Jason Goldberg‘s Bank Brief | Volume 23, Issue 125 | 7.22.26

Research evidence excerpt

Jason Goldberg‘s Bank Brief | Volume 23, Issue 125 | 7.22.26

Barclays | U.S. Large-Cap Banks

Earnings Explanations

KeyCorp

2Q26 EPS REVIEW: Trading some NIM for higher NII (7/21/26)

Bottom line: EPS exceeded consensus, driven by a lower-than-expected provision for credit

losses while net interest income (NIM +2bps vs. consensus +7bps) and fees were light. It booked

a $23mn reserve release despite its NPA ratio jumping 11bps with C&I (+$74mn) and CRE (+

$66mn) NPLs both rising. Still, KEY emphasized that the increase was driven by the timing of

three isolated credits (multifamily, consumer goods, and agriculture) that migrated to non-

performing status during the quarter. Although NIM increased q-o-q, it came in below

expectations as the company chose to fund stronger-than-expected 2Q26 loan growth with

short-term wholesale borrowings rather than reprice deposits. Looking ahead, KEY raised its

outlook for revenue, net interest income, and average earning assets, reflecting stronger loan

growth in 1H26 and improved expectations for the balance of the year. The trade off is a slightly

lower year-end NIM outlook of 3.00%-3.05% (vs. its prior ~3.05% outlook), as it is willing to

accept some margin dilution to add high-quality relationship clients with attractive returns and

support continued balance sheet growth. Nevertheless, KEY continues to target a 3.25% NIM by

4Q27, aided by ~$30bn of fixed-rate asset repricing across its swap portfolio, securities book,

and consumer mortgage portfolio through year-end 2027. Combined with expected growth in

core operating deposits, it believes these largely visible drivers should enable the company to

achieve its NIM objective even in a relatively flat or modestly higher rate environment.

Results: KEY reported 2Q26 EPS of $0.44.