Breaking Down KeyCorp (KEY) Financial Health: Key Insights for Investors

You're looking at KeyCorp's recent results and seeing a confusing signal: the company just reported a Q3 2025 GAAP net income of $454 million and adjusted earnings per share (EPS) of $0.41, beating consensus, but the stock still saw a pre-market dip, which defintely makes you pause. The headline revenue figure was strong at $1.9 billion, an adjusted 17% year-over-year growth, driven by a Net Interest Margin (NIM) of 2.75% that hit its year-end target early, but the market is clearly focused on near-term credit quality and expense control. Here's the quick math: with a Common Equity Tier 1 (CET1) ratio at a robust 11.8%, KeyCorp has the capital strength to manage the rise in net charge-offs, which hit $114 million in the quarter, but you need to know if the underlying business momentum-like the record $68 billion in Assets Under Management-is enough to sustain growth toward the full-year consensus sales estimate of $7.49 billion. We need to break down the balance sheet to see if the internal engine is truly accelerating, or if the regional banking environment is still creating too much drag.

Revenue Analysis

You need to know where KeyCorp (KEY) is making its money right now, not last year, because the banking environment has shifted so fast. The direct takeaway is that KeyCorp's revenue is seeing a strong rebound, largely driven by their core lending business-Net Interest Income (NII)-and a significant boost from their Commercial Bank segment.

For the third quarter of 2025, KeyCorp reported total revenue of approximately $1.9 billion, which is a solid beat on expectations. When we adjust for a securities portfolio repositioning from last year, that revenue figure represents a robust 17% year-over-year (YoY) growth. Honestly, that kind of double-digit revenue acceleration in a regional bank is defintely a good sign of operational tailwinds.

Primary Revenue Streams: NII and Fee Income

Like any bank, KeyCorp's revenue is split between Net Interest Income (NII) and Noninterest Income (Fee Income). NII is the difference between what they earn on loans and investments and what they pay out on deposits. This is the engine of a bank, and it's running hot right now.

In Q3 2025, NII was the primary driver, clocking in at $1.19 billion, a 24% jump compared to the same quarter in 2024. This surge is directly tied to the Net Interest Margin (NIM)-the profitability of their lending-expanding to 2.75%. The other half, Noninterest Income (fees), is also growing, up 8% YoY, fueled by strong results in wealth management and investment banking.

• NII is up 24% YoY, hitting $1.19 billion in Q3 2025.
• Fee Income saw an 8% growth, driven by capital markets activity.
• The CEO expects to deliver record revenue in 2025.

Segment Contribution and Growth Drivers

When you break the business down, you see the Commercial Bank is the powerhouse, but the Consumer Bank is showing impressive leverage. Here's the quick math on their Q3 2025 net income contribution, which gives you a clear picture of where the profits are coming from:

The Commercial Bank remains the largest profit center, delivering $367 million in net income, but the Consumer Bank's net income more than doubled, jumping by over 100% to $152 million. This massive consumer growth signals that the efficiency efforts and rate environment are finally flowing through to the retail side.

Near-Term Opportunities and Action

The significant change driving this revenue is the strategic repositioning of their balance sheet, allowing for the reinvestment of lower-yielding assets into higher-yielding ones, plus lower overall deposit costs. This is a structural tailwind that should continue to boost NII. Plus, the strength in investment banking and debt placement fees is a clear opportunity, especially as M&A pipelines are up materially.

So, the action item for you is to dive deeper into the quality of those commercial and consumer loan portfolios. You can start by reviewing the latest investors materials. Specifically, check the mix of new loan originations to see if the revenue growth is sustainable or if it's a one-time rate benefit.

Profitability Metrics

You're looking for a clear picture of KeyCorp's (KEY) earning power, and the 2025 data shows a significant, though still recovering, trend in profitability. The direct takeaway is that KeyCorp is successfully generating positive operating leverage-meaning revenue is growing faster than expenses-but its net margin remains below the industry's historical high-water marks, reflecting a challenging rate environment that is finally turning in their favor.

Gross, Operating, and Net Profit Margins

For a bank, the most relevant top-line metric is often Total Revenue, which for the trailing twelve months (TTM) leading up to November 2025 stood at approximately $6.142 billion. KeyCorp's profitability, however, is best tracked through its operating and net margins, which are showing a solid rebound from a difficult 2024.

• Operating Profit Margin (Pre-tax Margin): This TTM figure is around 20.24%, reflecting the profit before taxes and a few other items.
• Net Profit Margin: The TTM net margin is 17.5%, a healthy signal of earnings quality.
• Q2 2025 Net Income: The bank reported net income of $387 million in Q2 2025, which translated to a quarterly profit margin of 23%, a sharp increase from 17% in Q2 2024.

The jump in the quarterly net margin is defintely a strong indicator, but the TTM figure gives you the more grounded, full-year view. The TTM Net Income, as of September 30, 2025, was $932 million, which marks a massive year-over-year increase from a negative net income in 2024.

Operational Efficiency and Industry Comparison

Operational efficiency (cost management) is where KeyCorp has made tangible progress. We measure this using the Cash Efficiency Ratio, which tells you how much the bank spends to earn a dollar of revenue. KeyCorp's ratio improved to 63.5% in Q2 2025, down from 70.2% in Q2 2024.

Here's the quick math on why that matters: a lower number means better cost control. In Q2 2025, KeyCorp achieved significant positive operating leverage, with revenue up 21% year-over-year while expenses grew only 7%. That's the kind of discipline you want to see. Still, a peer like Truist Financial achieved an efficiency ratio of 60.1% in Q2 2025, so there is still room for KeyCorp to tighten its belt further.

When you compare KeyCorp's profitability to the regional bank industry, the picture is mixed but improving:

The higher P/E ratio suggests investors are pricing in the expected earnings growth, which analysts forecast to be in the mid to high teens for the regional bank sector in 2025. KeyCorp is positioned to capture that growth, driven by a net interest margin (NIM) that expanded to 2.75% in Q3 2025, ahead of its target.

Next step: Dig deeper into the drivers of this performance by reviewing the full investors profile, specifically the breakdown of Net Interest Income versus Non-Interest Income. Finance: draft a sensitivity analysis on KeyCorp's NIM for a 25 basis point Fed rate change by end of month.

Debt vs. Equity Structure

You're looking at KeyCorp (KEY) and trying to gauge its financial risk, which means we need to look past the income statement and dive into the balance sheet. The direct takeaway is that KeyCorp's leverage is slightly higher than the regional bank average, but its recent capital actions show a deliberate effort to manage this balance and reward shareholders.

As of the third quarter of 2025, KeyCorp's debt-to-equity (D/E) ratio stood at 0.61. This ratio measures how much of the company's financing comes from debt (liabilities) versus equity (shareholders' capital), and for a regional bank like KeyCorp, this is a key indicator of financial leverage (the use of borrowed money to amplify returns). To be fair, the industry average for US Regional Banks as of November 2025 is around 0.5; KeyCorp is running a bit hotter, but still within a manageable range for a large financial institution.

Here's the quick math on the debt structure from the September 2025 quarter end:

• Short-Term Debt & Capital Lease Obligation: $1,339 Million.
• Long-Term Debt & Capital Lease Obligation: $10,917 Million.
• Total Stockholders Equity: $20,102 Million.

The vast majority of KeyCorp's debt is long-term, which provides stability but also locks in interest rates, a trade-off they manage carefully. They're not relying heavily on short-term funding, which is defintely a good sign in this rate environment.

The company is actively managing its funding curve. In February 2025, KeyCorp issued $750 million of 5.121% 6NC5 senior debt, which means it's a six-year note callable by the company after five years. This issuance helped build out their funding while maintaining an active dialogue with credit rating agencies. Speaking of ratings, Morningstar DBRS confirmed KeyCorp's Long-Term Issuer Rating at A (low) with a Stable Trend in May 2025, reflecting a strong balance sheet and solid capitalization.

The balance between debt and equity is a strategic lever for KeyCorp. They use debt and equity capital markets issuance as a primary funding source for the parent company, but they're also focused on returning capital to shareholders. The company expects to be back in the open market repurchasing approximately $100 million of common stock in the fourth quarter of 2025, demonstrating confidence in their capital position and a preference for equity-friendly actions. This dual approach supports their overall vision for growth while maintaining regulatory capital strength, like their Common Equity Tier 1 ratio which stood at a robust 11.8% at the end of Q3 2025.

Liquidity and Solvency

You want to know if KeyCorp (KEY) can meet its near-term obligations, and the quick answer is yes, but the traditional liquidity ratios for a bank like this look different than for a manufacturer. We need to look beyond just the Current Ratio and focus on their capital and cash flow structure. For a bank, the most important liquidity measure is not the Current Ratio, but the stability of its funding and its regulatory capital position.

As of the third quarter of 2025, KeyCorp's liquidity positions, as measured by the standard current ratio (current assets divided by current liabilities) and quick ratio, were both at 0.83. This figure, which is below the 1.0 benchmark often sought by non-financial companies, is normal for a bank because their largest current asset, loans, is less liquid than a manufacturer's inventory, and deposits are classified as current liabilities. It's a bank thing.

Here's the quick math for Q3 2025, which confirms the ratio:

What this estimate hides is the regulatory strength. KeyCorp's Common Equity Tier 1 (CET1) ratio, a key measure of a bank's ability to absorb losses, was approaching 12% at the end of Q3 2025, which is a strong, peer-leading figure that provides significant flexibility and optionality. Plus, management noted in Q2 2025 that they were holding roughly $4 to $5 billion more cash and other short-term liquidity than they anticipate needing over the medium term.

Cash Flow and Working Capital Trends

The working capital trend for KeyCorp is positive, driven by solid deposit growth and strategic loan portfolio management. The net change in deposits was approximately $3.86 billion in Q3 2025, which is a clear sign of stronger funding stability. Commercial loans were up 5% year-to-date as of Q2 2025, showing healthy business activity.

Looking at the cash flow statement for the third quarter of 2025 shows a clear picture of operations and capital deployment:

• Cash Flow from Operating Activities (CFO): $1.49 billion in Q3 2025. This is the core strength-generating a significant amount of cash from the main business of banking.
• Cash Flow from Investing Activities (CFI): $814.00 million in Q3 2025. This positive flow suggests the bank is selling more investment securities than it is buying or that loans are decreasing faster than new ones are being originated, which can be a source of liquidity.
• Cash Flow from Financing Activities (CFF): $-2.11 billion in Q3 2025. This is a negative number, which is common and often desirable, as it reflects the return of capital to shareholders.

The one area that warrants a closer look is the financing cash flow. While the negative figure is normal, the dividend payout ratio is high at 101.23% as of late 2025, meaning the company is paying out more in dividends than it is earning in net income. This is not defintely a long-term sustainable practice for cash retention, even though the total cash dividends paid in Q3 2025 were $-792.00 million, which is manageable against the strong operating cash flow. You can read more about the overall financial picture in our health analysis.

Valuation Analysis

You are looking at KeyCorp (KEY) and wondering if the market has priced it fairly, and honestly, the answer is nuanced. Based on the financial metrics for the 2025 fiscal year, KeyCorp appears to be trading near fair value, but its high dividend payout ratio flags a near-term risk you need to consider.

The stock's current price sits around $17.81 as of late November 2025, which is a significant drop of about 9.11% over the last 12 months. This price action suggests the market is still processing the regional banking volatility from the past year, even as the stock has recovered from its 52-week low of $12.73 toward its 52-week high of $20.04.

Here's the quick math on KeyCorp's core valuation multiples:

• Price-to-Earnings (P/E) Ratio: The trailing P/E is about 20.61x. This is higher than the industry median, suggesting investors are pricing in future earnings growth, which is supported by the forward P/E of 10.60x. That forward multiple looks much more reasonable.
• Price-to-Book (P/B) Ratio: The P/B is 1.13x. For a bank, a P/B slightly over 1.0x generally means the market values the company just above its liquidation value (tangible assets minus liabilities), which is a fair, but not aggressive, valuation.
• Enterprise Value-to-EBITDA (EV/EBITDA): This metric isn't typically useful for banks, as their capital structure and core business-lending-make EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) an irrelevant measure. You can skip it here.

The dividend story is where things get interesting for investors seeking income. KeyCorp's annualized dividend is $0.82 per share, giving it a strong yield of approximately 4.6%. But, the dividend payout ratio is a flashing yellow light, currently sitting at about 101.23% of trailing earnings. This means the company is paying out more in dividends than it earned over the past year, which is defintely not sustainable long-term without cutting the dividend or seeing a significant earnings rebound.

Wall Street analysts are split on the stock, but the overall sentiment leans cautious-to-positive. The consensus rating is a 'Hold' from 21 brokerages, split between 10 'Hold' and 10 'Buy' recommendations. The average 12-month price target is set at $20.75. This target suggests an upside of over 16% from the current price, indicating that analysts believe the stock is undervalued relative to its future earnings potential, despite the current valuation metrics.

For more on the bank's profile, check out our deep dive for investors.

Risk Factors

You've seen KeyCorp (KEY) post a strong Q3 2025, with net income hitting $454 million and earnings per share (EPS) at $0.41. That's solid performance. But as a seasoned analyst, I focus on what could derail that momentum. For a regional bank of this scale, the risks are less about internal operational failure and more about macro forces and portfolio concentration. It's defintely a tightrope walk.

External and Macro Risks: The Regulatory and Rate Headwinds

The biggest external risks for KeyCorp, just like for any large regional bank, are regulatory changes and market volatility. Specifically, there is an ongoing focus from regulators on bank safety and soundness, which can translate into higher capital requirements or new liquidity rules. This is a perpetual cost of doing business. Also, interest rate fluctuations-the core of a bank's profitability-remain a major risk. While KeyCorp has managed its Net Interest Margin (NIM) well, projecting it to reach 2.75-2.80% in Q4 2025, a sudden, unexpected shift in the Federal Reserve's policy could quickly erode that forecast.

• Regulatory pressure raises compliance costs.
• Market volatility affects investment banking fees.
• Interest rate shifts directly impact the NIM.

Strategic Risk: Sector Concentration in Commercial Lending

A key part of KeyCorp's strategy is its commercial banking focus, especially through KeyBanc Capital Markets. This creates a concentration risk in specific industries. The company has a significant exposure to both the energy and healthcare sectors. While these are high-growth areas, they introduce unique, sector-specific volatility that a diversified portfolio might smooth out. For example, a sharp, sustained drop in oil prices or a major shift in healthcare policy could directly impact the credit quality of a large segment of KeyCorp's commercial loan book.

Mitigation Strategies and Financial Strength

KeyCorp's management is not blind to these risks; they are actively managing them. Their primary defense is a strong capital base. The Common Equity Tier 1 (CET1) ratio, a key measure of a bank's ability to withstand financial stress, stood at a robust 11.8% at the end of Q3 2025, well above regulatory minimums. They also demonstrated confidence in their financial position by announcing a plan to repurchase approximately $100 million of common stock in Q4 2025, a clear signal to the market that the stock is undervalued relative to their vision and internal valuation.

Operationally, they are intentionally shifting their loan portfolio. While overall average loans are expected to decline slightly for the full year, commercial loans are projected to grow by around 5%, offsetting the planned runoff of lower-yielding consumer loans. This focus on higher-quality commercial relationships is a deliberate move to improve credit quality and profitability over the long term, even as it maintains that sector concentration risk. They are playing offense while maintaining a strong defense.

Growth Opportunities

You want to know where KeyCorp (KEY) is going next, and honestly, the picture for 2025 is clearer than it has been in a while. The big takeaway is that KeyCorp is using strategic capital to pivot from a purely interest-rate-dependent model to one fueled by tech and better balance sheet management. They're not just waiting for the Federal Reserve to cut rates; they're building their own tailwinds.

The core of this strategy is a financial and operational overhaul. The anchor was the strategic minority investment from Scotiabank, which injected a total of approximately $2.8 billion into the company. This capital was immediately put to work, allowing KeyCorp to reposition its securities portfolio-selling off lower-yielding, longer-duration assets and reinvesting in higher-yielding, more liquid ones. This move is defintely the biggest near-term driver for Net Interest Income (NII), which management projected would be 20% higher in 2025. That's a massive lift.

• Fund balance sheet repositioning.
• Invest heavily in digital channels.
• Target high-growth commercial loans.

On the revenue side, the consensus full-year sales estimate for 2025 stands at $7.49 billion. That's a solid expectation, and their Q3 2025 results showed momentum, with revenue hitting approximately $1.90 billion, beating some analyst expectations. More importantly, the earnings per share (EPS) are projected to grow from $1.50 to $1.73 per share in the next year, a 15.33% jump. That growth is coming from two places: NII improvements and a projected 5%+ increase in fee income, which means their investment banking arm, KeyBanc Capital Markets, is pulling its weight.

Here's the quick math: you get a higher-quality balance sheet from the Scotiabank deal, plus a significant operational push into technology.

KeyCorp is committing $900 million to technology investment in 2025 alone. This isn't just server upgrades; it's a focus on digital banking and artificial intelligence (AI). They are rolling out tools like KeyTotal AR™, an AI-powered accounts receivable platform. This product innovation is key to winning new commercial clients and retaining existing ones by improving their experience (customer experience, or CX). They are also actively pursuing organic expansion in key markets, like the Northwest, and looking at strategic acquisitions of boutique investment banks to enhance their deal-making capabilities.

What this estimate hides is the risk of a slowdown in commercial loan demand, which has been weak. Management expects average loan balances to decline by 2% to 5% in 2025, which is a bit disappointing compared to peers. Still, the focus is on higher-quality commercial loans to offset the runoff in some consumer segments.

Their competitive advantage is a balanced strategy-leveraging their traditional regional bank strength across 15 states with about 1,000 branches, while simultaneously positioning themselves as a tech-forward partner for middle-market companies. Their capital levels are strong, with a CET1 capital ratio (Common Equity Tier 1, a measure of a bank's core financial strength) at the top end of their peer group, which supports confidence in their stability. You can dive deeper into their profile and metrics on our investors page.

To summarize the near-term outlook for KeyCorp:

The action for you is to monitor the execution of that $900 million tech spend. If they can translate that investment into sticky, high-margin commercial products, they will solidify their position as a dominant regional bank.