Merger costs take bite out of KeyCorp’s 4Q Profit

Expenses tied to KeyCorp’s purchase of First Niagara Financial Group cut into the company’s bottom line in the fourth quarter.

The $136.5 billion-asset company said Thursday that it earned $209 million, down about 5% from a year earlier.

KeyCorp recorded $207 million in merger-related expenses compared with $6 million a year earlier. The Cleveland company bought First Niagara in July and completed the integration and systems conversion during the fourth quarter.

A KeyBank sign with a market ticker is seen on the facade of the KeyBank Building in Columbus, Ohio.
A KeyBank sign with a market ticker on front of the KeyBank Building Monday, Nov. 13, 2006 in downtown Columbus, Ohio. Photographer: Jay LaPrete/Bloomberg News

"The contribution from our First Niagara acquisition and quality of our new team members continue to exceed our expectations,” Beth Mooney, KeyCorp’s chairman and CEO, said in a news release. "As we continue to realize cost savings and begin to see traction on revenue opportunities, we remain confident in reaching our financial targets."

The merger-related charges included $80 million tied to personnel expenses for systems conversions and integration. The remaining $127 million was mainly for nonpersonnel costs, such as computer processing, professional fees and marketing. Overall noninterest expenses totaled $1.2 billion, up almost 66% from a year earlier.

Net interest income totaled $948 million, up more than 55% from a year earlier. The fourth quarter included $92 million of purchase accounting accretion related to the First Niagara acquisition, the company said. KeyCorp’s net interest margin improved 25 basis points, to 3.12%, from a year earlier.

Average total loans surged roughly 43%, to $85.4 billion, as commercial, financial and agricultural credits increased about 28%, to $39.5 billion. Home equity loans rose 23%, to $12.8 billion, while other consumer loans more than doubled to $11.4 billion.

Noninterest income increased more than 27%, to $618 million, as KeyCorp’s investment banking business posted a record quarter. Investment banking and debt placement fees jumped almost 24% to $157 million, while cards and payments income rose almost 47% to $69 million.

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