Hoping to raise its profile in corporate banking, KeyCorp is shifting some of its fastest-growing financing businesses into a new stand-alone subsidiary.
Key Corporate Finance will house the banking company's health-care and media financing groups, as well as its structured finance and leasing operations. While the new unit will comprise only 20% of KeyCorp's 1,125- member corporate finance work force, it will boast about 50% of the company's corporate banking assets.
The Cleveland-based banking company is also planning to open 12 corporate finance offices this year in cities ranging from New York to San Francisco.
"We're broadening the financing spectrum and expanding our reach geographically throughout our franchise," said James S. Bingay, Key's corporate banking head and chairman of the new subsidiary.
The moves are part of a plan by KeyCorp, which has market capitalization of $12.7 billion, to differentiate itself from the mass of other financial services providers.
"KeyCorp gets lost right now," said Sandra Flannigan, a bank analyst at Merrill Lynch & Co. "You don't automatically think of them when you think of capital markets." The new subsidiary "adds some focus," she said.
Key Corporate Finance includes products that involve financial engineering and a high level of specialization, Mr. Bingay said. It is separate from the company's section 20 unit, Key Capital Markets Inc., which holds the bank's underwriting capabilities.
The bank hopes to foster a strong entrepreneurial culture in the businesses of its new unit, said Mr. Bingay, by maintaining a high growth rate-partly through strategic acquisitions. Key would be willing to spend as much as $500 million to buy a structured finance boutique or another firm that would enrich its product line, he said.
In addition, because the subsidiary will be separately capitalized and have its own equity base, it will be able to compensate its managers based on performance.
Analysts lauded the bank's effort to focus on growth at some of its corporate financing businesses.
"The bank is demonstrating its efforts at leveraging its customer base and improving the profitability of customer relationships by enhancing the products and services it provides," said Ms. Flannigan.
The new subsidiary could engage in potentially riskier transactions without necessarily putting the parent company's balance sheet in jeopardy, said Mr. Bingay. "The trend is to use your balance sheet as a principal financing source when time and expediency require it, but also we need to access the investor market.
"We want to act as agent and help be a source or act as mergers and acquisitions adviser and structure the best set of financing."