KeyCorp's share may increase by two-thirds as "problem" loans decrease and earnings rise, RBC Capital Markets analyst Gerard Cassidy said.

The shares may reach $10, the Cleveland company's book value, Cassidy said in an interview Tuesday.

"You are going to see the losses from problem loans decline dramatically for KeyCorp," he said. "We believe the nonperforming assets will peak in the first half of 2010 and when you bring down their credit costs by 50% or more in the next 12 months, earnings will come back."

KeyCorp may be acquired in 2011, Cassidy said.

"We anticipate that the earnings will recover from the credit improvement, but then at that point we believe that you are going to see that KeyCorp is going to face a challenge in growing their business and that could be the reason for them to sell out in 2011 or 2012," he said.

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