I'd like to thank you for joining KeyCorp's Q1 2026 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. Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15%+ return on tangible common equity by year-end 2027.
Revenue grew 10% year-over-year, with revenue growing more than 2 times the rate of expenses. Adjusted pre-provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth. Net interest margin expanded 5 basis points sequentially to 2.87% as we remain on track to exceed 3% net interest margin by year-end. Commercial loan growth was strong and broad-based across industries and geographies, increasing $3.3 billion or 4% sequentially on a period-end basis.
Total funding costs declined by 15 basis points during the quarter, with interest-bearing deposit costs decreasing 22 basis points, resulting in a cumulative through the cycle down beta of 56%. Asset quality metrics remained strong with a net charge-off ratio of just 38 basis points. In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders. Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients, to support our own organic growth, and to repurchase our shares.
| Metric | Period | Current guidance |
|---|---|---|
| Full-year net interest income guidance | FY2026 | increased (raised) |
| Full-year loan growth guidance | FY2026 | increased (raised) |
| Share repurchases | FY2026 | at least $1.3 billion (raised) |
| Q2 investment banking fees | Q2 2026 | $175 million-$180 million (expected to decline) |
| Investment banking fee growth | FY2026 | mid-single digits (5%-6%) (reiterated) |
| Net interest margin | year-end 2026 | exceed 3% (on track) |
| Return on tangible common equity | year-end 2027 | 15%+ (reiterated) |
| Metric | YoY | Note |
|---|---|---|
| Earnings per share | up 33% to $0.44 | Disciplined execution, revenue growing more than 2x expenses |
| Revenue | up 10% | NII growth and 12% growth in priority fee-based businesses |
| Taxable-equivalent net interest income | up 11% | Loan remixing, swap repricing, and proactive deposit beta management |
| Non-interest income | up 8% | Priority fee-based businesses collectively grew 12% |
| Investment banking and debt placement fees | up 13% to $197 million | M&A, equity issuance, and commercial mortgage debt placement activity; a new Q1 record |
| Tangible book value per share | up 10% | Earnings generation |
| Net charge-off ratio | 38 basis points | Asset quality metrics remained strong |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Net interest margin expansion | 2.82% (Q4 2025) | 2.87% | Improving |
| Deposit cost management | cumulative IB deposit beta 51% | cumulative IB deposit beta 56%, total deposit costs 1.65% | Improving |
| Commercial loan growth | C&I grew ~$900 million spot (Q4 2025) | C&I grew $3 billion or 5% period-end | Accelerating |
| Capital position and return of capital | 10.3% marked CET1, $300 million+ Q1 buyback committed | arrived at ~10% marked CET1, repurchased nearly $400 million, raised buyback to $1.3 billion+ | Strengthening |
| Private credit / MDFI disclosure | limited disclosure | added detailed disclosures; ~$10.9 billion private credit outstandings, books 90% investment grade | Expanding transparency |
| Middle-market M&A recovery | muted for three years, pickup expected | record pipelines but transactions slow-playing amid volatility | Still subdued |