Personal loans, IB to support KeyCorp (KEY) Q2 earnings

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KeyCorp KEY plans to report the results for the second quarter of 2021 on July 20, prior to opening. As in the previous several quarters, the overall lending scenario in the reporting quarter was restrained, despite the reopening of the economy.

According to the latest data from the Federal Reserve, commercial and industrial loan balances (accounting for nearly 50% of KeyCorp’s average loan balance) have seen a decline. On the other hand, consumer loans, which account for almost 30% of its average loan balance, have grown. This is most likely due to increased consumer confidence, as economic growth remains robust.

According to the Zacks consensus estimate, the average return on assets of $ 159.6 billion implies a sequential increase of 1.4%.

KeyCorp’s net interest income (NII) is expected to rise slightly despite generally moderate loan growth, near-zero interest rates and a flattening yield curve. The consensus forecast for net income (on a full tax basis) of $ 1.03 billion indicates an increase of 1.9% over the prior quarter’s reported figures.

Other important factors affecting the game

Non-interest income: As in the past few quarters, deals continued at a rapid pace in the second quarter of 2021, thanks to more favorable macroeconomic outlooks, solid cash reserves and lower interest rates. The IPO markets have shown a similar momentum, which, along with robust growth in subsequent share issues, likely provided support for stock underwriting fees. The bond issue volumes were also modest. They are expected to support KeyCorp’s investment banking business. On the other hand, the trading business returned to normal in the second quarter amid reduced market volatility. The $ 167 million consensus for IB and KeyCorp Capital Markets revenue indicates a 3.1% sequential increase.

The steadily growing balance of deposits during the quarter is expected to support the company’s deposit service fees. The consensus estimate of $ 75 million indicates a 2.7% sequential improvement.

The $ 105 million consensus for card and payment revenue is in line with the quarterly level. The Zacks consensus estimate for trust and investment services income of $ 124 million implies a 6.8% decline from the prior quarter.

Low mortgage rates continued to drive demand for new mortgages this quarter. However, as rates have gradually increased, it is not expected that there will be much refinancing activity. The Zacks consensus estimate for consumer mortgage income and mortgage servicing fees is $ 44 million and $ 24 million, implying a 6.4% and 29.4% decline, respectively, from the prior quarter levels.

Thus, the consensus estimate for total non-interest income of $ 704 million indicates a consistent 4.6% decline.

Expenses: KeyCorp’s efforts to reorganize operations and exit unprofitable / non-core businesses have helped it cut costs in the past. This trend is expected to continue in the second quarter.

As demand for digital banking continues to grow, KeyCorp has identified nearly 70 branches to consolidate by the end of 2021. Most branch closings are expected in the second quarter of 2021. It is also likely to result in lower costs.

Asset quality: KeyCorp is likely to release reserves in the second quarter thanks to an improved macroeconomic environment and a stable credit market environment. This could support the company’s earnings in the reporting quarter.

What the Sachs model predicts

Our proven model predicts KeyCorp’s revenue growth this time around. This is because it has the right combination of two key ingredients – a positive ESP for earning and a Zacks Rank # 3 (Retention) or higher – to increase your chances of winning.

You can find the best stocks to buy or sell before being reported with our ESP earnings filter.

ESP Earnings: ESP for KeyCorp is + 0.26%.

Rank Sachs: The company is currently ranked 3rd in the Zacks.

KeyCorp Price and EPS Surprise

KeyCorp Price and EPS Surprise

KeyCorp Price and EPS Surprise

KeyCorp price-eps-surprise | KeyCorp quote

The Zacks consensus estimate for earnings of 55 cents per share has been revised up 1.9% over the past seven days. The figure assumes an increase of 243.8% over the previous quarter’s reported figure.

The consensus sales forecast of $ 1.73 billion shows an increase of 1.3% over the year-ago quarter.

Other banks to look out for

Here are some other banking stocks you might want to consider, as they also have the right combination of elements to post this season’s gains.

Earning ESP for Hancock Whitney Corporation The HWC is + 2.18% and currently has a Zacks # 2 (Buy) rating. The company plans to release quarterly data on July 20.

BankUnited BKU plans to post earnings on July 22nd. The company, which is currently ranked 3rd on the Zacks rankings, has an ESP profit of + 3.07%. You can see the full list of today’s Zacks # 1 stocks (strong buy) here

Bank OZK UGC is due to report its quarterly results on July 22nd. The company currently has an ESP of + 7.68% and a Zacks rating of 2.

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KeyCorp (KEY): Free Stock Analysis Report

BankUnited, Inc. (BKU): Free Stock Analysis Report

Hancock Whitney Corporation (HWC): Free Stock Analysis Report

Bank OZK (OZK): Report on the analysis of free shares

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