Key swings to quarterly loss on securities repositioning

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KeyCorp’s profits took a hit in the fourth quarter of 2024, due to a loss on the sale of securities.

The parent company of KeyBank on Tuesday reported a net loss of $279 million, or 28 cents per share, for the three-month period ended Dec. 31. The swing into negative territory — KeyCorp’s second in a row — came from a one-time charge of $657 million from the sale of the bonds.

Revenue for the quarter totaled $865 million, down nearly 44% from the same quarter in 2023.

“Our fourth-quarter results marked a strong finish to the year,” Chairman and CEO Chris Gorman said in a press release.

“With strong performance momentum and a leading capital position, we are well-positioned for sound, profitable growth in 2025 and beyond,” Gorman said.

Key has been reworking its securities portfolio, with significant help from new capital provided by the Bank of Nova Scotia. The third-largest Canadian bank by assets, Scotiabank has invested $2.8 billion into Key, including the second and final investment of $2 billion in late December.

Key also reported a net loss for the third quarter of 2024.

During the fourth quarter, revenues rose 16% year-over-year excluding the one-time charge on the sale of the bonds, the company said. Adjusted net income totaled $378 million or 38 cents per share.

Analysts polled by S&P Capital IQ forecasted earnings per share to be 33 cents. Such forecasts typically excluded one-time charges.

Net interest income totaled $1.1 billion, up from $948 million in the year-ago quarter. The $187 billion-asset company, which has been clawing back toward $1 billion of quarterly net interest income for a while, said in October that it was likely to cross that threshold in the fourth quarter.

Fee income wasn’t as bright. The company reported a loss of $196 million in that category, down 132% due to a $915 million loss on the sale of securities and a $3 million loss related to the Scotiabank investment agreement valuation in the fourth quarter, the company said.

Noninterest expenses were down more than 10% year over year, totaling $1.2 billion for the quarter. The decrease reflected certain charges in the year-ago period that did not recur in the most recent period, including a special Federal Deposit Insurance Corp. fee and efficiency-related expenses.

Key’s fourth quarter was momentous. With Scotiabank’s final investment last month, the Toronto-based company increased its ownership stake to 14.9%. Its investment is part of a strategy to increase its presence in the United States, where it has a sizable corporate presence but doesn’t directly touch consumers. Scotiabank is now Key’s largest shareholder.

The deal with Scotiabank, which was announced in August, came after Key struggled to hit profitability targets in 2023 and during much of 2024. The added capital has helped Key reposition its balance sheet and improve its profitability, primarily by selling some investments that had suffered when interest rates rose.

The Federal Reserve Board’s approval of Scotiabank’s investment in mid-December happened earlier than expected. It was projected to be received sometime during the first quarter of 2025, the banks had said.

Following the completion of the investment, Gorman and and four other high-ranking executives at KeyCorp were granted a combined $16.71 million in performance-based equity awards that will vest in two years, as long as Key meets certain capital requirements and earnings goals between Jan. 1, 2025, and Dec. 31, 2026. Gorman’s share of the stock awards is $7.57 million.

The company also recently added two Scotiabank-designated individuals to its board of directors — Jacqueline Allard, the group head of global wealth management at Scotiabank, and Somesh Khanna, co-executive chairman of Apexon and the former co-leader of the global banking and securities practice at the consulting firm McKinsey. The board now has 15 directors.