Profile: KeyCorp (KEY.N)
23 Jul 2014
KeyCorp, incorporated on December 31, 1958, is a bank holding company. It is a bank-based financial services company. KeyCorp is the parent holding company for KeyBank National Association (KeyBank), its principal subsidiary, through which most of its banking services are provided. Through KeyBank and certain other subsidiaries, the Company provides a range of retail and commercial banking, commercial leasing, investment management, consumer finance and investment banking products and services to individual, corporate and institutional clients through two major business segments: Key Community Bank and Key Corporate Bank. As of December 31, 2012, the Company provided services across the country through KeyBank’s 1,088 full-service retail banking branches in 14 states, additional offices, a telephone banking call center services group and a network of 1,611 automated teller machines (ATMs) in 15 states. On July 13, 2012, it acquired 37 retail banking branches in Western New York. On August 1, 2012, it acquired Key-branded credit card assets from Elan Financial Services, Inc. In August 2013, KeyCorp closed on its agreement to sell Victory Capital Management and its broker dealer affiliate Victory Capital Advisers.
KeyCorp’s bank and trust company subsidiaries offer personal and corporate trust services, personal financial services, access to mutual funds, cash management services, investment banking and capital markets products, and international banking services. Through its bank, trust companies and registered investment adviser subsidiaries, the Company provides investment management services to clients that include large corporate and public retirement plans, foundations and endowments, high-net-worth individuals and multi-employer trust funds established for providing pension or other benefits to employees. The Company provides other financial services - both within and outside of its primary banking markets - through various nonbank subsidiaries. These services include community development financing, securities underwriting and brokerage. It also is an equity participant in a joint venture that provides merchant services to businesses.
Key Community Bank serves individuals and small to mid-sized businesses by offering a range of deposit, investment, lending, credit card, and personalized wealth management products and services. These products and services are provided through its relationship managers and specialists working in its 14-state branch network, which is organized into three internally defined geographic regions: Rocky Mountains and Northwest, Great Lakes, and Northeast. Key Corporate Bank includes three lines of business that operate nationally, within and beyond its 14-state branch network: Real Estate Capital and Corporate Banking Services; Equipment Finance, and Institutional and Capital Markets. The Real Estate Capital and Corporate Banking Services business consists of two business units: Real Estate Capital professionals are located in select markets across the country and provide financial services for public and private owners, investors and developers of nonowner-occupied commercial real estate properties.
Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to existing clients. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a range of commercial banking products and services to government and not-for-profit entities and to community banks. A variety of cash management services are provided through the Global Treasury Management unit. Equipment Finance is a bank-based equipment finance providers based in the United States. This business unit meets the equipment financing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with a platform and funding options for their clients. Equipment Finance specializes in the technology, healthcare, and renewable energy markets, as well as the finance needs related to other capital assets.
The Institutional and Capital Markets business consists of two business units: KeyBanc Capital Markets provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services, primarily to emerging and middle-market companies in the Industrial, Consumer, Real Estate, Energy, Technology and Healthcare sectors. Victory Capital Management is an investment advisory firm that manages or offers advice regarding investment portfolios. This business unit’s national client base consists of both institutional and retail clients derived from four primary channels: public plans, Taft-Hartley plans, corporations, and endowments and foundations.
Sources of Funds
Domestic deposits are the Company’s primary source of funding. During the year ended December 31, 2012, average domestic deposits were $61.1 billion and represented 85% of the funds it used to support loans and other earning assets. Wholesale funds, consisting of deposits in its foreign office and short-term borrowings, averaged $3 billion, during 2012. As of December 31, 2012, Key had $3.3 billion in time deposits of $100,000 or more. The Company maintains cash on deposit in its Federal Reserve account. It also has secured borrowing facilities at the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank of Cleveland. As of December 31, 2012, the Company’s unused secured borrowing capacity was $14.6 billion at the Federal Reserve Bank of Cleveland and $6.1 billion at the Federal Home Loan Bank of Cincinnati.
The Company’s securities portfolio totaled $16 billion, as of December 31, 2012. All of its mortgage-backed securities, which include both securities available for sale and held-to-maturity securities, are issued by government-sponsored enterprises or Government National Mortgage Association (GNMA), and are traded in highly liquid secondary markets. The majority of its securities available-for-sale portfolio consists of collateralized mortgage obligation (CMOs), which are debt securities secured by a pool of mortgages or mortgage-backed securities. CMOs generate interest income and serve as collateral to support certain pledging agreements. As of December 31, 2012, the Company had $12 billion invested in CMOs and other mortgage-backed securities in the available-for-sale portfolio.
Principal investments include investments in equity and mezzanine instruments made by the Company’s Principal Investing unit, which represented 58.9% of other investments, as of December 31, 2012. They include direct investments (investments made in a particular company), as well as indirect investments (investments made through funds that include other investors). In addition to principal investments other investments include other equity and mezzanine instruments, such as certain real estate-related investments.
The Company’s commercial, financial and agricultural loans, (Commercial and Industrial) represent 44% of its total loan portfolio, as of December 31, 2012. The loans consist of fixed and variable rate loans to its large, middle market and small business clients. Its commercial real estate loans (CRE) lending business is conducted through two primary sources: its 14-state banking franchise, and KeyBank Real Estate Capital, a national line of business that cultivates relationships with owners of CRE located both within and beyond the branch system. This line of business deals primarily with nonowner-occupied properties (generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties). The Company conducts commercial lease financing arrangements through its Key Equipment Finance line of business. Commercial lease financing receivables represented 13.3% of commercial loans, as of December 31, 2012. The home equity portfolio is the largest segment of its consumer loan portfolio. Approximately 95.9% of this portfolio, as of December 31, 2012, is derived from its Key Community Bank.
127 Public Square
CLEVELAND OH 44114-1306