DOW JONES NEWSWIRES
KeyCorp's (KEY) second-quarter loss narrowed on a year-earlier
charge as the regional bank again boosted its loan-loss provisions
and results missed expectations.
The company also slashed the amount of preferred shares it plans
to exchange by 71%.
KeyCorp wasn't a big subprime player but expanded aggressively
into hot markets that are now deeply troubled and has grappled with
surging loan losses.
Many regional banks have suffered during the credit crunch on
their considerable exposure to construction and commercial
real-estate loans, as well as their longer exposure to the
deteriorating housing market and recent increases in
unemployment.
Chief Executive Henry Meyer III said the company's results
continue to reflect the weak economic environment and the steps it
has taken to address issues in credit quality, strengthen capital
and control costs.
The Ohio regional bank posted a loss of $236 million, or 69
cents a share, compared with a year-earlier loss of $1.13 billion,
or $2.71 a share. In addition to the loan-loss provisions, the
latest results included $114 million in charges related to the
exchange of common shares for preferred stock. The prior year's
results included a $1.01 billion charge related to a federal
tax-court ruling.
Excluding items, the loss was 68 cents, compared with year-ago
earnings of 34 cents. Analysts polled by Thomson Reuters expected a
41-cent loss.
Loan-loss provisions were $850 million, up 31% from a year
earlier and down 2.9% from the prior quarter. Net charge-offs of
average loans from continuing operations rose to 3% from 2.75% a
year earlier and 2.65% in the prior quarter. Nonperforming assets
rose to 3.6% from 1.6% and 2.7%, respectively.
The company's tangible common equity ratio, which measures how
much of a bank's hard assets its common shareholders actually own,
was 7.4%, from 6.3% in the year earlier and 6.1% in the first
quarter.
Deposits grew 5% from a year earlier.
KeyCorp said earlier this month it had surpassed its target of a
$1.8 billion increase in common equity, which was dictated by
government stress tests. Last month, Fitch Ratings cut its issuer
default ratings on KeyCorp one notch as part of its review of U.S.
banks, saying that although its capital raise provided extra loss
absorption, it still faces elevated risk because of exposure to
commercial real estate.
KeyCorp said Wednesday it would now accept up to $500 million in
trust preferred securities as part of its exchange offer, down from
its original intention to accept $1.74 billion in exchange for
common stock.
KeyCorp's shares closed Tuesday at $4.82 and haven't traded
premarket. The stock is down 43% this year.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com