KeyCorp Uses AI to Reinforce Lending Discipline as Credit Improves

KeyCorp’s fourth-quarter results, released on Tuesday (Jan. 20), underscored a bank leaning into artificial intelligence (AI) and automation as tools of execution discipline, with an eye on wider transformation. Management framed technology spending as infrastructure that supports operating leverage as the franchise scales.

Chairman and CEO Chris Gorman said during the conference call with analysts that KeyCorp increased technology investment by roughly $100 million in 2025, bringing total technology and operations spending to about $900 million, with a further increase planned for 2026. The emphasis, he said, is on customer-facing capabilities and internal efficiency.

Gorman described AI as a way to rethink how work gets done across the organization. He pointed to deployments in call centers and internal workflows already in use, but said the larger opportunity lies in applying automation to core processes.

“Our investments in tech and ops have gone from $800 million to $900 million last year to $1 billion this year,” Gorman said. “I think we’re doing well with respect to implementing AI, but there’s a lot more that we can do … There are opportunities to really rethink our entire business, for example, in loan underwriting and processing. We can look at those whole horizontal areas and apply a lot of technology. It’ll be money-saving, and by the way, it’ll be a better experience for our clients.”

Chief Financial Officer Clark Khayat tied those investments to operating leverage. Adjusted non-interest expenses rose in 2025, he said, largely reflecting banker hiring and technology investment, but those costs were absorbed by faster revenue growth, producing nearly 1,200 basis points of operating leverage for the year.

For 2026, management expects expense growth of 3% to 4%, roughly half the pace of projected revenue growth.

Shares were up about 0.3% in intraday trading on Tuesday, a day where markets were broadly lower amid tariff and geopolitical tensions.

Credit Quality Improves as Loan Mix Shifts

Credit metrics improved broadly during the quarter. Net charge-offs declined sequentially in the fourth quarter to 39 basis points of average loans (earnings materials showed last year’s reading at 0.43%), while nonperforming assets and criticized loans both moved lower. Full-year net charge-offs totaled 41 basis points, landing at the favorable end of management’s guidance range.

Management said credit performance benefited from a deliberate remixing of the loan book. Commercial loans grew 6% year over year. Average deposits increased modestly during the quarter, driven by growth in commercial client balances. Commentary on the call also noted that balance sheet remains positioned to be relatively neutral to additional rate cuts.

NDFI Exposure Remains Disciplined

KeyCorp also detailed its exposure to non-depository financial institutions, an area under heightened scrutiny across the banking sector. The NDFI portfolio totaled $18.4 billion at quarter end and was approximately 90% investment grade, according to the earnings presentation that accompanied results.

For 2026, KeyCorp expects revenue growth of about 7%, driven by net interest income growth of 8% to 10% and continued expansion in fee-based businesses, including commercial payments and investment banking.