.
Compared to the first quarter of 2008, noninterest expense rose by $49
million. Personnel expense decreased by $5 million, while nonpersonnel
expense was up $54 million, due primarily to a $2 million credit for losses on
lending-related commitments in the current quarter, compared to a $27 million
credit in the prior quarter. Also contributing to the growth were increases
in professional fees and marketing expense of $10 million and $7 million,
respectively.
ASSET QUALITY
Key's provision for loan losses from continuing operations was $647
million for the second quarter of 2008, compared to $53 million for the
year-ago quarter and $187 million for the first quarter of 2008. The increase
in the provision was due primarily to a higher level of net loan charge-offs
recorded in the commercial real estate portfolio. As previously reported, Key
had undertaken a process to aggressively reduce its exposure in the
residential properties segment of its construction loan portfolio through the
planned sale of certain loans. In conjunction with these efforts, Key
transferred $384 million of commercial real estate loans ($719 million, net of
$335 million in net charge-offs) from the held-to-maturity loan portfolio to
held-for-sale status in June. In excess of 100 bids were received in this
process. As of June 30, 2008, sales had already closed on $44 million of
these loans. With respect to the balance, Key is working with numerous
bidders to finalize sales terms and documentation, and management anticipates
that sales of the majority of the remaining $340 million of loans, which are
on nonperforming status, will close during the third quarter. Key's provision
for loan losses for the second quarter of 2008 exceeded its net loan
charge-offs by $123 million, as the company continued to build reserves.
Selected asset quality statistics for Key for each of the past five
quarters are presented in the following table.

dollars in millions 2Q08 1Q08 4Q07 3Q07 2Q07

Net loan charge-offs $524 $121 $119 $59 $53
Net loan charge-offs to
average loans from
continuing operations 2.75% .67% .67% .35% .32%
Nonperforming loans at
period end $814 $1,054 $687 $498 $276
Nonperforming loans to
period-end portfolio
loans 1.07% 1.38% .97% .72% .41%
Nonperforming assets at
period end $1,210 $1,115 $764 $570 $378
Nonperforming assets to
period-end portfolio
loans plus OREO and other
nonperforming assets 1.59% 1.46% 1.08% .83% .57%
Allowance for loan losses $1,421 $1,298 $1,200 $955 $945
Allowance for loan losses
to period-end loans 1.87% 1.70% 1.69% 1.38% 1.42%
Allowance for loan
losses to nonperforming
loans 174.57 123.15 174.67 191.77 342.39

Net loan charge-offs for the quarter totaled $524 million, or 2.75% of
average loans from continuing operations, compared to $53 million, or 0.32%,
for the same period last year and $121 million, or 0.67%, for the previous
quarter. Net loan charge-offs from the commercial real estate and educational
loan portfolios totaled $354 million and $54 million, respectively, in the
current quarter. The net charge-offs in the commercial real estate portfolio
reflect the actions previously mentioned, while the educational loan
charge-offs derived from approximately $780 million of noncore loans,
predominately loans associated with non-Title IV schools, which the company
stopped underwriting in mid-2006.
Key's net loan charge-offs by loan type for each of the past five quarters
are shown in the table below.

dollars in millions 2Q08 1Q08 4Q07 3Q07 2Q07

Commercial, financial and
agricultural $61 $36 $35 $22 $24
Real estate -- commercial
mortgage 15 4 1 2 4
Real estate -- construction 339 25 44 6 2
Commercial lease financing 14 9 6 8 5
Total consumer loans 95 47 33 21 18
Total net loan charge-offs $524 $121 $119 $59 $53

Net loan charge-offs to average
loans from continuing
operations 2.75% .67% .67% .35% .32%

The company expects net loan charge-offs to be below the second quarter
level during the remainder of 2008; however, net loan charge-offs are expected
to remain at elevated levels. Additionally, the company expects net loan
charge-offs to be in the range of 1.20% to 1.60% of average loans for the
third and fourth quarters of 2008.
At June 30, 2008, Key's nonperforming loans totaled $814 million and
represented 1.07% of period-end portfolio loans, compared to 1.38% at March
31, 2008, and 0.41% at June 30, 2007. At the same time, nonperforming assets
totaled $1.210 billion and represented 1.59% of portfolio loans, other real
estate owned and other nonperforming assets, compared to 1.46% at March 31,
2008, and 0.57% at June 30, 2007. The decrease in nonperforming loans and the
increase in nonperforming assets during the second quarter were largely
attributable to the transfer of commercial real estate construction loans
(principally those in Florida and southern California) to held-for-sale
status. Also contributing to the rise in nonperforming assets was an increase
in the level of commercial loans (principally to businesses tied to
residential construction properties) on nonaccrual status.
The following table illustrates the trend in Key's nonperforming assets by
loan type over the past five quarters.

dollars in millions 2Q08 1Q08 4Q07 3Q07 2Q07

Commercial, financial and
agricultural $259 $147 $84 $94 $83
Real estate -- commercial
mortgage 107 113 41 41 41
Real estate -- construction 256 610 415 228 23
Commercial lease financing 57 38 28 30 34
Total consumer loans 135 146 119 105 95
Total nonperforming loans 814 1,054 687 498 276
Nonperforming loans held for
sale 342 9 25 6 4
OREO and other nonperforming
assets 54 52 52 66 98
Total nonperforming
assets $1,210 $1,115 $764 $570 $378

Nonperforming loans to
period-end portfolio loans 1.07% 1.38% .97% .72% .41%
Nonperforming assets to
period-end portfolio loans,
plus OREO and other
nonperforming assets 1.59 1.46 1.08 .83 .57

Key's allowance for loan losses was $1.421 billion, or 1.87% of loans
outstanding, at June 30, 2008, compared to $1.298 billion, or 1.70%, at March
31, 2008, and $945 million, or 1.42%, at June 30, 2007.
CAPITAL
Key's capital ratios, as presented in the following table, continued to
exceed all "well-capitalized" regulatory benchmarks at June 30, 2008.

Capital Ratios
6-30-08 3-31-08 6-30-07

Tier 1 risk-based capital (a) 8.49% 8.33% 8.14%
Total risk-based capital (a) 12.35 12.34 12.15
Tangible equity to tangible assets 6.98 6.85 6.97

(a) 6-30-08 ratio is estimated.

As previously announced, during the second quarter of 2008, Key took
several actions to preserve its capital strength in light of the charges
recorded in response to the federal court ruling on the tax treatment of a
service contract lease transaction. Key issued $650 million, or 6.5 million
shares, of noncumulative perpetual convertible preferred stock with a
liquidation value of $100 per share, and $1.0 billion, or 85.1 million
additional common shares. Further Key's Board of Directors announced its
intention to reduce the dividend on Key's common shares by 50% to an
annualized dividend of $0.75 per share commencing with the dividend declared
on July 18, 2008.
As part of the over allotment granted by Key to the underwriters on June
12, 2008, Key issued 7 million additional common shares and 75,000 additional
shares of noncumulative perpetual convertible preferred stock on July 11,
2008. The proceeds received as a result of these issuances totaled
approximately $90 million, and represented approximately 9 basis points of
additional Tier 1 and total capital.
During the second quarter, Key reissued .5 million of its common shares
under employee benefit plans. There was no repurchase activity by Key during
the second quarter, and the company currently does not anticipate any share
repurchase activity during the remainder of 2008.
Share issuances and repurchases that caused the change in Key's
outstanding common shares over the past five quarters are summarized in the
following table.

Summary of Changes in Common Shares Outstanding

in thousands 2Q08 1Q08 4Q07 3Q07 2Q07

Shares outstanding at
beginning of period 400,071 388,793 388,708 389,362 394,483
Common shares issued 85,106 --- --- --- ---
Shares reissued to acquire
U.S.B. Holding Co., Inc. --- 9,895 --- --- ---
Shares reissued under
employee benefit plans 485 1,383 85 1,346 879
Common shares repurchased --- --- --- (2,000) (6,000)
Shares outstanding at end
of period 485,662 400,071 388,793 388,708 389,362

LINE OF BUSINESS RESULTS
The following table shows the contribution made by each major business
group to Key's taxable-equivalent revenue and (loss) 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
2Q08 vs.
dollars in millions 2Q08 1Q08 2Q07 1Q08 2Q07

Revenue from continuing
operations (TE)
Community Banking $659 $630 $631 4.6% 4.4%
National Banking (a) (126) 439 612 N/M N/M
Other Segments (31) 26 101 N/M N/M
Total Segments 502 1,095 1,344 (54.2) (62.6)
Reconciling Items (c) (47) 137 11 N/M N/M
Total $455 $1,232 $1,355 (63.1)% (66.4)%

(Loss) income from continuing
operations
Community Banking $104 $115 $102 (9.6)% 2.0%
National Banking (a) (670) (24) 157 N/M N/M
Other Segments (b) (13) 21 55 N/M N/M
Total Segments (579) 112 314 N/M N/M
Reconciling Items (c) (547) 106 23 N/M N/M
Total $(1,126) $218 $337 N/M N/M

(a) During the second quarter of 2008, National Banking's
taxable-equivalent net interest income and net income were
reduced by $838 million and $536 million, respectively, as a result of
an adverse federal court ruling on the tax treatment of a service
contract lease transaction. During the prior quarter, National
Banking increased its tax reserves for certain lease in, lease out
transactions and recalculated its lease income in accordance with
prescribed accounting standards. These actions reduced National
Banking's taxable-equivalent revenue by $34 million and its net income
by $21 million in the first quarter.

(b) Other Segments' results for the second quarter of 2007 include a $26
million ($16 million after tax) charge for litigation. This charge
and the litigation charge referred to in note (c) below comprise the
$42 million charge recorded in connection with the Honsador
litigation.

(c) Reconciling Items for the second quarter of 2008 include a $475
million charge to income taxes for the interest cost associated with
the leveraged lease tax litigation. Reconciling Items for the prior
quarter include a $165 million ($103 million after tax) gain from the
partial redemption of Key's equity interest in Visa Inc. and a $17
million charge to income taxes for the interest cost associated with
the increase to Key's tax reserves for certain lease in, lease out
transactions. Reconciling Items for the second quarter of 2007
include a $40 million ($25 million after tax) gain related to
MasterCard Incorporated shares, and a $16 million ($10 million after
tax) charge for litigation.

TE = Taxable Equivalent, N/M = Not Meaningful

Community Banking
Percent change
2Q08 vs.
dollars in millions 2Q08 1Q08 2Q07 1Q08 2Q07

Summary of operations
Net interest income (TE) $437 $423 $417 3.3% 4.8%
Noninterest income 222 207 214 7.2 3.7
Total revenue (TE) 659 630 631 4.6 4.4
Provision for loan
losses 44 18 21 144.4 109.5
Noninterest expense 449 428 446 4.9 .7
Income before income
taxes (TE) 166 184 164 (9.8) 1.2
Allocated income taxes
and TE adjustments 62 69 62 (10.1) ---
Net income $104 $115 $102 (9.6)% 2.0%

Percent of consolidated
income from continuing
operations N/M 53% 30% N/A N/A

Average balances
Loans and leases $28,478 $28,128 $26,574 1.2% 7.2%
Total assets 31,385 31,068 29,346 1.0 6.9
Deposits 49,948 49,767 46,126 .4 8.3

Assets under management
at period end $19,366 $20,049 $21,061 (3.4)% (8.0)%

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

Additional Community
Banking Data Percent change
2Q08 vs.
dollars in millions 2Q08 1Q08 2Q07 1Q08 2Q07

Average deposits
outstanding
NOW and money market
deposit accounts $19,656 $19,865 $18,970 (1.1)% 3.6%
Savings deposits 1,804 1,754 1,619 2.9 11.4
Certificates of deposit
($100,000 or more) 6,661 6,435 4,709 3.5 41.5
Other time deposits 12,735 12,778 12,038 (.3) 5.8
Deposits in foreign
office 1,306 1,256 1,046 4.0 24.9
Noninterest-bearing
deposits 7,786 7,679 7,744 1.4 .5
Total deposits $49,948 $49,767 $46,126 .4% 8.3%

Home equity loans
Average balance $9,766 $9,693 $9,660
Weighted-average
loan-to-value ratio 70% 70% 70%
Percent first lien
positions 55 56 58
Other data
On-line households/
household
penetration 759,003/45% 749,512/45% 723,955/44%
Branches 985 985 954
Automated teller
machines 1,479 1,479 1,450

Community Banking Summary of Operations
Community Banking recorded net income of $104 million for the second
quarter of 2008, compared to $102 million for the year-ago quarter. Increases
in both net interest income and noninterest income accounted for the
improvement, but were substantially offset by a higher provision for loan
losses.
Taxable-equivalent net interest income rose by $20 million, or 5%, from
the second quarter of 2007. The increase was attributable to a $1.9 billion,
or 7%, rise in average earning assets, due largely to growth in the commercial
loan portfolio, and a $3.8 billion, or 8%, increase in average deposits. Both
loans and deposits experienced organic growth and 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.
Noninterest income increased by $8 million, or 4%, from the same period
one year ago, reflecting strong growth in bank channel investment product
sales income and deposit service charge income.
The provision for loan losses rose by $23 million, or 110%, compared to
the second quarter of 2007, reflecting a $12 million increase in net loan
charge-offs and the remainder a provision for general weakness in the economy.
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
2Q08 vs.
dollars in millions 2Q08 1Q08 2Q07 1Q08 2Q07

Summary of operations
Net interest income (TE) $(472)(a) $339 $339 N/M N/M
Noninterest income 346 100 273 246.0% 26.7%
Total revenue (TE) (126) 439 612 N/M N/M
Provision for loan
losses 609 169 32 260.4 N/M
Noninterest expense 337 308 330 9.4 2.1
(Loss) income from
continuing operations
before income taxes
(TE) (1,072) (38) 250 N/M N/M
Allocated income taxes
and TE adjustments (402) (14) 93 N/M N/M
(Loss) income from
continuing operations (670) (24) 157 N/M N/M
Loss from discontinued
operations, net of
taxes --- --- (3) --- 100.0%
Net (loss) income $(670) $(24) $154 N/M N/M

Percent of consolidated
income from continuing
operations N/M N/M 47% N/A N/A

Average balances from
continuing operations
Loans and leases $47,876 $44,149 $39,325 8.4% 21.7%
Loans held for sale 1,282 4,932 4,377 (74.0) (70.7)
Total assets 56,242 56,219 49,585 --- 13.4
Deposits 12,289 11,888 12,082 3.4 1.7

Assets under management
at period end $61,632 $60,404 $64,531 2.0% (4.5)%

(a) During the second quarter of 2008, National Banking's
taxable-equivalent net interest income and net income were reduced
by $838 million and $536 million, respectively, as a result of an
adverse federal court ruling on the tax treatment of a service
contract lease transaction. During the prior quarter, National
Banking increased its tax reserves for certain lease in, lease out
transactions and recalculated its lease income in accordance with
prescribed accounting standards. These actions reduced National
Banking's taxable-equivalent revenue by $34 million and its net income
by $21 million in the first quarter.

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

National Banking Summary of Continuing Operations
National Banking recorded a loss of $670 million from continuing
operations for the second quarter of 2008, compared to income of $157 million
from continuing operations for the same period last year. During the second
quarter of 2008, National Banking's net interest income was adversely affected
by a federal court ruling on the tax treatment of a segment of Key's leveraged
lease financing portfolio as further described below. Also contributing to
the less favorable results compared to the year-ago quarter were a
substantially higher provision for loan losses and an increase in noninterest
expense, offset in part by significant growth in noninterest income.
National Banking's taxable-equivalent net interest income for the second
quarter of 2008 was reduced significantly as a result of an adverse federal
court ruling on the company's tax treatment of a service contract lease
transaction entered into by AWG Leasing Trust, in which Key is a partner. As
a result of this ruling, 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," National Banking
recalculated its lease income from inception for this particular transaction,
as well as any other lease financing transactions being contested by the
Internal Revenue Service. Excluding the additional charges associated with
these actions, taxable-equivalent net interest income grew by $27 million, or
8%, from the second quarter of 2007 as a result of increases in average
earning assets and deposits, offset in part by tighter loan and deposit
spreads and a higher level of nonperforming assets. Average loans and leases
grew by $8.6 billion, or 22%, while average deposits rose by $207 million, or
2%, from the year-ago quarter.
Noninterest income increased by $73 million, or 27%, reflecting higher
income from several fee-based businesses. Income from investment banking and
capital markets activities rose by $35 million, while trust and investment
services income was up $23 million. Increases in income from tuition payment
plan processing, as well as syndication and other loan-related fees also
contributed to the improvement.
The provision for loan losses rose by $577 million, due primarily to a
higher level of net loan charge-offs recorded in the commercial real estate
portfolio. National Banking's provision for loan losses for the second
quarter of 2008 exceeded its net loan charge-offs by $123 million, as the
company continued to build reserves.
Other Segments
Other segments consist of Corporate Treasury and Key's Principal Investing
unit. These segments generated a net loss of $13 million for the second
quarter of 2008, compared to net income of $55 million for the same period
last year. These results reflect net losses of $14 million from principal
investing in the second quarter of 2008, compared to net gains of $90 million
for the year-ago quarter.
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 through its KeyBanc Capital Markets
unit, 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 its Victory Capital Management unit, Institutional and Capital
Markets also manages or offers 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 offers loans to consumers on a direct basis and an
indirect basis through dealers. It also provides federal and private
education loans to students and their parents, and processes tuition payments
for private schools. Through its Commercial Floor Plan Lending unit, Consumer
Finance 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 $102 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.
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.

ADD: /FIRST AND FINAL ADD - CLTU003 - KeyCorp Reports Second Quarter 2008
Results/ Financial Highlights
(dollars in millions, except per share amounts)

Three months ended
6-30-08 3-31-08 6-30-07
Summary of operations
Net interest income (TE) $(100) (a) $704 (a) $706
Noninterest income 555 528 649
Total revenue (TE) 455 1,232 1,355
Provision for loan losses 647 187 53
Noninterest expense 781 732 815
(Loss) income from continuing
operations (1,126) 218 337
Loss from discontinued operations,
net of taxes (b) -- -- (3)
Net (loss) income (1,126) (a) 218 (a) 334
Net (loss) income applicable to
common shares (1,126) 218 334

Per common share
(Loss) income from continuing
operations $(2.70) $.55 $.86
(Loss) income from continuing
operations - assuming dilution (2.70) .54 .85
Loss from discontinued operations (b) -- -- (.01)
Loss from discontinued operations -
assuming dilution (b) -- -- (.01)
Net (loss) income (2.70) .55 .85
Net (loss) income - assuming dilution (2.70) (a) .54 (a) .84
Cash dividends paid .375 .375 .365
Book value at period end 16.59 21.48 19.78
Tangible book value at period end 13.00 17.07 16.41
Market price at period end 10.98 21.95 34.33

Performance ratios - from continuing
operations
Return on average total assets (4.38)% .85 % 1.45 %
Return on average common equity (53.35) 10.38 17.66
Return on average total equity (52.56) 10.38 17.66
Net interest margin (TE) (.44) 3.14 3.46

Performance ratios - from consolidated
operations
Return on average total assets (4.38)% (a) .85 % (a) 1.43 %
Return on average common equity (53.35)(a) 10.38(a) 17.50
Return on average total equity (52.56)(a) 10.38(a) 17.50
Net interest margin (TE) (.44)(a) 3.14(a) 3.46

Capital ratios at period end
Equity to assets 8.57 % 8.47 % 8.28 %
Tangible equity to tangible assets 6.98 6.85 6.97
Tier 1 risk-based capital (c) 8.49 8.33 8.14
Total risk-based capital (c) 12.35 12.34 12.15
Leverage (c) 9.33 9.15 9.11

Asset quality
Net loan charge-offs $524 $121 $53
Net loan charge-offs to average loans
from continuing operations 2.75 % .67 % .32 %
Allowance for loan losses $1,421 $1,298 $945
Allowance for loan losses to period-
end loans 1.87 % 1.70 % 1.42 %
Allowance for loan losses to
nonperforming loans 174.57 123.15 342.39
Nonperforming loans at period end $814 $1,054 $276
Nonperforming assets at period end 1,210 1,115 378
Nonperforming loans to period-end
portfolio loans 1.07 % 1.38 % .41 %
Nonperforming assets to period-end
portfolio loans plus
OREO and other nonperforming assets 1.59 1.46 .57

Trust and brokerage assets
Assets under management $80,998 $80,453 $85,592
Nonmanaged and brokerage assets 29,905 30,532 33,485

Other data
Average full-time equivalent
employees 18,164 18,426 18,888
Branches 985 985 954

Taxable-equivalent adjustment $(458) $(9) $20

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

Six months ended
6-30-08 6-30-07
Summary of operations
Net interest income (TE) $604 (a) $1,406
Noninterest income 1,083 1,303
Total revenue (TE) 1,687 2,709
Provision for loan losses 834 97
Noninterest expense 1,513 1,599
(Loss) income from continuing
operations (908) 695
Loss from discontinued operations,
net of taxes (b) -- (11)
Net (loss) income (908)(a) 684
Net (loss) income applicable to
common shares (908) 684

Per common share
(Loss) income from continuing
operations $(2.23) $1.76
(Loss) income from continuing
operations - assuming dilution (2.23) 1.74
Loss from discontinued operations (b) -- (.03)
Loss from discontinued operations -
assuming dilution (b) -- (.03)
Net (loss) income (2.23) 1.73
Net (loss) income - assuming
dilution (2.23)(a) 1.71
Cash dividends paid .75 .73

Performance ratios - from continuing
operations
Return on average total assets (1.77)% 1.51 %
Return on average common equity (21.57) 18.35
Return on average total equity (21.40) 18.35
Net interest margin (TE) 1.35 3.48

Performance ratios - from consolidated
operations
Return on average total assets (1.77)% (a) 1.49 %
Return on average common equity (21.57)(a) 18.06
Return on average total equity (21.40)(a) 18.06
Net interest margin (TE) 1.35 (a) 3.49

Asset quality
Net loan charge-offs $645 $97
Net loan charge-offs to average
loans from continuing operations 1.74 % .30 %

Other data
Average full-time equivalent
employees 18,295 19,342

Taxable-equivalent adjustment $(467) $41

(a) The following table entitled "GAAP to Non-GAAP Reconciliations"
presents computations of certain earnings data and performance ratios,
excluding charges related to the tax treatment of certain leveraged lease
financing transactions disallowed by the Internal Revenue Service. The table
reconciles the related GAAP measures to these non-GAAP measures and provides a
basis for period-to-period comparisons.
(b) 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.
(c) 6-30-08 ratio is estimated.

TE = Taxable Equivalent

GAAP to Non-GAAP Reconciliations
(dollars in millions, except per share amounts)

As a result of an adverse federal court ruling on Key's tax treatment of a
service contract lease transaction entered into by AWG Leasing Trust, in
which Key is a partner, Key recorded after-tax charges of $1.011 billion, or
$2.43 per common share, during the second quarter of 2008. Additionally,
during the first quarter of 2008, Key increased its tax reserves for certain
lease in, lease out transactions and recalculated its lease income in
accordance with prescribed accounting standards, resulting in after-tax
charges of $38 million, or $0.10 per common share. The table below presents
computations of certain earnings data and performance ratios, excluding these
charges (non-GAAP), reconciles the related GAAP measures to these non-GAAP
measures and provides a basis for period-to-period comparisons. Non-GAAP
financial measures have inherent limitations, are not required to be uniformly
applied and are not audited. Non-GAAP financial measures should not be
considered in isolation, or as a substitute for analyses of results as
reported under GAAP.
Six
Three months ended months ended
6-30-08 3-31-08 6-30-08
Net income
Net (loss) income (GAAP) A $(1,126) $218 $(908)
Charges related to leveraged lease
tax litigation, after tax 1,011 38 1,049
Net (loss) income, excluding
charges related to leveraged
lease tax litigation (non-GAAP) B $(115) $256 $141

Weighted-average common shares
and potential common shares
outstanding (000) C 416,629 399,769 407,875

Per common share
Net (loss) income - assuming
dilution (GAAP) A/C $(2.70) $.54 $(2.23)
Net (loss) income, excluding
charges related to leveraged
lease tax litigation -
assuming dilution (non-GAAP) B/C (.28) .64 .34

Performance ratios

Return on average total
assets (a)

Average total assets D $103,290 $103,356 $103,323

Return on average total assets
(GAAP) A/D (4.38)% .85 % (1.77)%
Return on average total assets,
excluding charges related to
leveraged lease tax
litigation (non-GAAP) B/D (.45) 1.00 .27

Return on average common
equity (a)

Average common equity E $8,489 $8,445 $8,467

Return on average common equity
(GAAP) A/E (53.35)% 10.38 % (21.57)%
Return on average common equity,
excluding charges related to
leveraged lease tax
litigation (non-GAAP) B/E (5.45) 12.19 3.35

Return on average total
equity (a)

Average total equity F $8,617 $8,445 $8,531

Return on average total equity
(GAAP) A/F (52.56)% 10.38 % (21.40)%
Return on average total equity,
excluding charges related to
leveraged lease tax
litigation (non-GAAP) B/F (5.37) 12.19 3.32

Net interest income
Net interest income (GAAP) $358 $713 $1,071
Charges related to leveraged lease
tax litigation, pre-tax 359 3 362
Net interest income, excluding
charges related to leveraged lease
tax litigation (non-GAAP) $717 $716 $1,433

Net interest income/margin (TE)
Net interest income (TE) (as
reported) $(100) $704 $604
Charges related to leveraged lease
tax litigation, pre-tax (TE) 838 34 872
Net interest income, excluding
charges related to leveraged lease
tax litigation (TE) (adjusted basis) $738 $738 $1,476

Net interest margin (TE) (as
reported) (.44)% 3.14 % 1.35 %
Impact of charges related to
leveraged lease tax litigation,
pre-tax (TE) 3.76 .15 1.95
Net interest margin, excluding
charges related to leveraged lease
tax litigation (TE) (adjusted basis) 3.32 % 3.29 % 3.30 %

(a) Income statement amount has been annualized in calculation.

TE = Taxable Equivalent

GAAP = U.S. generally accepted accounting principles

Consolidated Balance Sheets
(dollars in millions)

6-30-08 3-31-08 6-30-07
Assets
Loans $75,855 $76,444 $66,692
Loans held for sale 1,833 1,674 4,546
Securities available for sale 8,312 8,419 7,819
Held-to-maturity securities 25 29 37
Trading account assets 1,483 1,015 994
Short-term investments 826 577 471
Other investments 1,559 1,561 1,602
Total earning assets 89,893 89,719 82,161
Allowance for loan losses (1,421) (1,298) (945)
Cash and due from banks 1,912 1,730 1,818
Premises and equipment 748 712 600
Operating lease assets 1,089 1,070 1,110
Goodwill 1,598 1,599 1,202
Other intangible assets 146 164 110
Corporate-owned life insurance 2,917 2,894 2,822
Derivative assets 1,693 1,508 374
Accrued income and other assets 2,969 3,394 3,715
Total assets $101,544 $101,492 $92,967

Liabilities
Deposits in domestic offices:
NOW and money market deposit
accounts $27,278 $26,527 $23,315
Savings deposits 1,809 1,826 1,613
Certificates of deposit ($100,000
or more) 8,699 8,330 6,197
Other time deposits 12,541 12,933 11,832
Total interest-bearing
deposits 50,327 49,616 42,957
Noninterest-bearing deposits 10,561 10,896 14,199
Deposits in foreign office -
interest-bearing 3,508 4,190 3,443
Total deposits 64,396 64,702 60,599
Federal funds purchased and
securities sold under
repurchase agreements 2,088 3,503 4,362
Bank notes and other short-term
borrowings 5,985 5,464 2,476
Derivative liabilities 637 465 248
Accrued expense and other
liabilities 4,626 4,429 5,000
Long-term debt 15,106 14,337 12,581
Total liabilities 92,838 92,900 85,266

Shareholders' equity
Preferred stock 650 -- --
Common shares 577 492 492
Capital surplus 2,544 1,659 1,652
Retained earnings 7,461 8,737 8,720
Treasury stock, at cost (2,675) (2,689) (2,994)
Accumulated other comprehensive
income (loss) 149 393 (169)
Total shareholders' equity 8,706 8,592 7,701

Total liabilities and shareholders'
equity $101,544 $101,492 $92,967

Common shares outstanding (000) 485,662 400,071 389,362

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

Three months ended Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07
Interest income
Loans $717 $1,123 $1,176 $1,840 $2,337
Loans held for sale 20 87 82 107 157
Securities available for
sale 111 109 106 220 206
Held-to-maturity securities -- 1 -- 1 1
Trading account assets 10 13 7 23 14
Short-term investments 8 9 9 17 20
Other investments 14 12 15 26 28
Total interest income 880 1,354 1,395 2,234 2,763

Interest expense
Deposits 347 428 447 775 880
Federal funds purchased and
securities sold under
repurchase agreements 15 28 59 43 108
Bank notes and other short-
term borrowings 27 39 18 66 29
Long-term debt 133 146 185 279 381
Total interest expense 522 641 709 1,163 1,398

Net interest income 358 713 686 1,071 1,365
Provision for loan losses 647 187 53 834 97
Net interest income after
provision for loan losses (289) 526 633 237 1,268

Noninterest income
Trust and investment
services income 138 129 115 267 240
Service charges on deposit
accounts 93 88 84 181 159
Investment banking and
capital markets income 80 8 52 88 96
Operating lease income 68 69 66 137 130
Letter of credit and loan
fees 51 37 45 88 83
Corporate-owned life
insurance income 28 28 32 56 57
Electronic banking fees 27 24 25 51 49
Net gains (losses) from
loan securitizations and
sales 33 (101) 33 (68) 42
Net securities (losses)
gains (1) 3 2 2 (45)
Net (losses) gains from
principal investing (14) 9 90 (5) 119
Gain from redemption of
Visa Inc. shares -- 165 -- 165 --
Gain from sale of McDonald
Investments branch network -- -- -- -- 171
Other income 52 69 105 121 202
Total noninterest income 555 528 649 1,083 1,303

Noninterest expense
Personnel 404 409 411 813 839
Net occupancy 62 66 59 128 122
Computer processing 43 47 49 90 100
Operating lease expense 55 58 55 113 107
Professional fees 33 23 26 56 52
Equipment 23 24 24 47 49
Marketing 21 14 20 35 39
Other expense 140 91 171 231 291
Total noninterest expense 781 732 815 1,513 1,599
(Loss) income from
continuing operations
before income taxes (515) 322 467 (193) 972
Income taxes 611 104 130 715 277
(Loss) income from
continuing operations (1,126) 218 337 (908) 695
Loss from discontinued
operations, net of taxes -- -- (3) -- (11)
Net (loss) income $(1,126) $218 $334 $(908) $684

Net (loss) income applicable
to common shares $(1,126) $218 $334 $(908) $684

Per common share:
(Loss) income from
continuing operations $(2.70) $.55 $.86 $(2.23) $1.76
Net (loss) income (2.70) .55 .85 (2.23) 1.73

Per common share - assuming
dilution:
(Loss) income from
continuing operations $(2.70) $.54 $.85 $(2.23) $1.74
Net (loss) income (2.70) .54 .84 (2.23) 1.71

Cash dividends declared per
common share $.375 -- $.365 $.375 $.73

Weighted-average common
shares outstanding (000) 416,629 399,121 392,045 407,875 394,944
Weighted-average common
shares and potential
common shares
outstanding (000) 416,629 399,769 396,918 407,875 400,180

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

Second Quarter 2008
Average
Balance Interest Yield/Rate
Assets
Loans: (a,b)
Commercial, financial and
agricultural $26,057 $352 5.42 %
Real estate - commercial
mortgage 10,593 156 5.91
Real estate - construction 8,484 118 5.61
Commercial lease financing 9,798 (709) (28.94)(c)
Total commercial loans 54,932 (83) (.58)
Real estate - residential 1,918 30 6.12
Home equity:
Community Banking 9,765 140 5.78
National Banking 1,200 23 7.68
Total home equity loans 10,965 163 5.99
Consumer other - Community
Banking 1,271 33 10.34
Consumer other - National Banking:
Marine 3,646 56 6.26
Education 3,595 53 5.88
Other 325 7 8.21
Total consumer other -
National Banking 7,566 116 6.16
Total consumer loans 21,720 342 6.32
Total loans 76,652 259 1.37
Loans held for sale 1,356 20 5.94
Securities available for sale
(a,d) 8,315 111 5.40
Held-to-maturity securities (a) 25 -- 11.47
Trading account assets 1,041 10 3.88
Short-term investments 773 8 3.83
Other investments (d) 1,580 14 3.09
Total earning assets 89,742 422 1.89
Allowance for loan losses (1,338)
Accrued income and other assets 14,886
Total assets $103,290

Liabilities
NOW and money market deposit
accounts $27,158 102 1.51
Savings deposits 1,815 1 .27
Certificates of deposit
($100,000 or more) (e) 8,670 88 4.09
Other time deposits 12,751 135 4.27
Deposits in foreign office 4,121 21 1.95
Total interest-bearing
deposits 54,515 347 2.56
Federal funds purchased and
securities sold under repurchase
agreements 3,267 15 1.86
Bank notes and other short-term
borrowings 4,770 27 2.26
Long-term debt (e,f) 14,620 133 3.87
Total interest-bearing
liabilities 77,172 522 2.75
Noninterest-bearing deposits 10,617
Accrued expense and other
liabilities 6,884
Total liabilities 94,673

Shareholders' equity
Preferred stock 128
Common shareholders' equity 8,489
Total shareholders' equity 8,617

Total liabilities and
shareholders' equity $103,290

Interest rate spread (TE) (.86) %
Net interest income (TE) and net
interest margin (TE) (100)(c) (.44) %(c)
TE adjustment (a) (458)
Net interest income, GAAP basis $358

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 (c)
Total commercial loans 54,166 799 5.93
Real estate - residential 1,916 30 6.29
Home equity:
Community Banking 9,693 154 6.38
National Banking 1,260 24 7.74
Total home equity loans 10,953 178 6.54
Consumer other - Community
Banking 1,305 34 10.59
Consumer other - National Banking:
Marine 3,646 58 6.31
Education 363 7 8.04
Other 339 7 8.32
Total consumer other -
National Banking 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,d) 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 (d) 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) (e) 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 (e,f) 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
Preferred stock --
Common shareholders' equity 8,445
Total 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(c) 3.14 %(c)
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)

Second Quarter 2007
Average
Balance Interest Yield/Rate
Assets
Loans: (a,b)
Commercial, financial and
agricultural $21,856 $401 7.36 %
Real estate - commercial
mortgage 8,565 165 7.75
Real estate - construction 8,243 167 8.09
Commercial lease financing 10,096 142 5.62
Total commercial loans 48,760 875 7.19
Real estate - residential 1,472 24 6.57
Home equity:
Community Banking 9,660 172 7.15
National Banking 1,092 21 7.86
Total home equity loans 10,752 193 7.22
Consumer other - Community
Banking 1,370 37 10.64
Consumer other - National
Banking:
Marine 3,323 52 6.26
Education 329 8 9.56
Other 309 7 9.18
Total consumer other -
National Banking 3,961 67 6.76
Total consumer loans 17,555 321 7.33
Total loans 66,315 1,196 7.23
Loans held for sale 4,415 82 7.50
Securities available for sale
(a,d) 7,793 106 5.45
Held-to-maturity securities (a) 39 -- 6.72
Trading account assets 813 8 3.58
Short-term investments 671 8 4.93
Other investments (d) 1,541 15 3.68
Total earning assets 81,587 1,415 6.95
Allowance for loan losses (942)
Accrued income and other assets 12,767
Total assets $93,412

Liabilities
NOW and money market deposit
accounts $22,953 179 3.14
Savings deposits 1,633 1 .19
Certificates of deposit
($100,000 or more) (e) 6,237 79 5.03
Other time deposits 12,047 141 4.70
Deposits in foreign office 3,600 47 5.20
Total interest-bearing
deposits 46,470 447 3.85
Federal funds purchased and
securities sold under repurchase
agreements 4,748 59 5.04
Bank notes and other short-term
borrowings 1,771 18 4.14
Long-term debt (e,f) 12,909 185 5.83
Total interest-bearing
liabilities 65,898 709 4.33
Noninterest-bearing deposits 13,927
Accrued expense and other
liabilities 5,933
Total liabilities 85,758

Shareholders' equity
Preferred stock --
Common shareholders' equity 7,654
Total shareholders' equity 7,654

Total liabilities and
shareholders' equity $93,412

Interest rate spread (TE) 2.62 %
Net interest income (TE) and net
interest margin (TE) 706 3.46 %
TE adjustment (a) 20
Net interest income, GAAP basis $686

Average balances have not been restated to reflect Key's January 1, 2008,
adoption of Financial Accounting Standards Board ("FASB") Interpretation No.
39, "Offsetting of Amounts Related to Certain Contracts," and FASB Staff
Position FIN 39-1, "Amendment of FASB Interpretation 39."
(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) During the second quarter of 2008, Key's taxable-equivalent net
interest income and net income were reduced by $838 million and $1.011
billion, respectively, as a result of an adverse federal court ruling on Key's
tax treatment of a service contract lease transaction. Excluding this
reduction, the taxable-equivalent yield on Key's commercial lease financing
portfolio would have been 5.25% for the second quarter of 2008, and Key's
taxable-equivalent net interest margin would have been 3.32%. During the
prior quarter, Key increased its tax reserves for certain lease in, lease out
transactions and recalculated its lease income in accordance with prescribed
accounting standards. These actions reduced Key's first quarter 2008 taxable-
equivalent net interest income and net income by $34 million and $38 million,
respectively. Excluding this reduction, the taxable-equivalent yield on Key's
commercial lease financing portfolio would have been 5.27% for the first
quarter of 2008, and Key's taxable-equivalent net interest margin would have
been 3.29%.
(d) Yield is calculated on the basis of amortized cost.
(e) Rate calculation excludes basis adjustments related to fair value
hedges.
(f) 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

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

Six months ended Six months ended
June 30, 2008 June 30, 2007
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
Assets
Loans: (a,b)
Commercial,
financial and
agricultural $25,734 $744 5.81 % $21,710 $793 7.37 %
Real estate -
commercial
mortgage 10,438 331 6.37 8,496 328 7.79
Real estate -
construction 8,476 252 5.98 8,235 333 8.14
Commercial lease
financing 9,901 (611) (12.34)(c) 10,095 288 5.70
Total
commercial
loans 54,549 716 2.65 48,536 1,742 7.23
Real estate -
residential 1,917 60 6.20 1,458 48 6.58
Home equity:
Community Banking 9,729 294 6.08 9,668 343 7.15
National Banking 1,230 47 7.71 1,061 41 7.87
Total home
equity loans 10,959 341 6.26 10,729 384 7.22
Consumer other -
Community Banking 1,288 67 10.46 1,410 73 10.39
Consumer other -
National Banking:
Marine 3,646 114 6.28 3,221 101 6.27
Education 1,979 60 6.07 334 16 9.53
Other 332 14 8.27 306 14 9.10
Total consumer
other -
National
Banking 5,957 188 6.32 3,861 131 6.77
Total consumer
loans 20,121 656 6.55 17,458 636 7.33
Total loans 74,670 1,372 3.70 65,994 2,378 7.25
Loans held for sale 3,170 107 6.78 4,179 157 7.59
Securities
available for
sale (a,d) 8,367 221 5.34 7,671 206 5.36
Held-to-maturity
securities (a) 27 1 11.23 39 1 6.96
Trading account
assets 1,058 23 4.37 783 14 3.68
Short-term
investments 969 17 3.44 762 20 5.09
Other investments (d) 1,566 26 3.07 1,471 28 3.66
Total earning
assets 89,827 1,767 3.95 80,899 2,804 6.97
Allowance for loan
losses (1,287) (942)
Accrued income and
other assets 14,783 12,801
Total assets $103,323 $92,758

Liabilities
NOW and money
market deposit
accounts $27,077 241 1.79 $23,187 356 3.10
Savings deposits 1,840 4 .45 1,631 2 .19
Certificates of
deposit ($100,000
or more) (e) 8,371 183 4.39 6,194 155 5.03
Other time
deposits 12,755 281 4.43 12,055 279 4.67
Deposits in
foreign office 4,987 66 2.64 3,430 88 5.16
Total interest-
bearing
deposits 55,030 775 2.83 46,497 880 3.81
Federal funds
purchased and
securities
sold under
repurchase
agreements 3,565 43 2.43 4,328 108 5.04
Bank notes and
other short-term
borrowings 4,852 66 2.75 1,444 29 4.08
Long-term debt (e,f) 13,929 279 4.27 13,261 381 5.87
Total interest-
bearing
liabilities 77,376 1,163 3.05 65,530 1,398 4.31
Noninterest-
bearing deposits 10,679 13,584
Accrued expense
and other
liabilities 6,737 6,008
Total
liabilities 94,792 85,122

Shareholders' equity
Preferred stock 64 --
Common shareholders'
equity 8,467 7,636
Total
shareholders'
equity 8,531 7,636

Total
liabilities
and
shareholders'
equity $103,323 $92,758

Interest rate spread
(TE) .90 % 2.66 %
Net interest income
(TE) and net
interest margin
(TE) 604(c) 1.35 %(c) 1,406 3.48 %
TE adjustment (a) (467) 41
Net interest
income, GAAP
basis $1,071 $1,365

Average balances have not been restated to reflect Key's January 1, 2008,
adoption of Financial Accounting Standards Board ("FASB") Interpretation No.
39, "Offsetting of Amounts Related to Certain Contracts," and FASB Staff
Position FIN 39-1, "Amendment of FASB Interpretation 39."
(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) During the second quarter of 2008, Key's taxable-equivalent net
interest income and net income were reduced by $838 million and $1.011
billion, respectively, as a result of an adverse federal court ruling on Key's
tax treatment of a service contract lease transaction. During the prior
quarter, Key's taxable-equivalent net interest income and net income were
reduced by $34 million and $38 million, respectively, as a result of an
increase to Key's tax reserves for certain lease in, lease out transactions
and a recalculation of its lease income in accordance with prescribed
accounting standards. Excluding these reductions, the taxable-equivalent
yield on Key's commercial lease financing portfolio would have been 5.26% for
the first six months of 2008, and Key's taxable-equivalent net interest margin
would have been 3.30%.
(d) Yield is calculated on the basis of amortized cost.
(e) Rate calculation excludes basis adjustments related to fair value
hedges.
(f) 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 Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07
Trust and investment services
income (a) $138 $129 $115 $267 $240
Service charges on deposit accounts 93 88 84 181 159
Investment banking and capital
markets income (a) 80 8 52 88 96
Operating lease income 68 69 66 137 130
Letter of credit and loan fees 51 37 45 88 83
Corporate-owned life insurance income 28 28 32 56 57
Electronic banking fees 27 24 25 51 49
Net gains (losses) from loan
securitizations and sales 33 (101) 33 (68) 42
Net securities (losses) gains (1) 3 2 2 (45)
Net (losses) gains from principal
investing (14) 9 90 (5) 119
Gain from redemption of Visa Inc.
shares -- 165 -- 165 --
Gain from sale of McDonald
Investments branch network -- -- -- -- 171
Other income:
Insurance income 20 15 15 35 29
Loan securitization servicing
fees 5 4 6 9 11
Credit card fees 3 4 3 7 6
Gains related to MasterCard
Incorporated shares -- -- 40 -- 40
Litigation settlement -
automobile residual value
insurance -- -- -- -- 26
Miscellaneous income 24 46 41 70 90
Total other income 52 69 105 121 202
Total noninterest income $555 $528 $649 $1,083 $1,303

(a) Additional detail provided in tables below.

Trust and Investment Services Income
(in millions)

Three months ended Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Brokerage commissions and fee income $41 $33 $28 $74 $68
Personal asset management and custody
fees 40 41 41 81 81
Institutional asset management and
custody fees 57 55 46 112 91
Total trust and investment
services income $138 $129 $115 $267 $240

Investment Banking and Capital Markets Income
(in millions)

Three months ended Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Investment banking income $36 $22 $22 $58 $43
Income (loss) from other investments 1 (6) 6 (5) 11
Dealer trading and derivatives income
(loss) 28 (21) 12 7 20
Foreign exchange income 15 13 12 28 22
Total investment banking and
capital markets income $80 $8 $52 $88 $96

Noninterest Expense
(dollars in millions)

Three months ended Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Personnel (a) $404 $409 $411 $813 $839
Net occupancy 62 66 59 128 122
Computer processing 43 47 49 90 100
Operating lease expense 55 58 55 113 107
Professional fees 33 23 26 56 52
Equipment 23 24 24 47 49
Marketing 21 14 20 35 39
Other expense:
Postage and delivery 12 11 11 23 23
Franchise and business
taxes 8 8 8 16 17
Telecommunications 7 8 7 15 14
(Credit) provision for
losses on lending-
related commitments (2) (27) 6 (29) (2)
Miscellaneous expense 115 91 139 206 239
Total other expense 140 91 171 231 291
Total noninterest
expense $781 $732 $815 $1,513 $1,599

Average full-time equivalent
employees 18,164 18,426 18,888 (b) 18,295 19,342 (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 Six months ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Salaries $235 $239 $236 $474 $481
Incentive compensation 79 74 82 153 157
Employee benefits 65 76 73 141 155
Stock-based compensation 17 14 16 31 40
Severance 8 6 4 14 6
Total personnel expense $404 $409 $411 $813 $839

Loan Composition
(dollars in millions)

Percent change
6-30-08 vs.
6-30-08 3-31-08 6-30-07 3-31-08 6-30-07
Commercial, financial and
agricultural $25,929 $25,777 $21,814 .6 % 18.9 %
Commercial real estate:
Commercial mortgage 10,737 10,479 8,629 2.5 24.4
Construction 7,849 8,473 8,214 (7.4) (4.4)
Total commercial real
estate loans 18,586 18,952 16,843 (1.9) 10.3
Commercial lease financing 9,610 10,000 10,138 (3.9) (5.2)
Total commercial loans 54,125 54,729 48,795 (1.1) 10.9
Real estate - residential
mortgage 1,928 1,954 1,572 (1.3) 22.6
Home equity:
Community Banking 9,851 9,678 9,736 1.8 1.2
National Banking 1,153 1,220 1,143 (5.5) .9
Total home equity loans 11,004 10,898 10,879 1.0 1.1
Consumer other - Community
Banking 1,261 1,266 1,366 (.4) (7.7)
Consumer other - National
Banking:
Marine 3,634 3,653 3,444 (.5) 5.5
Education (a) 3,584 3,608 327 (.7) 996.0
Other 319 336 309 (5.1) 3.2
Total consumer other -
National Banking 7,537 7,597 4,080 (.8) 84.7
Total consumer loans 21,730 21,715 17,897 .1 21.4
Total loans $75,855 $76,444 $66,692 (.8)% 13.7 %

Loans Held for Sale Composition
(dollars in millions)

Percent change
6-30-08 vs.
6-30-08 3-31-08 6-30-07 3-31-08 6-30-07
Commercial, financial and
agricultural $212 $291 $76 (27.1)% 178.9 %
Real estate - commercial
mortgage 994 1,139 1,613 (12.7) (38.4)
Real estate - construction 398 25 172 N/M 131.4
Commercial lease financing 42 31 22 35.5 90.9
Real estate - residential
mortgage 79 58 39 36.2 102.6
Home equity -- 1 -- (100.0) --
Education (a) 103 123 2,616 (16.3) (96.1)
Automobile 5 6 8 (16.7) (37.5)
Total loans held for sale $1,833 $1,674 $4,546 9.5 % (59.7)%

(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
6-30-08 3-31-08 6-30-07
Average loans outstanding from
continuing operations $76,652 $72,688 $66,315

Allowance for loan losses at
beginning of period $1,298 $1,200 $944
Loans charged off:
Commercial, financial and
agricultural 75 50 30

Real estate - commercial
mortgage 15 4 5
Real estate - construction 340 25 2
Total commercial real
estate loans 355 29 7
Commercial lease financing 18 15 9
Total commercial loans 448 94 46
Real estate - residential
mortgage 2 4 1
Home equity:
Community Banking 9 9 5
National Banking 11 7 3
Total home equity loans 20 16 8
Consumer other - Community Banking 11 9 8
Consumer other - National Banking:
Marine 16 19 6
Education 55 2 1
Other 2 4 2
Total consumer other -
National Banking 73 25 9
Total consumer loans 106 54 26
554 148 72
Recoveries:
Commercial, financial and
agricultural 14 14 6

Real estate - commercial
mortgage -- -- 1
Real estate - construction 1 -- --
Total commercial real estate
loans 1 -- 1
Commercial lease financing 4 6 4
Total commercial loans 19 20 11
Real estate - residential
mortgage 1 -- 1
Home equity:
Community Banking -- 1 1
National Banking 1 -- 1
Total home equity loans 1 1 2
Consumer other - Community Banking 1 2 1
Consumer other - National Banking:
Marine 6 3 3
Education 1 -- 1
Other 1 1 --
Total consumer other -
National Banking 8 4 4
Total consumer loans 11 7 8
30 27 19
Net loan charge-offs (524) (121) (53)
Provision for loan losses from
continuing operations 647 187 53
Allowance related to loans acquired,
net -- 32 --
Foreign currency translation
adjustment -- -- 1
Allowance for loan losses at end of
period $1,421 $1,298 $945

Net loan charge-offs to average loans
from continuing operations 2.75 % .67 % .32%
Allowance for loan losses to period-
end loans 1.87 1.70 1.42
Allowance for loan losses to
nonperforming loans 174.57 123.15 342.39

Summary of Loan Loss Experience
(dollars in millions)

Six months ended
6-30-08 6-30-07
Average loans outstanding from
continuing operations $74,670 $65,994

Allowance for loan losses at
beginning of period $1,200 $944
Loans charged off:
Commercial, financial and
agricultural 125 47

Real estate - commercial
mortgage 19 11
Real estate - construction 365 3
Total commercial real
estate loans 384 14
Commercial lease financing 33 22
Total commercial loans 542 83
Real estate - residential
mortgage 6 2
Home equity:
Community Banking 18 10
National Banking 18 6
Total home equity loans 36 16
Consumer other - Community Banking 20 15
Consumer other - National Banking:
Marine 35 14
Education 57 2
Other 6 4
Total consumer other -
National Banking 98 20
Total consumer loans 160 53
702 136
Recoveries:
Commercial, financial and
agricultural 28 13

Real estate - commercial
mortgage -- 4
Real estate - construction 1 --
Total commercial real estate
loans 1 4
Commercial lease financing 10 7
Total commercial loans 39 24
Real estate - residential
mortgage 1 1
Home equity:
Community Banking 1 2
National Banking 1 1
Total home equity loans 2 3
Consumer other - Community Banking 3 3
Consumer other - National Banking:
Marine 9 6
Education 1 1
Other 2 1
Total consumer other -
National Banking 12 8
Total consumer loans 18 15
57 39
Net loan charge-offs (645) (97)
Provision for loan losses from
continuing operations 834 97
Allowance related to loans acquired,
net 32 --
Foreign currency translation
adjustment -- 1
Allowance for loan losses at end of
period $1,421 $945

Net loan charge-offs to average loans
from continuing operations 1.74 % .30%
Allowance for loan losses to period-
end loans 1.87 1.42
Allowance for loan losses to
nonperforming loans 174.57 342.39

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

Six months
Three months ended ended
6-30-08 3-31-08 6-30-07 6-30-08 6-30-07

Balance at beginning of period $53 $80 $45 $80 $53
(Credit) provision for losses
on lending-related
commitments (2) (27) 6 (29) (2)
Charge-offs -- -- (1) -- (1)
Balance at end of period (a) $51 $53 $50 $51 $50

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

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

6-30-08 3-31-08 12-31-07 9-30-07 6-30-07
Commercial, financial and
agricultural $259 $147 $84 $94 $83

Real estate - commercial
mortgage 107 113 41 41 41
Real estate - construction 256 610 415 228 23
Total commercial real
estate loans 363 723 456 269 64
Commercial lease financing 57 38 28 30 34
Total commercial loans 679 908 568 393 181
Real estate - residential
mortgage 32 34 28 29 27
Home equity:
Community Banking 61 60 54 50 46
National Banking 14 14 12 11 9
Total home equity loans 75 74 66 61 55
Consumer other - Community
Banking 2 2 2 2 2
Consumer other - National
Banking:
Marine 20 20 20 12 10
Education 4 15 2 -- --
Other 2 1 1 1 1
Total consumer other
- National Banking 26 36 23 13 11
Total consumer loans 135 146 119 105 95
Total nonperforming loans 814 1,054 687 498 276

Nonperforming loans held for
sale 342 (b) 9 25 6 4

OREO 26 29 21 21 27
Allowance for OREO losses (2) (2) (2) (1) (2)
OREO, net of allowance 24 27 19 20 25

Other nonperforming assets (a) 30 25 33 46 73
Total nonperforming
assets $1,210 $1,115 $764 $570 $378

Accruing loans past due 90
days or more $367 $283 $231 $190 $181
Accruing loans past due 30
through 89 days 852 1,169 843 717 623
Nonperforming loans to period-
end portfolio loans 1.07 % 1.38 % .97 % .72 % .41 %
Nonperforming assets to
period-end portfolio loans
plus OREO and other
nonperforming assets 1.59 1.46 1.08 .83 .57

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

Summary of Changes in Nonperforming Loans
(in millions)

2Q08 1Q08 4Q07 3Q07 2Q07

Balance at beginning of period $1,054 $687 $498 $276 $254
Loans placed on nonaccrual
status 789 566 378 337 130
Charge-offs (547) (144) (147) (81) (72)
Loans sold (48) -- (13) (6) (7)
Payments (86) (32) (17) (13) (21)
Transfers to OREO -- (10) (5) (12) --
Transfer to nonperforming loans
held for sale (342) (8) -- -- --
Loans returned to accrual status (6) (5) (7) (3) (8)
Balance at end of period $814 $1,054 $687 $498 $276

Line of Business Results
(dollars in millions)

Community Banking

2Q08 1Q08 4Q07 3Q07 2Q07
Summary of operations
Total revenue (TE) $659 $630 $653 $628 $631
Provision for loan
losses 44 18 36 2 21
Noninterest expense 449 428 438 414 446
Net income 104 115 112 133 102
Average loans and
leases 28,478 28,128 27,234 26,944 26,574
Average deposits 49,948 49,767 47,254 46,729 46,126
Net loan charge-offs 38 30 31 19 26
Return on average
allocated equity 13.68 % 15.47 % 17.60 % 21.04 % 16.57 %
Average full-time
equivalent employees 8,785 8,714 8,454 8,625 9,026

Supplementary information
(lines of business)
Regional Banking
Total revenue (TE) $557 $531 $555 $533 $537
Provision for loan
losses 25 13 26 12 20
Noninterest expense 401 385 385 368 396
Net income 82 83 90 96 75
Average loans and
leases 19,608 19,472 18,771 18,667 18,471
Average deposits 46,246 46,176 43,696 43,237 42,725
Net loan charge-offs 33 29 26 17 20
Return on average
allocated equity 15.06 % 15.38 % 20.52 % 21.80 % 17.38 %
Average full-time
equivalent employees 8,439 8,365 8,101 8,264 8,655

Commercial Banking
Total revenue (TE) $102 $99 $98 $95 $94
Provision for loan
losses 19 5 10 (10) 1
Noninterest expense 48 43 53 46 50
Net income 22 32 22 37 27
Average loans and
leases 8,870 8,656 8,463 8,277 8,103
Average deposits 3,702 3,591 3,558 3,492 3,401
Net loan charge-offs 5 1 5 2 6
Return on average
allocated equity 10.21 % 15.73 % 11.12 % 19.29 % 14.67 %
Average full-time
equivalent employees 346 349 353 361 371

Line of Business Results
(dollars in millions)

Community Banking
Percent change 2Q08 vs.
1Q08 2Q07
Summary of operations
Total revenue (TE) 4.6 % 4.4 %
Provision for loan losses 144.4 109.5
Noninterest expense 4.9 .7
Net income (9.6) 2.0
Average loans and leases 1.2 7.2
Average deposits .4 8.3
Net loan charge-offs 26.7 46.2
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees .8 (2.7)

Supplementary information (lines of
business)
Regional Banking
Total revenue (TE) 4.9 % 3.7 %
Provision for loan losses 92.3 25.0
Noninterest expense 4.2 1.3
Net income (1.2) 9.3
Average loans and leases .7 6.2
Average deposits .2 8.2
Net loan charge-offs 13.8 65.0
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees .9 (2.5)

Commercial Banking
Total revenue (TE) 3.0 % 8.5 %
Provision for loan losses 280.0 N/M
Noninterest expense 11.6 (4.0)
Net income (31.3) (18.5)
Average loans and leases 2.5 9.5
Average deposits 3.1 8.9
Net loan charge-offs 400.0 (16.7)
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (.9) (6.7)

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

National Banking

2Q08 1Q08 4Q07 3Q07 2Q07
Summary of operations
Total revenue (TE) $(126) $439 $609 $505 $612
Provision for loan
losses 609 169 327 69 32
Noninterest expense 337 308 389 327 330
(Loss) income from
continuing operations (670) (24) (69) 68 157
Net (loss) income (670) (24) (66) 54 154
Average loans and
leases (a) 47,876 44,149 42,040 40,279 39,325
Average loans held
for sale (a) 1,282 4,932 4,709 4,692 4,377
Average deposits (a) 12,289 11,888 12,629 12,631 12,082
Net loan charge-
offs (a) 486 91 88 40 27
Return on average
allocated equity (a) (51.60)% (1.96)% (6.13)% 6.43 % 15.12 %
Return on average
allocated equity (51.60) (1.96) (5.86) 5.11 14.83
Average full-time
equivalent employees 3,603 3,758 4,010 3,869 3,856

Supplementary information
(lines of business)
Real Estate Capital and
Corporate Banking
Services
Total revenue (TE) $233 $77 $158 $128 $214
Provision for loan
losses 366 45 270 43 8
Noninterest expense 68 61 117 88 92
Net (loss) income (126) (18) (143) (2) 71
Average loans and
leases 17,086 16,484 15,003 14,160 13,713
Average loans held
for sale 616 989 1,257 1,584 1,246
Average deposits 10,460 9,787 10,397 10,243 9,447
Net loan charge-offs 376 38 45 7 3
Return on average
allocated equity (23.69)% (3.85)% (36.91)% (.56)% 20.43 %
Average full-time
equivalent employees 1,228 1,233 1,310 1,309 1,293

Equipment Finance
Total revenue (TE) $(694) $100 $181 $136 $150
Provision for loan
losses 36 24 23 16 16
Noninterest expense 89 96 97 94 94
Net (loss) income (512) (13) 38 16 25
Average loans and
leases 10,326 10,595 10,729 10,681 10,609
Average loans held
for sale 51 32 15 6 10
Average deposits 21 14 17 16 16
Net loan charge-offs 28 24 18 16 16
Return on average
allocated equity (225.30)% (5.66)% 16.53 % 7.10 % 11.43 %
Average full-time
equivalent employees 837 859 923 900 895

Institutional and Capital
Markets
Total revenue (TE) $231 $158 $171 $155 $159
Provision for loan
losses 36 16 15 (2) --
Noninterest expense 128 102 116 104 99
Net income 42 25 25 33 38
Average loans and
leases 7,897 7,633 7,219 6,716 6,566
Average loans held
for sale 494 555 394 373 463
Average deposits 1,384 1,460 1,560 1,844 2,072
Net loan charge-offs 5 2 6 6 --
Return on average
allocated equity 13.61 % 8.39 % 8.59 % 12.20 % 13.92 %
Average full-time
equivalent employees 931 938 979 1,019 992

Consumer Finance
Total revenue (TE) $104 $104 $99 $86 $89
Provision for loan
losses 171 84 19 12 8
Noninterest expense 52 49 59 41 45
(Loss) income from
continuing operations (74) (18) 11 21 23
Net (loss) income (74) (18) 14 7 20
Average loans and
leases (a) 12,567 9,437 9,089 8,722 8,437
Average loans held
for sale (a) 121 3,356 3,043 2,729 2,658
Average deposits (a) 424 627 655 528 547
Net loan charge-
offs (a) 77 27 19 11 8
Return on average
allocated equity (a) (32.07)% (7.87)% 5.06 % 10.36 % 11.56 %
Return on average
allocated equity (32.07) (7.87) 6.44 3.45 10.05
Average full-time
equivalent employees 607 728 798 641 676

(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 2Q08 vs.
1Q08 2Q07
Summary of operations
Total revenue (TE) N/M N/M
Provision for loan losses 260.4 % N/M
Noninterest expense 9.4 2.1 %
(Loss) income from continuing
operations N/M N/M
Net (loss) income N/M N/M
Average loans and leases (a) 8.4 21.7
Average loans held for sale (a) (74.0) (70.7)
Average deposits (a) 3.4 1.7
Net loan charge-offs (a) 434.1 N/M
Return on average allocated
equity (a) N/A N/A
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (4.1) (6.6)

Supplementary information (lines of
business)
Real Estate Capital and Corporate
Banking Services
Total revenue (TE) 202.6 % 8.9 %
Provision for loan losses 713.3 N/M
Noninterest expense 11.5 (26.1)
Net (loss) income (600.0) N/M
Average loans and leases 3.7 24.6
Average loans held for sale (37.7) (50.6)
Average deposits 6.9 10.7
Net loan charge-offs 889.5 N/M
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (.4) (5.0)

Equipment Finance
Total revenue (TE) N/M N/M
Provision for loan losses 50.0 % 125.0 %
Noninterest expense (7.3) (5.3)
Net (loss) income N/M N/M
Average loans and leases (2.5) (2.7)
Average loans held for sale 59.4 410.0
Average deposits 50.0 31.3
Net loan charge-offs 16.7 75.0
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (2.6) (6.5)

Institutional and Capital Markets
Total revenue (TE) 46.2 % 45.3 %
Provision for loan losses 125.0 N/M
Noninterest expense 25.5 29.3
Net income 68.0 10.5
Average loans and leases 3.5 20.3
Average loans held for sale (11.0) 6.7
Average deposits (5.2) (33.2)
Net loan charge-offs 150.0 N/M
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (.7) (6.1)

Consumer Finance
Total revenue (TE) -- 16.9 %
Provision for loan losses 103.6 % N/M
Noninterest expense 6.1 15.6
(Loss) income from continuing
operations (311.1) N/M
Net (loss) income (311.1) N/M
Average loans and leases (a) 33.2 49.0
Average loans held for sale (a) (96.4) (95.4)
Average deposits (a) (32.4) (22.5)
Net loan charge-offs (a) 185.2 862.5
Return on average allocated
equity (a) N/A N/A
Return on average allocated
equity N/A N/A
Average full-time equivalent
employees (16.6) (10.2)

(a) From continuing operations.

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

SOURCE KeyCorp

ANALYSTS, Jonathan I. Shulman, +1-216-689-3882,
Jonathan_I_Shulman@KeyBank.com, or Christopher F. Sikora, +1-216-689-3133,
Chris_F_Sikora@KeyBank.com, or MEDIA, William C. Murschel, +1-216-828-7416,
William_C_Murschel@KeyBank.com/ /FIRST AND FINAL ADD -- FINANCIAL MATERIAL --
TO FOLLOW