KeyBank reports second quarter results and says it is well positioned to help customers in the event of a potential downturn
CLEVELAND, Ohio — KeyBank posted strong profit and loan growth in the second quarter despite a changing economy.
CEO Chris Gorman told cleveland.com that the economy is slowing, but the bank is in a good position to continue to do well and help its 3.5 million customers.
“The time to really stand up for your customers is when they really need you,” Gorman said.
KeyBank reported net income of $504 million, or 54 cents per share, beating analysts’ estimates of 52 cents per share. Revenue was up from the $420 million made by KeyBank in the first quarter of 2022, but down from the $698 million in net profit made in the second quarter of 2021.
The company posted revenue of $1.79 billion, up 1.1% from the same period last year.
Revenue from net interest income, the money KeyBank earns from loans and deposits, was up 7.9% from the second quarter of 2021. Non-interest revenue, the money KeyBank earns from to services such as investment banking or business services, fell by 8.3%.
KeyBank’s quarter was helped by strong loan growth. Commercial loans were up $4.2 billion from the second quarter of last year, even as there was a $6.8 billion decline in Paycheck Protection Program loans. Consumer loans increased by $4.1 billion.
KeyBank has updated its forecast for 2022, now indicating that loans will increase by 9% to 11% this year instead of 4% to 6%, and that net interest income will be between 10% and 12%.
Gorman said on a conference call with analysts that KeyBank will continue to benefit from higher interest rates over the next few years. He said KeyBank, preparing for a potential downturn, has removed risk from its portfolio over the past 10 years.
Looking to the economy going forward, Gorman said the Federal Reserve will continue to take action to fight inflation, which in turn will dampen borrowing demand.
The Federal Reserve does two things to reduce inflation that affect interest rates. It increases the rate that institutions charge each other for short-term loans and it reduces its investments, which include mortgages.
In either case, it will be more expensive to borrow money.
Gorman said the risk of a recession is growing, but he doesn’t expect the country to be one in the next quarter.
The are also signs, even in times of inflation, that consumers are doing well.
Deposits at KeyBank are still strong, and customers have about 60% more liquidity than before the COVID-19 pandemic, Gorman said. Credit card spending is also on the rise. People spend more on gasoline, but they also spend more on entertainment and recreation.
Gorman said KeyBank expects account balances to decline over time and demand for mortgages to be weak.
He said commercial customers were still focused on labor, supply chain issues and inflation. To date, he said KeyBank customers have been able to pass on price increases to their customers. But this trend may not continue.