Beth Mooney tried to resolve a lingering mystery Thursday: why, in these days of tight margins and iffy loan demand, would her bank sell a fee machine?

Mooney, the chairman and CEO of KeyCorp (KEY), and other executives took several questions from analysts about their decision to sell Victory Capital Management this year.

Victory, which mainly serves institutional investors, did not fit with Keycorp's focus on building strong relationships with consumers, Mooney said.

"There was not a lot of linkage to what we are doing in terms of assets under management in our private bank," she said on the $89.2 billion-asset company's conference call about first-quarter results.

KeyCorp has worked hard to make sure other units at the bank fit within its "relationship strategy" and to bring "our corporate and community bank closer together," Mooney said. KeyCorp has no plans to sell other units, but she stopped short of ruling out the possibility when asked by an analyst if she would jettison another unit in the next 18 months.

"We are looking forward to completing the transaction and developing and growing the businesses we have," Mooney replied.

The announcement in February of the agreement to sell Victory and its broker-dealer affiliate to Crestview Partners for $246 million in cash and debt raised some eyebrows. Although the sale streamlines KeyCorp's operations, it also removes a valuable fee-generating revenue stream at a time when interest rates remain low, analysts said. KeyCorp's executives said during the Thursday call that they had already asked the Federal Reserve for a "no objection" to use the estimated $145 million to $155 million that the company will gain from the sale to repurchase shares; Fed officials have not yet acted on the request, they said.

Victory's sale is expected to be completed in the third quarter.

KeyCorp's management also gave an update on the integration of the 37 former HSBC branches in western New York that it purchased from First Niagara Financial Group (FNFG) for $110 million last year. Customer and employee retention has been good, Bill Hartmann, KeyCorp's chief risk officer, said during the call. The company is also looking for ways it can incorporate into its broader business the branches' focus on affluent customers, which had made the deal appealing in the first place, he added.

"There are some things we can learn from that team that we are building into our product offerings around investments," Hartmann said.

On Thursday Keycorp reported a 2% increase in first-quarter profits from a year earlier, and a 1% gain in revenue. Total average loans increased more than 6%, to $52.6 billion, from a year earlier; and noninterest income fell almost 4% from a year earlier to $425 million

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