KeyCorp raises NII and loan outlook after 'solid' quarter

After a serviceable second quarter, KeyCorp is sending cautiously optimistic signals about both its own finances and the broader economic environment.

In an earnings call with analysts on Tuesday, CEO Chris Gorman said the Cleveland-based bank was raising its guidance for net interest income and loan growth, adopting more tech and hiring more staff.

"We are enjoying significant success in the marketplace while concurrently making investments in people and technology that will drive our future growth," Gorman said.

In terms of its financial outlook, Key set its sights higher than it had last quarter. The $185.5 billion-asset bank predicted that by the end of 2025, average loans will be down 1 to 3% from last year, as opposed to down 2 to 5%. And it projected that NII would rise 20 to 22%, compared to its prior guidance of 20%.

One reason for that optimism was Key's recent performance. In the second quarter, NII reached $1.15 billion, a 27.9% climb from the same quarter of 2024. Average loans came out to $105.7 billion, down from $109 billion a year ago but up from $104.4 billion last quarter.

"We are positively revising our 2025 guidance, given the strong first half of the year and encouraging pipelines we see heading into the back half," KeyCorp CFO Clark Khayat said during Tuesday's call.

Gorman also said the bank is on course to increase its headcount of "frontline" bankers — including investment bankers, payments advisors and wealth managers — by 10% this year.

Overall, Key's most recent quarter met or slightly exceeded Wall Street's expectations. In the three months that ended June 30, earnings per share were 35 cents, exactly as analysts polled by S&P had estimated. Revenue came out to $1.84 billion, edging past estimates of $1.81 billion, per S&P.

The bigger difference was in Key's bottom line. Net income for the quarter rose to $389 million, surpassing analysts' estimates of $382.5 million and marking a 63% jump from the same period last year. (Excluding income from discontinued operations, net income was $387 million.)

"We had a solid first half of the year," Gorman said. "We remain vigilant in a dynamic environment and are well positioned for a wide range of scenarios. We are operating from a position of strength."

A number of analysts agreed. Keith Horowitz of Citi called Key's performance a "solid quarter delivering against a relatively high bar." David Long of Raymond James echoed that appraisal, highlighting the upticks in the bank's NII and loan growth guides.

"We are also encouraged by its wider NIM and well-managed expenses, which bode well for positive EPS revisions and Key's share price this morning," Horowitz said.

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As for the macro environment, Key's leaders struck a more hopeful tone than they had at their last earnings call. Back in April, shortly after President Trump announced a slew of new tariffs, Gorman lamented that clients were pausing major investments and "waiting to see how things play out."

On Tuesday, Gorman referred to that "April pause" in the past tense, and expressed tentative confidence that "probably more certainty" regarding U.S. trade policy was on its way — and Key's clients, he said, mostly felt the same way.

"I would say that our clients are cautiously optimistic," Gorman said. "They go through all the macro concerns, geopolitical tariffs, trade — and then you ask about their business, and they say they feel pretty good about their business."

This was true of consumer as well as commercial clients, he said.

"Our consumer is just fine," Gorman said. "As you look at how the credits are performing, if you look at how spending volumes are performing, our clients are in good shape."