2Q‘26 Earnings: Mixed Qtr, Positive FY26 Tweak; NIM Trajectory the Key Debate

Research evidence excerpt

2Q‘26 Earnings: Mixed Qtr, Positive FY26 Tweak; NIM Trajectory the Key Debate

ible Alpha

remain stable if rates are unchanged, though a hike could push them modestly higher. Total revenue Source: Visible Alpha

guidance was raised to up 7–8% (from 7%), driven by NII moving to up 9–11% (from 9–10%). The

4Q'26 NIM exit-rate guide was trimmed to 3.00–3.05% (from 3.05%), assuming a stable, competitive

deposit environment, with AEAs now expected to grow an additional $1–2bn from 2Q'26 levels

(prior guide held AEA stable vs. 1Q'26). Incremental balance sheet growth was flagged as modestly

margin dilutive, but management reiterated a willingness to trade NIM to add relationship clients

with strong return profiles. Adjusted fee income guidance was reiterated at 5–6% and GAAP fee

income at 3–4%. IB fees were guided up 20%+ Q/Q in 3Q'26 (below our prior 32% forecast), with the

FY26 guide reiterated at MSD growth. The commercial mortgage servicing run-rate was reiterated

at $50–$60mn/quarter for the balance of the year. Adj expense guide was reiterated at 3–4%, and

management expects "substantial" positive operating leverage in FY26, with revenue growing twice

as fast as expenses, and expects POL to continue into 2027. NCO guide was reiterated at 40–45

bps. Buybacks for FY26 were reiterated to >$1.3bn and the marked CET1 target was reaffirmed at

9.5–10.0% (2Q was 9.8%). NIM guide for 4Q'27 of 3.25% (2Q was 2.89%) and ROTCE target of 15%

+ (1H'26 was 13%) were reiterated, as was ROTCE LT target of 16-19%.

Estimate changes and recommendation. There are no changes to our 2026/2027 EPS estimates

David Chiaverini, CFA * | Equity Analyst

of $1.85/$2.20. We reiterate our HOLD rating as we believe KEY's outlook is appropriately reflected +1 (212) 778-8554 | dchiaverini@jefferies.com