UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 17, 2002
[KEYCORP LOGO]
KeyCorp
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-850 34-6542451
------------------------------- -------------------------- ------------------------------------
(State or other jurisdiction of Commission File Number (I.R.S. Employer Identification No.)
incorporation or organization)
127 Public Square, Cleveland, Ohio 44114-1306
---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
On April 17, 2002, the Registrant issued a press release announcing its
earnings results for the three-month period ended March 31, 2002. This press
release, dated April 17, 2002, is attached as Exhibit 99.1 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 The Registrant's April 17, 2002, press release announcing its
earnings results for the three-month period ended March 31,
2002.
ITEM 9. REGULATION FD DISCLOSURE
On April 17, 2002, the Registrant conducted a conference call/webcast to
discuss its quarterly earnings and currently anticipated earnings trends. The
slide presentation reviewed by the Registrant in the conference call/webcast
follows as Annex A to this Item 9.
Annex A
1
FIRST QUARTER 2002 REVIEW
[KEYCORP LOGO]
APRIL 17, 2002
[KEYCORP LOGO]
2
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FORWARD-LOOKING STATEMENT DISCLOSURE
The conference call and discussion, including related questions
and answers, and presentation materials, contain
forward-looking statements about issues like anticipated second
quarter and full-year 2002 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; continued weakness in the economy,
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.
[KEYCORP LOGO]
3
FIRST QUARTER REVIEW
- Introduction B. Somers
- Overview H. Meyer
- Financial Review L. Irving
- Asset Quality K. Blakely
- Outlook / Q&A B. Somers
[KEYCORP LOGO]
4
OVERVIEW
- Completed PEG initiative
- Continued progress on strategic initiatives
- Reduced auto loan/ leases by $1.4 billion
- Run-off portfolio reduced by $670 million
- Increased dividend 37th consecutive year
- Announced management changes
- Enhanced client focus
[KEYCORP LOGO]
5
FINANCIAL HIGHLIGHTS - 1Q02
- EPS of $0.56 exceeds consensus estimate
- Solid, clean quarter
- Strong expense management
[KEYCORP LOGO]
6
NET INTEREST INCOME & MARGIN (TE)
$ in millions
[CHART]
1Q01 2Q01 3Q01 4Q01 1Q02
Net interest income $695 $719 $730 $726 $702
Net Interest Margin 3.63% 3.77% 3.85% 3.98% 3.93%
Avg. Earning Assets $76,872 $76,546 $75,687 $72,706 $71,981
[KEYCORP LOGO]
7
NET INTEREST MARGIN (TE)
4Q01 VS. 1Q02
Net Interest Margin 4Q01 3.98%
Seasonal Factors (3)
Deposit Mix/ Spreads (3)
Asset Mix/Spreads 1
-----
Total (5) b.p.
Net Interest Margin 1Q02 3.93%
[KEYCORP LOGO]
8
NONINTEREST INCOME 4Q01 VS. 1Q02
in millions
Noninterest Income 4Q01 $418
4Q01 Core Items:
Principal investing writedowns 45
Reserve for customer derivatives 15
Demutualization income (10)
Investment banking fees (10)
Letter of credit & loan fees (10)
All other-net (5)
-----
Total 25
Noninterest Income 1Q02 $443
[KEYCORP LOGO]
9
NONINTEREST EXPENSE 4Q01 VS. 1Q02
in millions
Noninterest Expense 4Q01 $702
4Q01 Core Item:
Demutualization contribution (10)
Goodwill accounting change (SFAS 142) (20)
Computer processing (11)
----
Total (41)
Noninterest Expense 1Q02 $661
[KEYCORP LOGO]
10
PEG COST SAVINGS
NONINTEREST EXPENSE: ACTUAL vs. INFLATIONARY GROWTH
(in millions)
[GRAPH]
1999 2000 2001 2002
Noninterest expense adjusted
for inflation $2,776(b) $2,869(c) $2,949(d) $3,020(e)
Noninterest expense (a) 2,776 2,789 2,769 2,770T
------ ------ ------ -------
Savings $ -- $ 80 $ 180 $ 250
====== ====== ====== =======
(a) Total noninterest expense less significant nonrecurring items, adjusted for
divested operations
(b) CPI base
(c) CPI + 3.4% (Bureau of Labor Statistics Jan-Dec 2000)
(d) CPI + 2.8% (Bureau of Labor Statistics Jan-Nov 2001)
(e) CPI + 2.5% (Estimate of 2.5% for 2002)
T - Target for 2002
[LOGO]
11
KEY CONSUMER BANKING
in millions
[BAR GRAPH]
Revenue (TE) Net Income (Loss)
------------- -----------------
1Q01 1Q02 1Q01 1Q02
---- ---- --- ----
-Retail Banking $325 $312 $59 $ 63
-Small Business 89 95 23 28
-Indirect Lending 106 91 18 10
-National Home Equity 41 60 (1) 1
---- ---- --- ----
Total Key Consumer
Banking $561 $558 $99 $102
==== ==== === ====
[KEYCORP LOGO]
12
KEY CORPORATE FINANCE
in millions
[BAR GRAPH]
Revenue (TE) Net Income
------------- ----------
1Q01 1Q02 1Q01 1Q02
---- ---- ---- ----
-Corporate Banking $191 $188 $52 $ 56
-National Commercial R/E 82 91 28 32
-National Equipment Finance 42 62 5 21
---- ---- --- ----
Total Key Corporate
Finance $315 $341 $85 $109
==== ==== === ====
[KEYCORP LOGO]
13
KEY CAPITAL PARTNERS
in millions
[BAR GRAPH]
Revenue (TE) Net Income
-------------- -----------
1Q01 1Q02 1Q01 1Q02
---- ---- ---- ----
-Victory Capital Management $ 56 $ 53 $ 7 $ 8
-High Net Worth 159 145 13 15
-Capital Markets 81 78 10 13
---- ---- --- ---
Total Key Capital Partners $296 $276 $30 $36
==== ==== === ===
[KEYCORP LOGO]
14
NET CHARGE-OFFS BY LOAN TYPE
in millions 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Continuing Portfolio
Commercial $51.0 $39.9 $47.8 $62.3 $69.2
Consumer 58.2 59.6 68.1 70.4 66.9
---- ---- ---- ---- ----
109.2 99.5 115.9 132.7 136.1
Run-off Portfolio & Loan Sales 71.3 57.0 87.2 70.2
---- ---- ---- ----
Total Net C/O $109.2 $170.8 $172.9 $219.9 $206.3
[KEYCORP LOGO]
15
ASSET QUALITY INDICATORS
TOTAL TOTAL CONTINUING CONTINUING
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
$ in millions 4Q01 1Q02 4Q01 1Q02
---- ---- ---- ----
Nonperforming Loans $ 910 $ 973 $ 679 $ 765
to EOP Loans 1.44% 1.52% 1.09% 1.21%
Nonperforming Assets $ 947 $1,012 $ 716 $ 804
to EOP Loans + OREO 1.49% 1.58% 1.15% 1.28%
Net C/O $ 220 $ 206 $ 133 $ 136
to Average Loans 1.37% 1.32% 0.84% 0.88%
Allowance $1,677 $1,607 $1,402 $1,402
to Total Loans 2.65% 2.51% 2.25% 2.22%
to Nonperforming Loans 184% 165% 206% 183%
[KEYCORP LOGO]
16
RUN-OFF PORTFOLIO &
NONREPLENSHING RESERVES
in millions
5/17/01 6/30/01 9/30/01 12/31/01 03/31/02
------- ------- ------- -------- --------
Commitments $2,648 $2,393 $2,019 $1,694 $1,532
Outstandings 1,611 1,423 1,176 1,023 941
Allowance for
Loan Losses 300 229 172 275 205
NPLs 257 242 233 231 208
[KEYCORP LOGO]
17
NONPERFORMING LOANS: 1Q02
1Q02 INCREASE IN NPL: $63MM OR 7%
Largest NPL: $24MM (Healthcare-CP)
10th Largest: $13MM (Middle Market-CP)
20th Largest: $ 9MM (Structured Finance-ROP)
CP: Continuing Portfolio
ROP:Run-off Portfolio
[KEYCORP LOGO]
18
NONPERFORMING LOANS: 1Q02
Composition of NPLs:
(A) (B) (C) (D) (E) (C)/(D)
Average % of % of NPL Asset
Total Total Total % Weighted
$ In millions Loans NPL NPL Loans Loans NPL
------ ----- ---- ---- ---- ---
Middle Market $9,434 $208.3 21.4% 14.9% 2.21% 1.43
Healthcare 1,347 145.0 14.9 2.1 10.76 7.10
Structured Finance 1,569 132.0 13.6 2.5 8.41 5.44
Large Corporate 2,350 84.0 8.6 3.7 3.57 2.32
Commercial Other 19,144 160.7 16.5 30.1 0.84 0.55
Consumer (a) 29,644 242.8 25.0 46.7 0.82 0.54
------ ----- ---- ---- ---- ----
Total $63,488 $972.8 100.0% 100.0% 1.52%
(a) Includes Small Business loans
[KEYCORP LOGO]
19
SECOND QUARTER 2002 OUTLOOK
(COMPARED WITH 1Q02)
Revenue Slight increase
- Slightly higher loans
- Relatively stable NIM
- Modest fee growth
Expense Slight increase
Credit Quality NPAs are expected to increase modestly
Slight increase in core net charge-offs
[KEYCORP LOGO]
20
APPENDIX
[KEYCORP LOGO]
21
NONINTEREST INCOME
in millions 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Recurring Items
1. Trust & Invest Services Inc. $141 $132 $140 $137 $135
2. Inv. Banking & Cap. Mkts. Inc. 65 72 46 6 72
3. Service Charges on Deposits 84 90 107 106 100
4. COLI Income 27 27 28 32 26
5. L/C & Loan Fees 29 30 27 38 28
6. Electronic Banking Fees 17 18 20 19 18
7. Other Income 92 29 86 80 64
---- ---- ---- ---- ----
Core Noninterest Income 455 398 454 418 443
Non-core Items - - - - -
---- ---- ---- ---- ----
Total Noninterest Income $455 $398 $454 $418 $443
[KEYCORP LOGO]
22
NONINTEREST EXPENSE
in millions 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Recurring Items
1. Personnel $364 $345 $334 $335 $363
2. Net Occupancy & Equipment 95 96 97 96 91
3. Computer Processing 62 63 62 65 54
4. Marketing 27 29 31 25 26
5. Amortization of Intangibles 26 24 22 23 3
6. Professional Fees 18 19 26 25 21
7. Postage & Delivery 17 16 16 14 15
8. Telecommunications 11 12 10 11 8
9. Other Expense 78 82 85 108 80
-- -- -- --- --
Core Noninterest Expense 698 686 683 702 661
Non-core Items - 172 - - -
--- --- --- --- ---
Total Noninterest Expense $698 $858 $683 $702 $661
[KEYCORP LOGO]
23
STATEMENT OF INCOME - REPORTED
$ in millions, except per share data 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Net Interest Income(TE) $695 $719 $730 $726 $702
Loan Loss Provision 110 401 116 723 136
Noninterest Income 455 398 454 418 443
Noninterest Expense 698 858 683 702 661
---- ---- ---- ---- ----
342 (142) 385 (281) 348
Income Taxes and TE adj. 124 (6) 136 (107) 108
Accounting Change, Net of Tax (1) (24) - - -
---- ---- ---- ---- ----
Net Income (Loss) $217 $(160) $249 $(174) $240
Avg Common Shares O/S
Assuming Dilution 429.9 424.7 430.3 428.3 430.0
EPS - Assuming Dilution $0.51 $(0.38) $0.58 $(0.41) $0.56
[KEYCORP LOGO]
24
SIGNIFICANT NON-CORE ITEMS
in millions 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Net Interest Income(TE) - - - - -
Loan Loss Provision - - - - -
Noninterest Income - - - - -
Noninterest Expense - $172 - - -
----
- (172) - - -
Income Taxes and TE adj. - (8) - - -
Acct. Change, Net of Tax - (24) - - -
---- ---- ---- ---- ----
Net Loss - $(188) - - -
2Q01 Goodwill write-down, additional litigation reserves,
restructuring and other one-time net charges,
accounting change for retained interests
[KEYCORP LOGO]
25
STATEMENT OF INCOME-CORE
$ in millions, except per share data 1Q01 2Q01 3Q01 4Q01 1Q02
---- ---- ---- ---- ----
Net Interest Income(TE) $695 $719 $730 $726 $702
Loan Loss Provision 110 401 116 723 136
Noninterest Income 455 398 454 418 443
Noninterest Expense 698 686 683 702 661
--- --- --- --- ---
342 30 385 (281) 348
Income Taxes & TE adj. 124 2 136 (107) 108
Accounting Change, Net of Tax (1) - - - -
--- --- --- --- ---
Net Income $217 $ 28 $249 $(174) $240
Avg. Common Shares O/S
Assuming Dilution 429.9 424.7 430.3 428.3 430.0
EPS - Core $0.51 $0.07 $0.58 $(0.41) $0.56
[KEYCORP LOGO]
26
ASSET QUALITY INDICATORS
CP: CONTINUING PORTFOLIO
TP: TOTAL PORTFOLIO
CP TP
$ in millions 1Q01 2Q01 3Q01 4Q01 1Q02 1Q02
---- ---- ---- ---- ---- ----
Nonperforming Loans $713 $797 $885 $910 $765 $973
to EOP Loans 1.06% 1.20% 1.37% 1.44% 1.21% 1.52%
Nonperforming Assets $740 $823 $913 $947 $804 $1,012
to EOP Loans + OREO 1.10% 1.23% 1.41% 1.49% 1.28% 1.58%
Net C/O $109 $171 $173 $220 $136 $206
to Average Loans 0.66% 1.02% 1.04% 1.37% 0.88% 1.32%
Allowance $1,001 $1,231 $1,174 $1,677 $1,402 $1,607
to Total Loans 1.49% 1.85% 1.82% 2.65% 2.22% 2.51%
to Nonperforming Loans 140% 154% 133% 184% 183% 165%
[KEYCORP LOGO]
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEYCORP
-------------------------------
(Registrant)
Date: April 17, 2002 /s/ Lee Irving
-------------------------------
By: Lee Irving
Executive Vice President
and Chief Accounting Officer