KeyCorp (KEY): SWOT Analysis [Nov-2025 Updated]

You want a clear-eyed view of KeyCorp's competitive position, and the truth is they're walking a tightrope in 2025: riding a huge growth wave while fighting a structural profitability headwind. Management is projecting Net Interest Income (NII) growth of about 22% for the fiscal year, a massive tailwind from higher rates, but you have to square that with the difficult profitability profile, like the negative EBIT margin of -1.2% reported in August 2025. This isn't a simple success story; it's a fight to translate operational strength into bottom-line returns against megabank competitors, and the full SWOT analysis below maps exactly where the pressure points are.

KeyCorp (KEY) - SWOT Analysis: Strengths

Projected NII growth of about 22% for FY 2025

KeyCorp's core business is poised for significant revenue acceleration, largely driven by its Net Interest Income (NII), which is the profit from a bank's lending activities minus the interest paid to depositors. Following a strong first half of 2025, KeyCorp raised its full-year guidance, now projecting NII to increase by 20% to 22% for the full fiscal year 2025.

This is a powerful tailwind, fueled by strategic balance sheet management, specifically the repositioning of the securities portfolio in late 2024, which allowed the bank to reinvest at higher yields. In the second quarter of 2025 alone, NII reached $1.15 billion, marking a 27.9% climb from the same quarter in 2024. The expectation is that this positive momentum will continue to drive profitability throughout the year, even as the interest rate environment remains dynamic. This NII outlook is defintely a key differentiator among regional banking peers.

Investment banking fees reached record levels in Q1 2025

The company's strategic focus on its fee-based businesses, particularly its investment banking arm, KeyBanc Capital Markets, is paying off with concrete results. For the first quarter of 2025, investment banking and debt placement fees hit a record high for a first quarter, reaching $175 million.

This Q1 2025 performance exceeded the previous first-quarter record by 3%, primarily fueled by strong syndication and debt capital markets activity. This diversification away from pure interest income is a critical strength, providing a more stable and high-growth revenue stream. The pipeline for M&A (Mergers and Acquisitions) and other commercial deals remains at historically elevated levels, suggesting this fee-income strength is sustainable and not just a one-off event.

Strong capital base with a Common Equity Tier 1 (CET1) ratio of 11.8%

KeyCorp maintains a robust capital position, which is essential for both regulatory compliance and investor confidence. The Common Equity Tier 1 (CET1) ratio, a key measure of a bank's financial strength and its ability to absorb unexpected losses, stood at a very strong 11.8% as of September 30, 2025 (Q3 2025).

This ratio is a significant improvement from 10.8% a year prior and is considered at or near the top of its peer group. A high CET1 ratio gives management the flexibility to pursue growth opportunities, execute share repurchases, and navigate economic downturns without undue stress. This strong capital position was driven by net earnings generation during the quarter and was further validated by a credit rating upgrade from Fitch Ratings.

Long-standing dividend history, maintaining a 54-year streak

For income-focused investors, KeyCorp's commitment to returning capital is a major strength. The company has maintained its dividend payments for an impressive 54 consecutive years. This long-standing streak demonstrates resilience through multiple economic cycles and recessions, signaling a reliable and mature financial institution.

The current dividend yield is attractive at 4.62% as of Q3 2025, which compares favorably to industry medians. While the growth rate has been modest recently, the consistency of the payout is a testament to the bank's disciplined capital management and stable cash flow generation, making it a reliable component of a diversified portfolio.

• Maintained dividend payments for 54 consecutive years.
• Current dividend yield is 4.62%.
• Quarterly dividend per share was $0.21 as of September 15, 2025.

Nonperforming assets declined 6% sequentially in Q3 2025

Credit quality continues to trend positively, which is a major strength in the current economic climate. Nonperforming assets (NPAs), which are loans or assets not currently producing income due to the borrower's inability to make payments, declined by 6% sequentially in the third quarter of 2025.

This sequential decline is a clear indicator of improved risk management and a healthier loan portfolio. The ratio of nonperforming assets to loans plus OREO (Other Real Estate Owned) also improved by three basis points to 63 basis points in Q3 2025. Furthermore, criticized loans-those with potential weaknesses-declined by about $200 million, or 3% sequentially. This shows that KeyCorp is actively managing its credit book and successfully mitigating potential risks.

KeyCorp (KEY) - SWOT Analysis: Weaknesses

Profitability Struggles and Margin Pressure

You need to look closely at KeyCorp's recent profitability metrics, which show a clear struggle to maintain margins, especially when compared to the largest money-center banks. While the bank reported a positive net income of $454 million in the third quarter of 2025, the underlying profitability ratios reflect significant pressure. For instance, the Net Profit Margin (NPM) for Q3 2025 stood at a notably low 0.7%, a sharp drop from the 12.5% recorded in the prior year, signaling a major contraction in earnings efficiency.

This margin weakness is often more pronounced in a regional bank's operating income. To be fair, the near-term profitability outlook has been strained, with the EBIT (Earnings Before Interest and Taxes) margin hovering around -1.2% in the period leading up to the fourth quarter of 2025. This negative operating margin highlights that core banking activities, before accounting for financing costs and taxes, are not generating sufficient returns relative to revenue. It's a key indicator that the cost of doing business is still too high relative to the revenue base.

High Expense Growth, Including Strategic Tech Spend

The bank is making necessary, long-term investments, but these create a near-term headwind in expense growth. KeyCorp is committed to a substantial technology investment plan for 2025, which is pushing noninterest expense higher. This is a deliberate trade-off: invest now to compete later, but it hits the bottom line immediately.

The core of this expense growth is a planned technology spend of $900 million in the 2025 fiscal year. This represents a 10% increase over the previous year's tech budget and is focused on core modernization, cloud migration, and enhancing digital client experiences. While essential for future efficiency and scale, this investment surge directly impacts the bank's efficiency ratio, which analysts watch closely. The year-over-year expense growth was up 7% in Q3 2025, primarily driven by these technology-related investments and higher personnel costs for frontline producers.

• Planned 2025 Technology Investment: $900 million
• Q3 2025 Noninterest Expense Increase: Up 7% year-over-year
• Expense growth is outrunning the immediate revenue benefit.

Net Charge-Offs Remain Within the Full-Year Target of 40-45 Basis Points

While credit quality is generally stable, the level of net charge-offs (NCOs) remains a persistent weakness, reflecting a cautious economic outlook and specific loan portfolio risks. Net charge-offs are the debt a bank writes off as uncollectible. For the third quarter of 2025, KeyCorp reported net charge-offs of 42 basis points (0.42%) of average total loans.

The good news is this figure is squarely within the full-year guidance range of 40 to 45 basis points (bps). The bad news is that maintaining NCOs at this elevated level still consumes a significant portion of pre-provision net revenue (PPNR), limiting the capital available for other strategic uses like share buybacks or further loan growth. The provision for credit losses for Q3 2025 was $107 million. This shows that while credit risk is managed, it is not receding.

Limited Net Profit Margin Compared to Larger National Peers

KeyCorp's size and geographic footprint inherently limit its ability to generate the same scale of profits as the national banking giants. The Q3 2025 Net Profit Margin of just 0.7% dramatically illustrates this scale disadvantage. Larger national peers benefit from massive, diversified revenue streams-especially in non-interest income like investment banking and wealth management-and a lower relative cost of funds.

Here's the quick math: A low NPM means KeyCorp keeps less than one cent of profit for every dollar of revenue. This lack of scale makes the bank more sensitive to regional economic downturns or unexpected credit events. It's defintely harder to absorb a shock when your margin is this thin.

KeyCorp (KEY) - SWOT Analysis: Opportunities

You're looking for clear paths to growth and improved profitability for KeyCorp, and the good news is the bank has several high-impact opportunities that are already in motion. The key takeaway is that strategic capital injection and a focused digital push are setting the stage for significant earnings and capital ratio improvement in the near term.

Expansion into embedded banking initiatives for deposit growth

KeyCorp is pushing aggressively into embedded banking, which is the integration of financial services directly into non-financial platforms, like a retailer's checkout or a software vendor's platform. This strategy is a direct route to sticky, low-cost deposit growth without relying on expensive branch expansion. The bank is committed to developing its differentiated platform, with plans to invest in additional software advisors, relationship bankers, and enhanced digital and analytics tools.

This focus is already showing results. KeyCorp's overall average deposits stood at $149.7 billion in the fourth quarter of 2024, and management noted growth in both consumer and commercial segments. The embedded finance market is projected to reach $138 billion in revenue by 2026, so this focus positions KeyCorp to capture a significant share of a rapidly expanding, high-margin space.

Leveraging the $2.8 billion strategic investment from Bank of Nova Scotia

The $2.8 billion strategic minority investment from Bank of Nova Scotia (Scotiabank) is a game-changer, acting as a powerful capital accelerator. This transaction, which closed its larger $2.0 billion tranche in the first quarter of 2025, gave Scotiabank a 14.9% pro forma common stock ownership in KeyCorp. This capital raise was immediately used to strengthen the balance sheet and execute a strategic repositioning of the available-for-sale (AFS) securities portfolio.

Here's the quick math on the immediate impact:

The repositioning of the securities portfolio, while incurring a one-time loss, is expected to generate nearly $400 million in additional Net Interest Income (NII) over 2025 and 2026. This alone contributes about 8% of KeyCorp's expected NII growth for the full fiscal year 2025, implying organic NII growth in the low teens. That's a huge boost to the top line, defintely.

Goal to raise Return on Tangible Common Equity (ROTCE) to 15% by 2027

Management has set a clear, ambitious target to achieve a Return on Tangible Common Equity (ROTCE) of at least 15% by the end of 2027. This is a crucial metric for investors, and reaching this level would put KeyCorp firmly in the top tier of regional bank performance. The ROTCE reached 12.5% in the third quarter of 2025, showing solid progress from the 1.46% low point seen in the fourth quarter of 2023.

The path to the 15% goal is supported by three clear actions:

• Sustained loan and deposit growth from targeted initiatives like embedded banking.
• The NII boost from the Scotiabank-related securities repositioning.
• Disciplined capital management, including ongoing share repurchases.

Management views the 15% as a stop, not the final destination, signaling confidence in sustained operational improvements.

Growth in specialized financing, particularly renewable energy projects

KeyCorp's specialized financing arm, KeyBanc Capital Markets, is a significant source of fee income and a major growth engine, especially in the renewable energy sector. The bank has a long-standing, strong position in this market, which is critical as the U.S. continues its energy transition. Even with policy uncertainty in 2025, the underlying demand for financing in this sector remains resilient.

The investment banking and debt placement fees highlight this strength, totaling $353 million for the first half of fiscal year 2025, marking the second-best first half in the company's history. The overall Commercial Bank segment is performing well, achieving its full-year plan to grow commercial loans by about $3 billion in the first half of 2025 alone. This growth is broad-based, covering large institutions and middle market clients, and includes project-based deals in areas like affordable housing, traditional multi-family, and data centers.

Regulatory changes welcomed by management could reduce compliance costs

KeyCorp's leadership has publicly welcomed the shift in the regulatory environment, specifically citing the deregulation of the banking industry. This change in tone and policy direction, which the CEO called a 'remarkable change,' presents a tangible opportunity to reduce compliance costs and administrative overhead that have weighed on the industry for years.

Less stringent regulatory requirements, particularly those that may be eased for regional banks, could free up capital and operational resources. This capital could then be directed toward the high-growth areas mentioned above, such as technology investments for embedded banking or further expanding the specialized financing teams. It's a tailwind that directly supports the ROTCE target by improving the expense base.

KeyCorp (KEY) - SWOT Analysis: Threats

Intense competition from larger national banks and agile fintech firms

You're operating in a market where the scale of your competitors is a constant, heavy headwind. KeyCorp, with assets around \$187 billion as of late 2024, is caught between two powerful forces: the national giants and the specialized tech players. The Big Four-JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup-have massive economies of scale, allowing them to offer more favorable rates on both loans and deposits, which directly pressures your net interest margin (NIM).

Plus, the super-regional banks like PNC Financial Services Group, Fifth Third Bank, and Huntington Bancshares are aggressively consolidating. For example, Fifth Third Bank's purchase of Comerica Inc. in 2025 and Huntington Bancshares' acquisition of Cadence Bank were major deals that increase their footprint and challenge KeyCorp directly in the Midwest and Northeast. You also have to contend with agile fintech firms, which are chipping away at high-margin services like commercial payments and wealth management by offering seamless digital experiences. To keep up, KeyCorp is investing heavily in technology, planning to spend \$900 million in 2025, a 10% increase from 2024.

Achieving the ambitious 22% NII growth target amid interest rate uncertainty

The biggest financial threat is the uncertainty around achieving your Net Interest Income (NII) targets, which are aggressive but necessary to drive profitability. Management has raised the full-year 2025 NII growth guidance to the high end of the range, or about 22%, but this relies heavily on the interest rate environment remaining favorable, specifically through the re-pricing of fixed-rate assets.

If the Federal Reserve unexpectedly cuts rates more aggressively in 2026, or if deposit costs rise faster than expected, that 22% target becomes a stretch goal. The market is watching the Q4 2025 NII exit rate, which is projected to grow 13% or more compared to Q4 2024, as the immediate barometer. Missing this key indicator will immediately spook investors who are already cautious about regional bank stability. The entire thesis for a higher valuation rests on realizing this NII growth.

Deterioration in loan quality remains the most important short-term risk

Even though credit quality metrics showed some improvement through Q3 2025, the risk of a reversal remains the single most important short-term threat. We are still operating in a higher-for-longer rate environment, which puts stress on commercial borrowers, particularly in commercial real estate (CRE).

Here's the quick math: While net loan charge-offs (NCOs) declined to \$114 million (or 0.42% of average total loans) in Q3 2025-which is within the full-year guidance of 40 to 45 basis points-this is still a higher level than the pre-2023 environment. Nonperforming loans (NPLs) at September 30, 2025, stood at \$658 million, or 0.62% of period-end portfolio loans, down from 0.73% at the end of 2024, but any economic slowdown could quickly push those figures back up.

The primary short-term risk is an unexpected spike in defaults from your commercial and industrial (C&I) or CRE portfolios. You defintely need to keep a close eye on the reserve coverage.

Potential for higher-than-expected adjusted noninterest expense growth (projected 3%-5%)

KeyCorp is projecting adjusted noninterest expense growth to be between 3% and 5% for the full year 2025, but this projection is fragile. The bank is actively hiring, targeting a 10% increase in front-line bankers-including investment bankers and wealth managers-to drive future fee income. This aggressive hiring, combined with the \$900 million technology spend, creates a substantial risk of overshooting the upper end of the expense guidance.

If the revenue growth from these new hires and technology investments doesn't materialize fast enough, the bank will lose positive operating leverage (when revenue growth outpaces expense growth). This would directly hurt profitability and could force management to implement painful, and often costly, restructuring programs later in 2026. The market will tolerate a higher expense base only if the revenue growth is demonstrably higher.

Finance: Track Q4 2025 NII exit rate closely against the projected 13% growth target.