Transcript Driving for Top-Tier Performance

Goldman Sachs
Bank CEO Conference
December 2, 2003
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 and discussion, including related questions and answers,
and presentation materials, contain forward-looking statements about issues
like anticipated fourth quarter and full-year 2003 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 forwardlooking statements for a variety of factors including: changes in interest rates;
continued weakness in the economy, 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.
Reshaping Key: A Different Company
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
Built Loan
Loss
Reserve
Hired
Hired
Conning
Tom Bunn
New CFO
Corporate Banking Acquisition Jeff Weeden
2002
Completed PEG
$250 mill. savings
Integrated
Investment &
Commercial
Banking
2003
Union Bankshares
Acquisition
T.D. Leasing
Portfolio
Acquisition
NewBridge
Acquisition
Strategic Priorities
 Profitably grow revenue
• Focus on relationship businesses
• Increase deposits
• Improve cross-sell
 Improve credit quality
 Maintain expense discipline
 Increase shareholder returns
Revenue by Line of Business
Revenue – 3Q03 YTD
• Corporate Banking
• KeyBank Real Estate Capital
• Key Equipment Finance
• Victory Capital Mgmt
• McDonald Financial Group
Investment
Mgmt. Services
Corporate &
17%
Investment Banking
33%
Consumer
Banking
50%
• Retail Banking
• Small Business
• Consumer Finance
Profitably Grow Revenue
• Retail Banking
• Small Business
• Consumer Finance
Consumer Banking
– New DDA accounts opened up 48% YTD
– Small Business deposit balances up 18%YTD
– Hired 125 new RMs
– Opened 14 KeyCenters in 2003 / 15–20 in 2004
– Appointed Retail national sales manager
Profitably Grow Revenue
• Corporate Banking
• KeyBank R/E Capital
• Key Equipment Finance
Corporate and Investment Banking
– Aligned commercial and investment banking
– Key represented OfficeMax in sale to Boise Cascade
– “Lead with Leasing” campaign - balances up 6.5%
vs. a year-ago
– Commercial mortgage servicing portfolio increased
to $24 billion
Profitably Grow Revenue
• Victory Capital Mgmt
• McDonald Financial
Group
Investment Management Services
– Acquired NewBridge Partners
– Increased AUM by $3.3 billion YTD
– Appointed national sales leader for Victory
– Licensed 178 RMs to sell investment products
– Completed integration of Private Banking and
Private Client Group- 4.6 products per household
Improve Credit Quality
 Nonperforming loans down four consecutive
quarters
 Net loan charge-offs at lowest level since first
quarter 2001
 Reduction in exit portfolios since May 2001:
– Commercial portfolio down $1.4 billion
– Auto portfolios down $3.2 billion
Net Charge-Offs to Average Loans
1.50%
1.37%
1.32%
1.27%
1.16% 1.18%
1.20%
1.02% 1.04%
1.04%
0.90%
0.90%
0.84%
0.77%
0.66%
0.63% 0.64%
0.60%
0.42%
0.51%
0.30%
0.00%
1Q00
2Q00
3Q00
KEY
4Q00 1Q01
2Q01
3Q01
4Q01 1Q02
2Q02
3Q02 4Q02
1Q03
2Q03
Peer M edian S&P Regional & Diversified Bank Indices
3Q03
NPAs to Loans and OREO
2.00%
1.61%
1.58%
1.49%
1.60%
1.41%
1.56%
1.59%
1.54%
1.42%
1.37%
1.23%
1.10%
1.20%
1.00%
0.93%
0.88%
0.80%
0.78%
0.74%
0.40%
0.00%
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03
KEY
Peer M edian S&P Regional & Diversified Bank Indices
Allowance to Total Loans
3.00%
2.65%
2.51%
2.50%
2.00%
2.41%2.37%
2.32% 2.27%
2.22% 2.24%
1.85% 1.82%
1.53% 1.49% 1.51% 1.50% 1.49%
1.50%
1.45%
1.00%
0.50%
0.00%
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03
KEY
Peer M edian S&P Regional & Diversified Bank Indices
Maintain Expense Discipline
$ in millions
Noninterest Expense
$4,000
3,070
2,917
$3,000
2,941
2,653
1,985
2,044
$2,000
$1,000
$0
1999
2000
2001
2002
3Q-02 YTD 3Q-03 YTD
Focus on Shareholder Value
 Disciplined capital management
– Investing in growth businesses
– New share repurchase authorization
– Strong dividend record
 Focused on Economic Profit Added (EPA)
 Alignment of management and shareholder
interests
Summary
 Profitably grow revenue
 Improve credit quality
 Maintain expense discipline
 Increase shareholder returns
Question & Answer
Goldman Sachs
Bank CEO Conference
December 2, 2003
Henry L. Meyer III
Chairman & Chief Executive Officer
Jeffrey B. Weeden
Senior Executive Vice President &
Chief Financial Officer