Cleveland’s KeyCorp reports narrower loss with less money set aside to cover soured loans

Banking company KeyCorp posts smaller 1Q loss

CLEVELAND — KeyCorp reported a smaller first-quarter loss on Wednesday due to cost cutting and a lower provision to cover soured loans, briefly sending its shares to a 52-week high.

The regional bank cut by more than half the amount of money it set aside for bad loans, and net loan charge-offs tumbled from the end of the year.

KeyCorp, which hasn’t posted a profit in two years due to a cascade of bad loans, said it lost $96 million in the January-March quarter, less than its loss of $536 million a year ago.

The company said its results translate to a loss of 11 cents per share, versus a loss of $1.09 per share in the year-ago period.

Losses were not as severe as Wall Street had anticipated. Analysts surveyed by Thomson Reuters expected a loss of 30 cents a share.

Its shares closed up 36 cents, or 4 percent, at $8.94 after rising to a 52-week high of $9.84 a share early in the session.

Provisions for bad loans continued to fall, down to $413 during the first quarter. KeyCorp reported a provision of $847 million during the same period last year and $756 million just last quarter.

“We have reduced our risk, continue to emphasize our core relationship businesses, and our balance sheet reflects strong capital, liquidity and loan loss reserve levels,” said CEO Henry L. Meyer III.

Net loan charge-offs fell to $522 million from $708 million in the last quarter. That’s still $62 million more than the first quarter of 2009.

In a conference call with analysts, Meyer said the bank was focused on returning to profitability and hadn’t set a timetable for repaying $2.5 billion in TARP federal bailout funds.

“Our No. 1 priority that we think will insure that smooth transition to the right time to pay the TARP money back is to really be focused on sustainable profitability,” he said.

“And obviously our improvement from the fourth quarter to the first quarter is setting up a trend line that, you know, if things continue will get us there sooner rather than later.”

KeyCorp lost $265 million in the October-December quarter, when it set aside $756 million for bad loans.

In a phone interview after the results were released, Meyer declined to predict when KeyCorp might return to profitability but said the quarter-to-quarter trend “suggests this year.”

He said the public focus on unemployment rates in the 10 percent range was holding back borrowing for home repairs, business startups and the like, and affecting bank business.

The recession and years without a profit demonstrated the importance of watching loan risks, Meyer said. “Risk awareness is something that sort of slipped by, given the number of years that the economy did well,” he said.

KeyCorp said eight branches have opened since Jan. 1 and the bank plans to open another 32 by year’s end.

KeyCorp has more than 1,000 community bank branches across a 14-state region.

On the Net: https://www.key.com