I'd like to thank you for joining KeyCorp's second quarter 2025 earnings conference call. As usual, we will reference our earnings presentation slides, which can be found in the investor relations section of the key.com website. This covers our earnings materials as well as remarks made on this morning's call. Earnings per share were $0.35 even while we added $36 million to our loan loss reserves and elected to pre-fund our charitable foundation this quarter.
Our pre-provision net revenue increased by $44 million sequentially, marking the fifth straight quarter that our PP&R has increased. With respect to fees, which grew 10% from a year ago, our priority fee-based businesses all continue to perform very well. We raised over $30 billion of capital for our clients in the quarter, retaining 22% on our balance sheet. Additionally, sales production in our mass affluence segment was a record in the first half of the year.
Finally, commercial mortgage servicing continued its strong performance as named special servicing balances reached record levels and active special servicing balances remained near record levels. As Clark will discuss in more depth shortly, we are increasing our net interest income and loan growth guidance. Based on the rebound in client activity, we continue to feel good about our ability to deliver 5% or better fee growth this year. Concurrently, we remain committed to holding expense growth in the low to mid-single-digit range, even while investing meaningfully in our front-line bankers and increasing our tech spend by nearly $100 million this year.
| Metric | Period | Current guidance |
|---|---|---|
| Net interest income growth | FY2025 | 20%-22% YoY (raised) |
| Q4 NII exit rate | Q4 2025 | 11%+ (raised) |
| Fee growth | FY2025 | 5% or better (reiterated) |
| Expense growth | FY2025 | low to mid-single-digit range (reiterated) |
| Q3 investment banking fees | Q3 2025 | could look similar to Q2 levels (new) |
| Net interest margin | end of 2026 | 3.0% (reaffirmed at current course and speed) |
| Ending loan growth | FY2025 | up 2% (raised guidance) |
| Share repurchases | H2 2025 | modest in Q3, stepping up later in Q4 (resuming) |
| Metric | YoY | Note |
|---|---|---|
| Earnings per share | $0.35 | Strong PPNR offset by a $36 million reserve build and a $10 million charitable contribution |
| Revenue | up 21% | NII tailwinds and broad-based fee growth |
| Taxable-equivalent net interest income | up 28% (up 4% sequentially) | Deposit beta management, fixed-rate asset repricing, swap maturities, commercial loan growth, and an extra day |
| Non-interest income | up 10% to $690 million | All priority fee-based businesses growing mid-single digits or better |
| Investment banking and debt placement fees | up 41% to $178 million | Syndication, commercial real estate, and equity issuance activity |
| Commercial mortgage servicing fees | up ~15% | Elevated special servicing balances (~$11 billion active, up 59%) |
| Trust and investment services income | up 5% | Despite April volatility and a one-month booking lag; AUM record $64 billion |
| Tangible book value per share | up 27% (up 3% sequentially) | Earnings generation |
| Net charge-offs | $102 million (39 bps, down 7% sequentially) | Stable to improving credit |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Net interest margin expansion | around 2.58% prior quarter (up 8 bps to 2.66%) | 2.66% | Improving |
| Commercial loan growth | full-year ~$3 billion plan | full-year plan already achieved by June 30, backlogs building | Ahead of plan |
| Deposit beta / funding costs | rising-rate terminal beta | cumulative down beta mid-50s, deposit costs below 2% | Improving |
| Capital return | paused | marked CET1 at 10% (high end of target); modest Q3 buybacks stepping up in Q4 | Resuming |
| Banker hiring | 10% frontline growth target | on track, front-ended; new Chicago/Southern California teams already producing | Progressing |
| Reserve / macro uncertainty | Q1 qualitative adjustment for heightened uncertainty | partially reversed as uncertainty now reflected in Moody's scenario; $36 million net build | Moderating |