KeyCorp has reported third quarter net loss from continuing operations attributable to Key common shareholders of $422 million. These results compare to a net loss from continuing operations attributable to Key common shareholders of $9 million for the third quarter of 2008.
The loss for the current quarter is largely the result of an increase in the provision for loan losses, write-downs of certain real estate related investments, higher costs associated with other real estate owned (OREO), and the write-off of certain intangible assets. During the third quarter, Key continued to increase its loan loss reserves by taking a $733 million provision for loan losses, which exceeded net charge-offs by $146 million. As of the end of the quarter, Key’s allowance for loan losses was $2.5 billion, or 4% of total loans, up from $1.4 billion, or 1.90%, one year ago.
During the third quarter, Key exchanged common shares for retail capital securities, raising $505 million of additional Tier 1 common equity. This completed a series of successful capital raises and exchanges that generated approximately $2.4 billion of new Tier 1 common equity to bolster the company’s overall capital. At September 30, 2009, Key’s estimated Tier 1 risk-based capital and Tier 1 common equity ratios were 12.61% and 7.63%, respectively.
Key’s average deposits grew by $3.6 billion, or 6%, compared to the year-ago quarter, and the company originated approximately $8.5 billion in new or renewed loans and commitments to consumers and businesses during the quarter, and $24.5 billion during the first nine months of the year. As part of a multi-year investment in its 14-state branch network, the company has opened 32 new branches (including relocations) in 8 markets in 2009, and expects to open an additional 6 branches by the end of the year.
Henry Meyer, CEO of KeyCorp, said: “While our results continue to be impacted by the difficult operating environment, we believe the aggressive actions we’ve taken to address credit quality, strengthen capital and liquidity, and reshape our business mix position us to meet the challenges posed by the current environment and to emerge as a more competitive company when the economy rebounds. Further, we are encouraged by the continuation of deposit growth and the improvement in our net interest margin.”
“We are continuing to strengthen our business mix and to concentrate on the areas in which we believe we can be the most competitive. Earlier this month, we announced our decision to exit the government-guaranteed education lending business, following earlier actions taken to cease private student lending. Additionally, within the equipment leasing business, we have decided to cease conducting business in both the commercial vehicle and office leasing markets. These actions exemplify our disciplined focus on our core relationship businesses,” he added.
