Transcript Driving for Top-Tier Performance

UBS
Financial Services Conference
May 10, 2004
Henry L. Meyer III
Chairman & Chief Executive Officer
Jeffrey B. Weeden
Senior Executive Vice President &
Chief Financial Officer
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FORWARD-LOOKING STATEMENT DISCLOSURE
The presentation, including related questions and answers, contain forwardlooking statements about issues like anticipated second quarter and full-year
2004 earnings, anticipated level of net loan charge-offs and nonperforming
assets and anticipated improvement in profitability and competitiveness.
Forward-looking statements by their nature are subject to assumptions, risks
and uncertainties. Actual results could differ materially from those contained
in or implied by such forward-looking statements for a variety of factors
including: changes in interest rates; failure of the economy to continue to
recover, which could materially impact credit quality trends and the ability to
generate loans; failure of the capital markets to function consistent with
customary levels; delay in or inability to execute strategic initiatives designed
to grow revenues and/or manage expenses; consummation of significant
business combinations or divestitures; new legal obligations or restrictions or
unfavorable resolution of litigation; further disruption in the economy or the
general business climate as a result of terrorist activities or military actions;
and changes in accounting, tax or regulatory practices or requirements.
1
Reshaping Key: A Different Company
2
Focused on product
Focused on deepening relationships
Higher credit risk tolerance
Re-established conservative credit culture
Unfocused expense culture
PEG expense culture
Inconsistent financial measures
Economic Profit Added (EPA)
Exit Auto Lease
Est. Runoff Portfolio
2001
Henry Meyer
Elected Chairman
Integrated
Investment &
Commercial
Banking
Hired
Hired
Conning
Tom Bunn
Jeff Weeden
Corporate Banking Acquisition
CFO
2002
Completed PEG
$250 mill. savings
2003
Union Bankshares
Acquisition
Sterling Branch
Acquisition
2004
Hired
T.D. Leasing NewBridge
Tim King
Acquisition
Portfolio
Retail Banking
Acquisition
Key Messages
 Improving revenue environment
 Improving asset quality
 Continuing expense discipline
 Improving shareholder returns – strong
dividend record
3
4
Net Income by Line of Business
Net Income – 1Q04
• Corporate Banking
• KeyBank Real Estate Capital
• Key Equipment Finance
Investment
Management Services
Corporate &
Investment Bkg.
45%
12%
Consumer
Banking
43%
• Retail Banking
• Small Business
• Consumer Finance
5
Profitably Grow Revenue
• Retail Banking
• Small Business
• Consumer Finance
Consumer Banking
– Tim King appointed President of Retail Banking
– Acquired 11 branches in high-growth Detroit suburbs
– New DDA accounts opened up 26%
– Small Business deposit balances up 11%
– Accounts per customer have increased 5% to 3.15
– Licensed 260 RMs to sell investment products
6
Profitably Grow Revenue
• Corporate Banking
• KeyBank R/E Capital
• Key Equipment Finance
Corporate and Investment Banking
– Aligned commercial and investment banking
– Focused on 8 industries – Institutional Bank
– Successful “Lead with Leasing” campaign
– Commercial mortgage servicing portfolio increased
to $26 billion
7
Profitably Grow Revenue
• Victory Capital Mgmt
• McDonald Financial
Group
Investment Management Services
– Increased AUM by $9.0 billion
– Appointed national sales leader for Victory
– Completed integration of Private Banking and
Private Client Group – 4.6 products per household
– Building brand awareness – Affluent Consumer
Confidence Index
8
Financial Review
Financial Objectives
 Achieve long-term targets
• ROE: 16 – 18%
• EPS Growth: 8 – 10%
 Profitably grow revenue
 Continue to improve asset quality
 Maintain expense discipline
9
10
Net Interest Income
$ in millions
Investments
Consumer Loans
Commercial Loans
Net Interest Income (TE)
Net Interest Margin (TE)
Average Earning Assets
Net Interest Income (TE)
75,000
3.86% 3.85%
$800
$703
$710
3.73% 3.78% 3.74%
$690
$693
$73,424
$73,934
$73,623
$73,113
$73,381
1Q03
2Q03
3Q03
4Q03
1Q04
4.0%
$685
50,000
3.0%
$600
$400
2.0%
25,000
$200
1.0%
0
1Q03
2Q03
3Q03
4Q03
1Q04
11
Average Loans
$ in billions
$63.5
$63.9
$63.5
$62.7
$62.8
$63.0
$63.1
$62.6
$62.8
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
% change *
1Q04 vs. 4Q03
$37.1
24.0
$36.5
24.6
$36.4
24.3
$36.5
24.7
$36.5
25.2
$36.4
25.7
$36.1
25.7
$36.3
26.0
2%
4%
2.0
0.8
1.7
0.7
1.4
0.6
1.1
0.5
0.9
0.4
0.8
0.2
0.6
0.2
0.4
0.1
NM
NM
Commercial $37.1
Consumer
22.9
Exit Portfolios
2.5
Auto
Commercial 1.0
* Annualized
12
Asset Quality
$ in millions
1Q04
4Q03
1Q03
Change 1Q04 vs.
4Q03
1Q03
Net C/O
to Average Loans
$ 111
.71%
$ 123
.78%
$ 161
1.04%
$ (12)
-
$ (50)
-
Nonperforming Loans
to EOP Loans
$ 587
.94%
$ 694
1.11%
$ 904
1.44%
$ (107)
-
$ (317)
-
Nonperforming Assets
to EOP Loans + OREO
$ 670
1.07%
$ 753
1.20%
$ 968
1.54%
$ (83)
-
$ (298)
-
Allowance
to Total Loans
to Nonperforming Loans
$1,306
2.09%
222%
$1,406
2.24%
203%
$ (100)
$1,421
2.27%
157%
$ (115)
-
13
Maintain Expense Discipline
$ in millions
Noninterest Expense
$858
$698
$683 $702
$661 $665
$688 $699 $698
$659 $668 $657
$659
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
364
Personnel
Non-Personnel 334
345
513
334
349
335
367
363
298
361
304
358
301
354
314
363
294
371
317
380
319
379
319
373
286
14
Capital
Tang. Equity/Tang. Assets
1Q03
2Q03
3Q03
4Q03
1Q04
6.71%
6.90%
6.94%
6.94%
6.98%
Tier 1 Risk-Based Capital
7.86%
7.94%
8.23%
8.35%
8.13%
Cash dividends paid
(per share)
$.305
$.305
$.305
$.305
$.31
2.0
3.0
2.5
4.0
8.0
Shares Repurchased
(millions)
15
2004 Outlook
 Improving climate for fee-based businesses
 Stable to improving asset quality
 Modest loan growth
 Continued focus on expenses
 EPS Range:
2Q04
2004 F.Y.
$0.54 to $0.59
$2.30 to $2.45
16
Strong Dividend Record
Dividend increased 39 consecutive years
$1.12
$1.18
$1.20
$1.22
$1.24
2001
2002
2003
2004T
$1.04
$0.94
$0.84
$0.72
$0.76
$0.64
1994
1995
1996
1997
1998
1999
2000
Strategic Priorities
 Profitably grow revenue
 Improve credit quality
 Maintain expense discipline
 Improve shareholder returns
17