KeyCorp (KEY) Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. KeyCorp operates as a large accelerated filer with two primary business segments: Consumer Bank and Commercial Bank. The company serves individuals, small businesses, and large corporate/institutional clients across a 15-state footprint and nationally. During the quarter, KeyCorp announced the acquisition of Clearwater U.K. to expand its middle-market M&A advisory capabilities.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Net Income (Continuing Ops) | $472 million | $387 million | $958 million | $757 million |
| Diluted EPS | $0.44 | $0.35 | $0.89 | $0.69 |
| Net Interest Income (TE) | $1.26 billion | $1.15 billion | $2.49 billion | $2.26 billion |
| Net Interest Margin (TE) | 2.89% | 2.66% | 2.88% | 2.62% |
| Noninterest Income | $706 million | $690 million | $1.43 billion | $1.36 billion |
| Noninterest Expense | $1.22 billion | $1.15 billion | $2.40 billion | $2.29 billion |
| Provision for Credit Losses | $92 million | $138 million | $198 million | $256 million |
| Total Assets | $191.3 billion | $185.5 billion | N/A | N/A |
| Total Loans | $110.4 billion | $105.7 billion | N/A | N/A |
| Total Deposits | $153.1 billion | $146.9 billion | N/A | N/A |
| CET1 Capital Ratio | 11.17% | 11.78% | N/A | N/A |
Note: TE = Taxable-Equivalent basis. Capital ratios as of June 30, 2026, are estimates.
Material Changes vs. Prior Period
- Earnings Growth: Net income from continuing operations increased 22% year-over-year in Q2, driven by higher net interest income and a lower provision for credit losses.
- Net Interest Income: Increased $108 million (9.4%) in Q2 due to reduced deposit costs from declining interest rates, proactive deposit beta management, and a shift toward higher-yielding commercial and industrial loans. This was partially offset by lower yields on repricing earning assets.
- Loan Portfolio: Average loans increased $4.4 billion to $110.1 billion. Commercial loans grew $6.7 billion, while consumer loans declined $2.3 billion due to the intentional run-off of low-yielding loans.
- Asset Quality: Nonperforming assets increased $191 million to $818 million, driven by idiosyncratic exposures in select commercial and industrial industries and multifamily real estate. Management does not view this as indicative of broader credit deterioration. Net charge-offs were 42 basis points in Q2.
- Expense Management: Noninterest expense rose 5.5% primarily due to higher personnel costs (salaries, incentives, and headcount growth in fee businesses), partially offset by lower professional fees and operating lease expenses.
Guidance, Outlook, and Risks
Full-Year 2026 Outlook (Updated): KeyCorp increased its full-year outlook for revenue, net interest income, and average loans to reflect stronger commercial loan growth and client acquisition.
- Revenue (TE): Up 7-8% (previously ~7%).
- Net Interest Income (TE): Up 9-11% (previously 9-10%).
- Net Interest Margin: 4Q exit rate expected at 3.00% - 3.05%.
- Average Loans: Up 4-5% (previously 2-4%).
- Average Commercial Loans: Up 8-10% (previously 6-8%).
- Net Charge-offs: Expected at 40-45 basis points.
- Interest Rate Risk: Management maintains a neutral interest rate risk position. Simulated exposure to a 200 basis point decline in rates is 0.15%, and to a 200 basis point increase is 0.17%.
- Credit Risk: Concentrated exposure in commercial and industrial loans and commercial real estate. Geopolitical tensions and energy price volatility are being monitored via qualitative reserve adjustments.
- Regulatory: The company remains "well capitalized" under the revised Prompt Corrective Action framework. Moody's upgraded KeyCorp's long-term issuer rating to "Baa1" in July 2026.
Investor Verification Checklist
- Commercial Loan Growth: Verify the sustainability of the 8-10% commercial loan growth outlook against broader economic conditions.
- Deposit Beta Management: Assess the durability of the reduced deposit costs as interest rates stabilize or fluctuate.
- Idiosyncratic Credit Exposures: Monitor the specific commercial and multifamily exposures driving the increase in nonperforming assets to ensure they remain contained.
- Share Repurchase Execution: Confirm the company's ability to meet the $1.3 billion repurchase target while maintaining capital ratios above regulatory minimums.
- Fee-Based Revenue: Track the performance of the priority fee-based businesses (investment banking, wealth management) which grew 8% in the first half of 2026.