KeyCorp’s (KEY) second-quarter net loss came in at 69 cents per share, substantially worse than the Zacks Consensus
Estimate. The downside primarily resulted from preferred
dividend payment and a significant increase in the
provision for loan losses.
Credit quality worsened
significantly during the quarter. However, we are
impressed by the company’s steps to reduce its exposure
to the commercial real estate (CRE) home builders
business.
Though the company will benefit by exiting
its risky and unprofitable businesses, we expect elevated
provision requirements and a weak net interest to put
significant pressure on its profitability. As such, the shares
carry and Underperform recommendation from us.
