KeyCorp’s Commercial Payments Business Grows Despite Macro Uncertainty

KeyCorp’s latest earnings results showed growth in deposits, while management pointed to momentum in payments, including commercial payments, that should prove resilient even in the face of tariff-induced macroeconomic headwinds.

The presentation materials released Thursday (April 17) indicate that average commercial loans were up 0.4% quarter over quarter in the period ended March 31, to $72.4 billion. Consumer deposits of $88.3 billion were up from $87.5 billion in the fourth quarter and $84.1 billion last year.

Chris Gorman, CEO, said that “credit costs, NPAs [nonperforming assets] and criticized loans are all trending in a positive direction, with NPAs declining by nearly 10% sequentially.”

He added, “We continue to drive strong deposit growth and beta dynamics. On a year-over-year basis, deposits were up mid-single digits. Household relationships were up 2%, and our commercial payments business continued to experience strong momentum while being very disciplined with respect to rate management.”

Current Environment

At a high level, Gorman said, “recent events are clearly having an impact on markets and client sentiment as the outlook for the economy is becoming more uncertain.

“At the same time, inflation remains sticky, potentially limiting some of the response actions the Fed could take. And finally, the geopolitical environment remains both uncertain and complex. … So far in the second quarter, that is since the tariff announcements, we have seen our clients pause transactional activity waiting to see how things play out.”

Later in the call, he said, “With respect to tariffs, we are currently performing a name-by-name review of our largest clients to refine on a bottoms-up basis our potential exposure to the rapidly evolving landscape. Based on our top-down view of our industry concentrations, we believe this direct exposure will prove to be limited.”

The earnings materials revealed that overall net charge-offs were flat at 0.4% quarter over quarter. The company has reserved an additional $8 million to cover anticipated loan losses.

Shares were up 3% in late-day trading on Thursday.

CFO Clark Khayat said on the call that “nonperforming loans were down 9%. The NPL ratio decreased 8 basis points to 65 basis points.”

He added that “our base case expectation is that the U.S. avoids a recession in 2025. Of course, uncertainty has increased and business conditions are subject to change based on the environment. Assuming our macro view holds, we continue to believe adjusted fees will grow 5% or better this year, underpinned by mid to high single-digit growth across investment banking, wealth and commercial payments.”

And, with some additional remarks on corporate clients’ projects and financing needs, CEO Gorman said, “If they have a capex project that’s in flight, full speed ahead. The last 90 days haven’t changed a thing because those are planned and committed long before they start.

“I will say, over the last 90 days, most everybody is pausing until they have better visibility going forward. So, existing things that are in the pipeline, I don’t see them being impacted. In terms of new projects being launched, until there’s more clarity, I think obviously the current environment hinders that.”

Gorman told analysts later in the call, “The economy is in a period of great uncertainty. We’re 15 days into these tariffs. The reality is our credit book is in good shape. Our clients are in good shape. Our backlogs are in good shape. Our business is doing well.”