KeyCorp (KEY) Chairman and Chief Executive Henry Meyer is stepping down in May, after a decade of running the Ohio bank, and is handing the reins to the head of the company's community bank, Beth Mooney.

The executive move puts the bank's community unit, which includes its retail, wealth management and private-banking operations, in the driver's seat. KeyCorp has been pulling back from nationwide operations to focus on community banking, where it makes most of its revenue. The coming change could also signal the bank is getting closer to paying back the $2.5 billion in funds it got from the Troubled Asset Relief Program.

Meyer, who will turn 61 next month, will retire from both his posts effective May 1, 2011. He said it was "100% my decision" and it was time for new leadership after his long run.

"The country has gone through a financial crisis and Key is on the rebound," Meyer said in an interview with Dow Jones Newswires. "Now we need to grow again...and I think it's time to turn the lead over."

Meyer said the bank is well capitalized and with new guidance from the Federal Reserve this week, it moved closer to paying back the TARP funds since KeyCorp shouldn't have to raise the whole $2.5 billion in new capital. The Fed ordered a second round of stress tests Wednesday, seeking to clarify the capital positions of the nation's biggest banks.

"The Fed has come up with the new stress tests and I think we look forward to that because I think we have been in a position to pay TARP back," Meyer said. "We are in active discussions with our regulators."

When asked if the funds would be paid back before he stepped down, Meyer said he wouldn't put a definitive time frame on it.

Meyer joined Society National Bank in 1972, ultimately being named its chief executive before it merged with KeyCorp in 1994. He served in various executive roles at the combined KeyCorp until he was named chief executive in February 2001 and chairman in May of that year.

Mooney, who is 54 and is currently one of three vice chairmen, came to KeyCorp in 2006 after serving as chief financial officer at Regions Financial Corp. (RF) predecessor AmSouth Bancorp.

She will take both roles as chairman and chief executive, becoming the first female chief executive of a Top 20 U.S. bank, an opportunity she said was "tremendously exciting." She will serve as chief operating officer until the handover.

The other two vice chairmen are Christopher Gorman and Thomas Stevens. Gorman heads national bank business--which includes the corporate, investment bank, capital markets and commercial bank. Stevens is chief administrative officer.

In its third quarter, the community bank unit represented just over half of KeyCorp's revenue and about a quarter of its income, while the national bank was about a third of revenue and almost two-thirds of the income.

Mooney said in an interview she is "delighted" to have a seasoned management team that includes Gorman and others. She said she would continue pushing KeyCorp to become a "community banking model with the expertise of a national banking group."

Nancy Bush, analyst with NAB Research LLC in Annandale, N.J, said Mooney's specialty was retail banking, adding "It seems to indicate to me they want to seriously beef up the retail systems, which they desperately need to do."

KeyCorp, based in Cleveland with operations throughout the Midwest, Northeast and West, struggled in the recession with commercial real-estate loans offered at the height of the credit boom. It has suffered more than $5 billion in credit losses since the start of 2008, but it wasn't considered close to death's door like some competitors.

Still, it has yet to pay TARP back and when the government pushed the nation's 19 biggest banks through stress tests last year, KeyCorp was forced to raise capital.

Analysts say the bank will need to raise additional capital in order to pay the TARP funds back, with J.P. Morgan analysts saying Thursday it may have to issue around $1.25 billion in stock in light of the new Fed plans.

But the more recent perception has been that KeyCorp's operations are improving. It recorded a profit in the second quarter before Wall Street's analysts expected one, and its third-quarter results, released last month, showed significant improvement from the prior year.

Wednesday, Standard & Poor's Ratings Service moved the bank's credit rating outlook to stable, signaling it was no longer on the radar for downgrade.

It was also long thought that Meyer might sell the bank, said Gerard Cassidy, banking analyst with RBC Capital Markets. But appointing the younger Mooney as his replacement means a sale is less likely, at least in the near term, he said.

Shares of KeyCorp slipped 2.9% in after-hours trading.

The bank also announced a nonrelated departure from its board of directors, with Lauralee Martin of Jones Lang LaSalle Inc. (JLL) stepping down in light of her own company's growing independent business with KeyCorp.

-By David Benoit, Dow Jones Newswires; 212-416-2458; david.benoit@dowjones.com

(Dan Fitzpatrick contributed to this report.)
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