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Transcript
Citigroup Smith Barney Financial Services Conference January 27, 2004 Henry L. Meyer III Chairman & Chief Executive Officer Jeffrey B. Weeden Senior Executive Vice President & Chief Financial Officer PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 FORWARD-LOOKING STATEMENT DISCLOSURE The presentation, including related questions and answers, contain forwardlooking statements about issues like anticipated first quarter and full-year 2004 earnings, anticipated level of net loan charge-offs and nonperforming assets and anticipated improvement in profitability and competitiveness. Forward-looking statements by their nature are subject to assumptions, risks and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: changes in interest rates; failure of the economy to continue to recover, which could materially impact credit quality trends and the ability to generate loans; failure of the capital markets to function consistent with customary levels; delay in or inability to execute strategic initiatives designed to grow revenues and/or manage expenses; consummation of significant business combinations or divestitures; new legal obligations or restrictions or unfavorable resolution of litigation; further disruption in the economy or the general business climate as a result of terrorist activities or military actions; and changes in accounting, tax or regulatory practices or requirements. Reshaping Key: A Different Company Focused on product Focused on deepening relationships Higher credit risk tolerance Re-established conservative credit culture Unfocused expense culture PEG expense culture Inconsistent financial measures Economic Profit Added (EPA) Exit Auto Lease Est. Runoff Portfolio 2001 Henry Meyer Elected Chairman Built Loan Loss Reserve Hired Hired Conning Tom Bunn New CFO Corporate Banking Acquisition Jeff Weeden 2002 Completed PEG $250 mill. savings Integrated Investment & Commercial Banking 2003 Union Bankshares Acquisition T.D. Leasing Portfolio Acquisition NewBridge Acquisition Strategic Priorities Profitably grow revenue • Focus on relationship businesses • Increase deposits • Improve cross-sell Improve credit quality Maintain expense discipline Improve shareholder returns Net Income by Line of Business Net Income – 2003 • Corporate Banking • KeyBank Real Estate Capital • Key Equipment Finance Investment Management Services Corporate & Investment Bkg. 43% 11% Consumer Banking 46% • Retail Banking • Small Business • Consumer Finance Profitably Grow Revenue • Retail Banking • Small Business • Consumer Finance Consumer Banking – New DDA accounts opened up 36% in 2003 – Small Business deposit balances up 18% in 2003 – Hired 125 new RMs – Opened 13 KeyCenters in 2003 / 15–20 in 2004 – Appointed Retail national sales manager Profitably Grow Revenue • Corporate Banking • KeyBank R/E Capital • Key Equipment Finance Corporate and Investment Banking – Aligned commercial and investment banking – Investment banking activity improving – “Lead with Leasing” campaign – balances up 11% vs. a year ago – Commercial mortgage servicing portfolio increased to $25 billion Profitably Grow Revenue • Victory Capital Mgmt • McDonald Financial Group Investment Management Services – Increased AUM by $7.0 billion in 2003 – Appointed national sales leader for Victory – Licensed 250 RMs to sell investment products – Completed integration of Private Banking and Private Client Group – 4.6 products per household Financial Review Financial Objectives Achieve long term targets • ROE: 16 – 18% • EPS Growth: 7 – 8% Improve asset quality Continue expense discipline Maintain strong capital position Net Interest Income $ in millions Investments Consumer Loans Commercial Loans Net Interest Income (TE) Net Interest Margin (TE) Average Earning Assets Net Interest Income (TE) 3.98% $75,000 3.86% 3.85% $800 $724 $703 $710 3.73% 3.78% $690 $72,554 $73,424 $73,934 $73,623 $73,113 4Q02 1Q03 2Q03 3Q03 4Q03 4.0% $693 $50,000 3.0% $600 2.0% $25,000 $400 $200 1.0% $0 4Q02 1Q03 2Q03 3Q03 4Q03 Average Loans $ in billions $63.8 $63.5 $63.9 $63.5 $62.7 $62.8 $63.0 $63.1 $62.6 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 $37.1 22.9 $37.1 24.0 $36.5 24.6 $36.4 24.3 $36.5 24.7 $36.5 25.2 $36.4 25.7 $36.1 25.7 2.5 1.0 2.0 0.8 1.7 0.7 1.4 0.6 1.1 0.5 0.9 0.4 0.8 0.2 0.6 0.2 Commercial $37.7 Consumer 22.0 Exit Portfolios 3.0 Auto Commercial 1.1 * Annualized % change * 4Q03 vs. 3Q03 (4)% NM NM Commercial Portfolio - Utilization Rate 50% 47.3% 45.9% 45% 46.5% 46.1% 45.9% 44.3% 45.2% 44.0% 44.0% 42.0% 42.5% 41.1% 39.9% 40% 38.5% 37.2% 35.1% 35% 30% 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 * Excludes Real Estate, Leasing and Commercial Run-off portfolios Average Core Deposit Growth $ in billions $39.2 $40.4 $41.3 $42.2 $42.8 $37.4 $37.3 $37.0 $37.2 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 $13.0 1.9 13.7 8.8 $37.4 $13.4 1.9 13.4 8.6 $37.3 $13.2 2.0 13.1 8.7 $37.0 $13.3 2.0 12.7 9.2 $37.2 $15.1 2.0 12.2 9.9 $39.2 $16.8 2.0 11.8 9.8 $40.4 $17.7 2.1 11.4 10.1 $41.3 18.4 2.1 11.1 10.6 $42.2 18.8 2.1 11.0 10.9 $42.8 Now/MMDA Savings CD’s DDA TOTAL * Annualized % change * 4Q03 vs. 3Q03 8% (4) (2) 10 5% Asset Quality $ in millions 4Q02 1Q03 2Q03 3Q03 4Q03 Net C/O to Average Loans $186 1.18% $161 1.04% $141 .90% $123 .77% $123 .78% Nonperforming Loans to EOP Loans $943 1.51% $904 1.44% $837 1.32% $795 1.27% $694 1.11% Nonperforming Assets to EOP Loans + OREO $993 1.59% $968 1.54% $897 1.42% $862 1.37% $753 1.20% Allowance to Total Loans to Nonperforming Loans $1,452 2.32% 154% $1,421 2.27% 157% $1,405 2.22% 168% $1,405 2.24% 177% $1,406 2.24% 203% Maintain Expense Discipline $ in millions Noninterest Expense $858 $698 $683 $702 $661 $665 $659 $668 $657 $688 $699 $698 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 364 Personnel Non-Personnel 334 345 513 334 349 335 367 363 298 361 304 358 301 354 314 363 294 371 317 380 319 379 319 Capital 4Q02 1Q03 2Q03 3Q03 4Q03 Tang. Equity/Tang. Assets 6.73% 6.71% 6.90% 6.94% 6.94% Tier 1 Risk-Based Capital 7.74% 7.86% 7.94% 8.23% 8.29% * $.300 $.305 $.305 $.305 $.305 1.2 2.0 3.0 2.5 4.0 Cash dividends paid (per share) Shares Repurchased (millions) * Estimated 2004 Outlook Improving climate for fee-based businesses Stable to improving asset quality Modest loan growth Continued focus on expenses EPS Range: 1Q04 2004 F.Y. $0.52 to $0.55 $2.25 to $2.35 Focus on Shareholder Value Disciplined capital management – Invest in growth businesses – Share repurchase – Strong dividend record Focused on Economic Profit Added (EPA) Alignment of management and shareholder interests – Insider ownership: 7% – Stock ownership guidelines – Incentive compensation tied to EPA Strong Dividend Record Dividend increased 39 consecutive years $1.12 $1.18 $1.20 $1.22 $1.24 2001 2002 2003 2004T $1.04 $0.94 $0.84 $0.72 $0.76 $0.64 1994 1995 1996 1997 1998 1999 2000 Summary Profitably grow revenue Improve credit quality Maintain expense discipline Improve shareholder returns Question and Answer